Crime in the Suites: An Analyis of Current Issues in White Collar Defense
Posts Tagged ‘Online Gambling’
Mar 19
2014

Live Report From iGNA 2014 – Is iGaming The Problem or The Solution?

This afternoon at the iGaming North America 2014 conference an interesting panel, “Visionaries’ Perspective—Is i-Gaming the Problem or the Solution?” explored two vastly divergent viewpoints on online gaming in the United States. The panel was moderated by Steve Lipscomb, the Founder of the World Poker Tour, and featured, Mitch Garber, the CEO Caesars Acquisition Co. and Caesars Interactive Entertainment, and Andy Abboud, Vice President of Government Relations, Las Vegas Sands Corp, which is owned by billionaire Sheldon Adelson.

Abboud made clear the positions of his Las Vegas Sands from the start stating, “We are not fans of online gaming.” Abboud expressed caution because he felt that there is a strong presence of illegal operators in the industry and that was what the company feared, not the legalized regulated gaming that is currently offered in Delaware, New Jersey, and Nevada.

Garber called attention to Abboud’s stance differing from Adelson’s public position, which is that iGaming should not be permitted in any context.  Adelson has made it clear publicly that he intends to spend large sums of money to defeat online gaming, and federal legislation to do so may be forthcoming.

Abboud said that the Las Vegas Sands supports legislation to restore the Wire Act and make it clear that the Wire Act prohibits online gaming as well as sports betting. Abboud emphasized that he believes that the industry is dependent on a Wire Act opinion that was issued by Attorney General Eric Holder, but that interpretation of the Wire Act could be overturned by a new administration or a change in perspective from the current administration. Abboud emphasized that he believes the industry needs to be much more cautious in its approach before moving forward, on the law and in terms of consumer protection.

Garber emphasized that he believes that both the federal government and the individual states are capable of regulating online gaming. Garber stated that the consumer protection controls that are in place online are even stronger than in the land-based casinos. Online casinos have the ability to track the money players deposit, view their hand histories,  age and ID verify all participants.

The lively exchange highlighted the divergent perspectives on online gaming in the United States. The debate will continue to play out in the future, but we believe that online gaming is here to stay and the companies that believe that it will cannibalize the land-based casino industry will be proven wrong in time as more states join the market.

posted in:
Internet Law
Feb 26
2014

Jeff Ifrah Presents on the Future of Online Gaming at J.P. Morgan Global High Yield & Leveraged Finance Conference

Yesterday, at the annual J. P. Morgan Global High Yield & Leveraged Finance Conference in Miami Beach, Florida, Ifrah Law Founding Member Jeff Ifrah shared his predictions for the growing online gaming industry in the U.S. and in Europe.  Susan Berliner, an analyst with J.P. Morgan who covers gaming and lodging, moderated the panel, which also included Marc Falcone, CFO of Fertitta Entertainment/Station Casinos, and Eamonn Toland, President of Paddy Power.  The panelists addressed the potential for online gaming’s additional expansion in the states as well as payment and logistical issues.

J.P. Morgan’s conference attracted a crowd of over 1,000 CEOs, CFOs and other C-Suite executives from high-growth companies across an array of industries, including gaming, entertainment, energy, and transportation and institutional investors. Questions from attendees at Tuesday’s panel indicated that investors were most interested in the rollout of online gaming in the three states that presently permit it:  Delaware, Nevada, and New Jersey.

Ifrah noted that one study predicts online gaming revenues in the U.S. to reach approximately $670 million. According to Ifrah, how online gaming grows depends on what the states do to permit gaming and their licensing processes and what other states come online in the near future.  Ifrah shared that just a couple hours before, Delaware and Nevada announced an historic agreement to pool their liquidity to increase their prize pool, allowing poker players in those states (and any other states which may subsequently sign on to the agreement) to play online poker offered by operators in either state, and to play against players in the other state. Governor Sandoval of Nevada and Governor Markell of Delaware met in Wilmington yesterday to announce this exciting development.  The State of Delaware, an Ifrah Law client, launched online gaming in November.

Marc Falone of Station Casinos observed that run rate revenues for online gaming are estimated at $150 million in 2014.  While online gaming is still in the early stages, it has the potential to be a much larger business with significant long-term growth potential. Falcone pointed out five challenges to online gaming growth, about which the panel generally agreed:

* General awareness – many consumers still do not understand that online gaming is legal in Delaware, Nevada, and New Jersey, which hinders participation and growth.

* Payments – despite online poker’s legality in the three states, Mastercard, Visa and other payment processors nevertheless decline to make deposits on online gaming sites.

* Geolocation – the states utilize geolocation technology to confirm that only residents in those states play.  Many individuals have found the geolocation confirmation process unwieldy and difficult with which to interact, causing them to choose another activity.  Falcone, Ifrah and the other panelists agreed geolocation technology and ease would improve over time.

* Security – in the age of high profile data breaches at Target, Neiman Marcus and elsewhere, and a reported breach on the Sands website, consumers’ interest in online gaming may be chilled.  New Jersey requires a player enter a social security number. Consumers are understandably reluctant to provide that type of sensitive personal information in a website form.  Industry needs to continue to work on secure procedures that will boost consumer confidence.

* Offshore gaming – licensed operators in the three states still compete with offshore gaming sites.

Eamonn Toland of Paddy Power stressed that online gaming revenues are currently as anticipated; growth takes time as consumers become more aware and some of the “wrinkles” identified above are ironed out.  He sees a significant revenue growth of 28% month-to-month.  As to whether online gaming “cannibalizes” land-based casinos, Toland and the other panelists concurred that the online gaming player is an entirely different demographic and they did not see the cannibalism effect.  Toland believes online gaming will grow significantly as states contract with each other like Delaware and Nevada just announced.

As to other states that may authorize online gaming, Ifrah and the other panelists mentioned California, Illinois, New York, and Pennsylvania as potential markets.  The panel participants cautioned that while these are exciting developments at the state level, the federal government would be monitoring online gaming operations to see if there are any significant issues, such as consumer protection issues.  However, at least one panelist believes that online gaming has extensive protections – such as age verification, protections for problem gamblers  – that result in fewer losses for consumers than in land-based casinos.

posted in:
Internet Law
Jan 03
2014

Federal Government Blocks International Online Gamblers, Cheyenne and Arapaho Tribes Sue

The Cheyenne and Arapaho Tribes have filed suit against Secretary of the Interior Sally Jewell after the Department Interior blocked their effort to offer real-money online gaming to international customers.

The Tribes were prepared to launch Pokertribes.com after coming to a revenue-sharing agreement with the state of Oklahoma.  Pursuant to the terms of the agreement, the Cheyenne and Arapaho Tribes were permitted to offer their online gaming to clients overseas, but were prohibited from offering gaming to clients in Oklahoma or elsewhere in the United States.  Under the compact, the tribe would pay the state 4 percent of the first $10 million in annual net revenue from electronic gaming, 5 percent of the next $10 million and 6 percent of any subsequent amount, plus a monthly 10 percent from non-house banked card games.

However, the Department of Interior Assistant Secretary of Indian Affairs disapproved two versions of the plan, in August and November 2013 respectively, finding that the state of Oklahoma could not offer exclusive access to an international market and that therefore the state’s “concession is illusory” and it is not entitled to revenue sharing.  Notably, however, the Department of Interior explicitly declined to “reach the issue of whether internet gaming as contemplated in the Agreement was lawful,” restricting the basis of its opinion to the fact that “the State has not offered a meaningful concession” sufficient to justify sharing revenue from the online games.  Since the Department did not approve the agreement, Pokertribes.net is currently inactive.

The Cheyenne and Arapaho Tribe filed the complaint against the Department of Interior on December 26, 2013 alleging that its decision was arbitrary and capricious, an abuse of discretion, and otherwise contrary to law.  The tribe seeks declaratory and injunctive relief to prevent further obstruction of the website’s operation.  The case is currently pending before Judge Timothy D. DeGiusti in the Western District of Oklahoma.

Instead of trying to resolve this issue through litigation, we think the better path forward for the Tribes would be to use their political leverage to pass state legislation allowing the Tribes to offer intrastate online gaming to Oklahoma residents, as well as to players internationally.  If the Tribes were successful in getting this legislation passed, their authority to offer online gaming would be derived from state law rather than tribal compact and would therefore preclude federal involvement.  Offering gaming to Oklahoma residents as well as international customers would also resolve any concerns about the state’s allegedly illusory concessions.

posted in:
Internet Law
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About Ifrah Law

Crime in the Suites is authored by the Ifrah Law Firm, a Washington DC-based law firm specializing in the defense of government investigations and litigation. Our client base spans many regulated industries, particularly e-business, e-commerce, government contracts, gaming and healthcare.

Ifrah Law focuses on federal criminal defense, government contract defense and procurement, health care, and financial services litigation and fraud defense. Further, the firm's E-Commerce attorneys and internet marketing attorneys are leaders in internet advertising, data privacy, online fraud and abuse law, iGaming law.

The commentary and cases included in this blog are contributed by founding partner Jeff Ifrah, partners Michelle Cohen and George Calhoun, counsels Jeff Hamlin and Drew Barnholtz, and associates Rachel Hirsch, Nicole Kardell, Steven Eichorn, David Yellin, and Jessica Feil. These posts are edited by Jeff Ifrah. We look forward to hearing your thoughts and comments!

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