States racing to set up legal online gambling
April 13, 2012

April 15, widely known as tax-deadline day, carries a starker meaning for fans of online gambling.

On April 15, 2011, federal authorities shut down U.S. operations of the three largest online-poker sites, stopping thousands of people from playing and tying up millions of dollars they had deposited or won.

Since "Black Friday," actions by the Justice Department, casino and online companies and several states indicate legal online gaming in the United States is tantalizingly close but still months away.

"Any time you're changing laws, whether it's in Harrisburg or Sacramento (Calif.) or any other place, it's time-consuming, an arduous process," Richard "Skip" Bronson, chairman of U.S. Digital Gaming says. His firm, based in Beverly Hills, Calif., provides online-gambling systems.

John Pappas, executive director of Poker Players Alliance, says many people expected virtual cards to be dealt in at least one state by the middle of this year after the Justice Department said in December that the Wire Act did not prohibit online gambling.

"Maybe by the middle of 2013, we'll see (online poker legal in) multiple states, but it's certainly not going to be this year," says Pappas, whose group favors federal regulation.

Bronson doesn't hazard a guess about which state will be first to have online gambling, but says Nevada, New Jersey, California, Iowa and Delaware are pursuing it aggressively.

Pennsylvania, the sixth most-populous state, is noticeably absent from the list.

When one state starts online play, others will follow suit, as with lotteries and traditional casinos, Bronson says.

Nevada approved regulations for online poker in January. The Las Vegas Review-Journal predicts some websites could be operating by fall if the technology is approved. New Jersey Gov. Chris Christie vetoed an Internet gambling bill last year, but indicated he might sign a revision working its way through the Legislature, news reports say.

Much of the action followed the Justice Department ruling that Illinois and New York could sell lottery tickets online to in-state purchasers. The department also said that except for sports betting, the Wire Act does not prohibit using the Internet for legal gambling in a state. That reversed the department's previous position.

Moves in the casino industry also indicate that legal online poker rooms -- and possibly, games such as blackjack, craps and slot machines -- are coming sooner or later. Major casino companies are partnering with or buying online-game providers. For example, Zynga, whose games include FarmVille and Facebook Poker, is negotiating a deal with Wynn casinos. Slot manufacturers Bally and Aristocrat agreed to work together to provide online-poker networks to casino operators.
The attraction, as always, is money.

"There's no revenue source that can compete with the kind of revenue that can be generated from online gaming," Bronson says.

Research company H2 Gambling Capital, based in Great Britain, predicts legalized online poker in the United States could generate operator revenue of $4.3 billion in its first year, rising to $9.6 billion in the fifth year. H2 says half of that would come from players in eight states -- the seven most populous plus Massachusetts.

The states' share would depend on their tax rate; for example, an average rate of 15 percent on $9.6 billion would yield $1.44 billion.

Bronson says states eventually will form compacts allowing play to cross state lines, similar to the Powerball and MegaMillions lotteries. Pappas says the compacts could extend to other countries, as well.

One reason is that online poker rooms need at least 70,000 players to have "liquidity" -- the ability to offer a wide enough range of games and betting levels, Bronson says.

The biggest worries about online casinos include keeping underage players off a site; preventing a spread of compulsive gambling; protecting players' money (Full Tilt Poker, a target of last year's crackdown, is accused of using $150 million in players' money for its own purposes); and guarding against cheating and collusion. Supporters say existing software makes those issues easier to handle online than in traditional casinos, which must address similar concerns.

Pappas says a state-by-state approach would emphasize generating tax revenue and involving local companies rather than determining the best setup for players. Bronson says Congress is too divided to agree on a law that brings gambling into every home.

'GAMBLING WITH AN EDGE'
Player's Advantage columnist Mark Gruetze is scheduled to appear next week on the "Gambling with an Edge" radio show hosted by video-poker expert Bob Dancer and Michael "Wizard of Odds" Shackleford.

The hourlong show will air live at 10 p.m. EDT Thursday on KLAV-AM, Las Vegas; listeners can tune in online at www.klav1230am.com. Dancer, author of video-poker books and software, has hosted the weekly show since February 2011. Shackleford, whose website www.WizardOfOdds.com is an encyclopedia of casino games and strategies, joined Dancer two months ago.

MONEY TRAIL
Slot players lost $49.4 million in Pennsylvania's 11 casinos during the week ended April 8, the Gaming Control Board reported. That's up from $47.43 million in the comparable week last year. This week's total includes $959,144 from the Valley Forge Resort Casino, which was not open last year.

The state gets 55 percent of the "gross slot revenue," or what's left of players' bets after jackpots are paid.

Statewide, slot machines have a 90.05 percent payout rate since the fiscal year started in July; for every $100 put in, the machines return an average of $90.05. Payout rates for Western Pennsylvania casinos:

• 89.86%: Rivers; slot revenue for the week was $5.05 million, down from $5.25 million last year.
• 89.78%: Meadows; slot revenue for the week was $4.71 million, down from $4.75 million last year.
• 90.43%: Presque Isle is Erie; slot revenue for the week was $3.28 million, down from $3.29 million last year.