Regulators expand review of Internet gambling ties to Nevada licensees | NevadaAppeal.com

Regulators expand review of Internet gambling ties to Nevada licensees

BRENDAN RILEY Associated Press Writer

CARSON CITY, Nev. (AP) – Shoveling against a seeming Internet tidal wave, state regulators are expanding their reviews of Nevada licensees with ties to the burgeoning online gambling industry.

What the Nevada Gaming Control Board has found is troubling: Some of the biggest entities and individuals in licensed gambling are dabbling in Internet ventures that have come under increasing scrutiny.

There’s a U.S. ban against online sports betting, and a bill that passed the Senate last year would make it illegal to bet on casino-style games online. A companion bill is pending in the House.

In Nevada, the big concern is that federal action against some offshore betting operation could give a black eye to someone holding a state gambling license – and in turn tarnish this state’s regulatory apparatus.

”It’s such uncharted waters right now,” Gaming Control Board Chairman Steve DuCharme said in an interview. ”Legitimate gamblers have their own reputations to protect – as well as the integrity of the state.”

”They need to be very careful about getting into industries that are still emerging,” adds DuCharme, noting the recent U.S. District Court conviction in New York of a man who operated a sports betting business on the Internet.

Federal prosecutors say Jay Cohen, head of World Sports Exchange in Antigua, was the first to stand trial in the nation for running an Internet sports gambling site. He plans an appeal.

DuCharme says the potential for problems with Internet gambling is a bigger concern for casino-dependent Nevada than the prospect of increased competition from expanded Indian gambling in neighboring California and elsewhere.

”At least with tribal gambling we can determine if there’s a legitimate compact with a state,” he said. ”But with Internet gambling we don’t have that luxury.”

With Internet gambling, ”we don’t believe the technology is out there that will allow these companies to restrict access in those jurisdictions where it’s not legal,” he said.

”We’re investigating further to see what types of firewalls these companies have to restrict access,” he said. ”We’re concerned that Nevada licensees might run afoul of either state or federal laws.”

Nevada-licensed companies that have been scrutinized so far by the Control Board include American Wagering Inc. of Las Vegas – which now faces a GCB complaint because of involvement in an online betting enterprise in Australia.

AWI is fighting what it considers overzealous attempts by an undercover Control Board investigator to circumvent protections designed to block Americans from betting with the company’s online sportsbook in Australia, Mega$ports.

Reno-based International Game Technology recently decided to pull out of another online-related venture in Australia after disclosing the deal to state regulators and hearing their concerns.

The world’s largest slot machine manufacturer is dropping its stake in Access Systems, a Sydney software maker specializing in online gambling systems.

In a third Australian case to catch the Control Board’s eye, an Internet casino that will primarily target overseas customers is being planned by Jupiters Ltd. – in which Las Vegas-based Park Place Entertainment Corp. holds a 19.9 percent interest.

Park Place owns, manages or has an interest in 29 gambling properties operating worldwide under the Bally’s, Caesars, Flamingo, Grand and Hilton brand names. .

Scott LaPorta, the corporation’s executive vice president and chief financial officer, says Park Place has no direct involvement in Jupiters’ Internet gambling activity.

”Also, they ensure that none of their Internet gaming involves taking wagers from citizens of the U.S.,” LaPorta added. ”That’s their corporate policy, and they have the systems in place to protect against that.”

Another case involves Terrence Lanni, chairman of the board of MGM Grand Inc., one of the premiere hotel and gambling companies headquartered in Las Vegas. Lanni recently was named a director of Youbet.com Inc., a global online live sports event company.

Youbet.com says its role in the betting process is to transmit information on wagers to licensed wagering facilities, and not actually accept or place bets.

Despite the Youbet.com caveats, DuCharme says such moves by Nevada licensees are being monitored because of the overall concern about gambling’s new frontier of slots, roulette and blackjack over the Internet.

The number of online casinos has mushroomed from 15 in 1996 to more than 700 today. Revenue to the roughly 200 companies that operate those sites is estimated to reach nearly $1.5 billion this year and $3 billion by 2002, according to industry research.

By comparison, the nation’s 450 commercial casinos took in $20 billion in 1998, while 160 American Indian casinos had $7.2 billion, according to the American Gaming Association.

Cybercasinos accessible to U.S. players are headquartered offshore, from the Caribbean to Europe to Australia. Such gambling is legal in about 20 countries.