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Howard Stutz

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AGA says Internet gambling can be regulated

26 Mar 2010

By Howard Stutz

LAS VEGAS, Nevada -- The gaming industry's Washington, D.C.-based lobbying group has shifted course on its view of legalized Internet gambling and now believes the technology exists to allow the activity to be regulated at the state or federal level.

In a new policy statement, the American Gaming Association said it was open to the concept of legalized Internet gaming, as long as a regulatory structure was in place to protect consumers and the game's integrity.

But the organization, which represents the bulk of the nation's casino operators and slot machine manufacturers, has not taken a stance on any of the bills now floating through Congress that could legalize all or some forms of Internet gaming, estimated to be a $26 billion a year industry.

"If something were to start, then fundamentally this give us a seat at the table," American Gaming Association Chief Executive Officer Frank Fahrenkopf Jr. said Wednesday. "The majority of our board now has a favorable stance on Internet gaming, as long as there is strong regulatory control. But also, we're not endorsing any of the bills now in the loop."

The policy is a change from the neutral stance toward Internet gaming the organization has taken since 2008. Before taking that view, the American Gaming Association supported a congressionally backed independent study of Internet gaming by the National Research Council at the National Academy of Sciences.

Internet gaming has been hotly debated in Washington, D.C., for much of the past decade. In 2006, the Unlawful Internet Gambling Enforcement Act made it a crime for banks and other financial institutions to process transactions used in online gaming.

Still, the American Gaming Association estimated $5.9 billion was wagered by U.S. residents with offshore online gambling companies in 2008 while $21 billion was bet by players worldwide.

"This is a topic our board has discussed many times," Fahrenkopf said. "The board has been split three ways: those who were opposed, those who were in favor and those who were unsure. That left us pretty neutered, but this stance allows the organization to be a player in what is ultimately decided."

Harrah's Entertainment, which owns the World Series of Poker, supports legalizing Internet gaming and has backed a bill by Rep. Barney Frank, D-Mass., that would establish a framework to permit online gambling operators to accept wagers from U.S. residents.

MGM Mirage took a short-lived stab at running an Internet gambling site in 2001, but abandoned the idea after 21 months. The casino was licensed on the Isle of Man and did not accept wagers from Americans.

Fahrenkopf said the American Gaming Association studied the issue over the past few years. The member committees explored three issues: whether the technology was available to regulate the activity and safeguard against money laundering and underage gambling; whether Internet gaming would cannibalize the commercial casino industry; and whether federal or state regulation was a better process.

Fahrenkopf said the committee that reported to the association's board on technology decided systems now available would properly regulate Internet gambling with appropriate law-enforcement oversight and would provide appropriate consumer protections for individuals gambling online.

With almost $6 billion gambled online by Americans despite the 2006 act, the association believes any cannibalization has already been realized.

"It might even become a new profit center for some of our members," Fahrenkopf said. "The dynamic for the large companies is certainly changing."

The association was split in favor of federal or state regulation.

Fahrenkopf said a hearing on Frank's bill could take place in the spring. A bill introduced in 2009 by Sen. Robert Menendez, D-N.J., would allow for federal regulation of online poker.

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