Financial Times FT.com

Online gambling moves need traditional backing

By Joseph Menn in San Francisco

Published: November 8 2009 20:43 | Last updated: November 8 2009 20:43

While online poker companies and US gamblers have greeted this year’s proposed legalisation measures with enthusiasm, such efforts are unlikely to succeed without further support from traditional bricks and mortar casinos.

The most recent important move by online gaming supporters in Congress came in August, when senator Robert Menendez of New Jersey introduced a bill that would exempt “games of skill”, which it explicitly defined to include poker, chess and backgammon, from gambling bans.

Mr Menendez’s bill follows the introduction in the spring of a more sweeping attempt at legalisation and regulation by Barney Frank, a powerful House committee chair. Mr Frank has been swamped with financial regulation and other economic crisis issues but looks likely to get his bill at least to a floor vote.

The Senate has long been seen as the trickier of the two legislative bodies to get through and poker lobbyists gave Mr Menendez’s bill a warm welcome. But while the senator plays a role in the Democratic leadership, he does not chair a relevant committee and has no co-sponsors for his measure. No hearings have been scheduled and that would ordinarily be the next step.

Regardless of Senate procedures, the bottom line is that no legislation on internet gambling is going to become law without the consent of Senator Harry Reid, former Nevada Gaming Commission chairman, who as Senate majority leader is the most important man in the chamber.

“I would agree that Harry Reid is critical to any gaming issue that is going to move through,” said John Pappas, executive director of the Poker Players Alliance. “We’re hopeful we can continue to educate him.”

Mr Reid has not moved from his position, which is that internet poker would be too unwieldy to control, Jim Manley, his spokesman, said on Friday. “He’s still pretty sceptical about the ability to regulate online gaming,” Mr Manley told the Financial Times.

Mr Reid is the Senate’s biggest recipient of donations from the casino industry and the bricks and mortar industry remains divided. Harrah’s Entertainment and MGM Mirage favour allowing some online betting, while Wynn Resorts and others are opposed.

That split has taken the traditional companies’ American Gaming Association out of the fight.

The Players Alliance acknowledged it would help if it could win support from others in the non-virtual side of the industry.

Mr Pappas said positive sentiment would inevitably spread in Las Vegas as the companies realised that online poker was the “way of the future”.

In the meantime, federal prosecutors continue to seize funds moving between gambling companies and their clients and occasionally to wrest guilty pleas from executives.

And even the best-laid lobbying campaigns can backfire.

David Carruthers, then chief executive of London-traded BetonSports, once wrote an op-ed piece supporting the US legalisation of sports betting, while his company secretly controlled the industry group the Offshore Gaming Association.

The latter fact emerged only after his indictment. Mr Carruthers is due to be sentenced in about two months’ time.

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