Banks have yet to install online gambling software

May 14, 2013 3:09 AM
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Station Casinos Online PokerSports wagering by deep-pocketed private groups could produce a significant spurt in commercial activity as more people with more money arrive to enjoy the fun and games Nevada’s number one industry offers.

But how about those red flags? They mark challenges that need careful study if the proposal before state lawmakers is to become law.

The promise of additional spending and the jobs and tax revenue it generates is appealing, everyone seems to agree. But would these “private entities” attract additional unwelcome attention from the feds? Would it create a massive money laundering problem? And how is the Gaming Control Board to investigate these groups and their principals?

“Right now we do not regulate bettors,” Control Board Chairman A.G. Burnett told members of the Assembly Judiciary Committee who furrowed their brows and asked a lot of questions. Action on Senate Bill 346 is expected to come before the end of the week.

Greg Brower, the state senator and former U.S. attorney told the Assembly committee that the answer to all concerns is in the special emphasis on “transparency requirements.” The entities would be based in Nevada. All contact with regulators would be taking place here.

That seemed to ease some of Burnett’s concerns. SB 346 “seeks to take advantage of Nevada’s unique status” as the only state that allows a full menu of sports wagers. New Jersey is challenging the federal prohibition that keeps it from offering sports betting and a number of other state legislatures are paying careful attention to all this drama, readying their own proposals to legalize sports wagering should they sense an opportunity.

How would it benefit Nevada? Assembly Judiciary Chairman Jason Frierson wanted to know.

There was a full range of responses to this question but former Control Board member Randall Sayre probably covered the most important ground nicely when he said, “We anticipate a significant increase in handle as we access untapped markets.”

Another 346 proponent saw private entry wagering as “portfolio diversification” by investment groups looking for opportunities that are not affected by the ups and downs of financial markets.

As for the challenges facing regulators and lawmakers, veteran gaming attorney Bob Faiss, who knows the industry and its evolution better than anyone, saw the private entity issue as roughly similar to the challenges facing lawmakers a half-century ago when they agonized over whether publicly traded companies should be allowed become Nevada casino owners.

“Nevada became the center of legal gambling in the U.S.,” he reminded lawmakers, “by recognizing opportunity.”

Here we are years later with another chance to recognize opportunity and make the adjustments necessary to take advantage of it, Faiss seemed to be telling committee members.

Station stands alone: Station Casinos continues having the cash game Internet poker stage to itself two weeks after dealing the first legal hands to Nevada players. Gaming regulators say there are some operational hurdles to be crossed but the “core process” appears to be functioning as planned.

Control Board Chairman A.G. Burnett told GamingToday there are some “issues” that will be dealt with over time as the system, participating players and financial institutions handling cash transactions get accustomed to the rules underlying this newest addition to Nevada gaming.

Burnett was reluctant to talk in detail saying he did not want to discuss proprietary components of the system developed by Station and its company partner Ultimate Poker. He did, however, say there is nothing to rumors of deficiencies in the methods used to determine whether a player is somewhere within Nevada borders as required by law.

“There is much more to it than simply determining the location of a player’s cell phone.”

One of the problems to be worked out over time, according to Burnett is the fact that “some banks” were initially declining credit card activity associated with the poker games. It may take some time, he conceded, for them to become comfortable with the fact that what’s happening is legal in Nevada “and that everything is taking place in a regulated environment.”

Some banks have not yet installed the software that enables a computer to recognize a “7995 transaction,” part of the string of numbers that identifies a legal transfer of cash for gaming purposes. This comes from a gaming industry veteran familiar with the complex coding used to speed credit card cash and transactions through the system that links players and the casino.

The difficulty, he explained, stems from the fact that when the federal prohibitions that prohibit Internet gaming transactions went into effect many banks simply stopped all 7995 transactions rather than try to differentiate between those that were legal or not illegal.

“It’s really a ramping up process that will take a little time and education,” he said, “but I think the biggest banks are well on the way to having the software in place because as Internet gaming spreads customers will be demanding it.”

As for other issues, Mac users do not yet have easy access to Ultimate Poker without loading Windows software. A Mac compatible system will eventually be available. Also, there were reports that at least one of the major cell phone servers was declining involvement during the first days of operation.

When will the next Nevada-based real money game be launched?

Burnett says the Board will issue approvals to prospective operators of Internet games as the underlying systems are approved. These green lights could be given at any time.

There may be at least one other factor affecting the timeline. Las Vegas-based gaming companies with resorts in Atlantic City may be waiting for Internet gaming – not just poker – to get the green light there late this year. Interstate agreements that allow the two jurisdictions to combine player pools may be approved by then.

That’s easy to believe with two Republican governors and legislatures committed to doing what they can to benefit their respective gaming and tourism industries.

Internet gaming operations In New Jersey are limited to existing casinos. Boyd Gaming, Caesars and Golden Nugget dominate the scene there. MGM has re-applied to be reinstated as the 50 percent owner of the Borgata, which is operated by co-owner Boyd.

Phil Hevener has been writing about the Nevada gaming business for more than 30 years. He can be reached at PhilHevener@GamingToday.com.

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