William Hill waiting for online gambling to get past hurdles

Jun 19, 2012 3:07 AM

Internal operations at some companies hoping to do Internet-related business in Nevada may require serious tinkering before state gaming regulators will give their approval.

That fact of life became apparent as the Gaming Control Board recommened for approval William Hill’s purchase of three Nevada sports book operators and IGT as an Internet service provider.

Blame it all on the rapidly evolving global landscape associated with Internet business. It has resulted in a hodge-podge of conflicting rules about who is or is not suitable in this or that jurisdiction.

The prospects related to Internet poker have attracted much of the current interests. No one knows how the sports betting business may be impacted as New Jersey Gov. Chris Christie continues to be intent on challenging the 1992 federal prohibition on sports betting. Christie says he will allow Atlantic City’s beleaguered casinos to begin accepting sports bets this fall.

The lineup of U.S. and U.K.-based bookmakers centering their North American operations in Nevada guarantees Nevada licensing decisions will continue to get a lot of attention.

But one storyline at a time.

British bookmaking giant William Hill will probably get approval this week from the Nevada Gaming Commission to put its name on the roughly 160 Nevada sports betting locations now controlled by Leroy’s, Brandywine and Cal Neva by the start of football season.

Hill executives told the GCB none of the books will be closed and at least $10 million – perhaps more “if conditions warrant” – will be spent on upgrades over the next 18 months.

“It’s hard to say no to a deal that will bring this kind of new money and economic muscle into the state,” a former regulator confided.

But the full integration of the existing WH structure into Nevada gaming may be slowed by decisions that are still to be made concerning Hill’s online joint venture partner.

The Commission is expected this week to endorse the 3-0 recommendation the State Gaming Control Board has given William Hill, which generates about 92 percent of its annual revenue from U.K. residents visiting more than 2,000 betting shops across the U.K.

The still to come decisions related to Hill involve Playtech, an Israeli supplier of gaming software to Hill and dozens of other online operators around the globe. Playtech is 45 percent owned by Teddy Sagi who served about 18 months in an Israeli prison for what Hill General Counsel Thomas Murphy termed, “the equivalent of an insider dealing conviction.”

Hill CEO Ralph Topping admitted to Control Board members he “had a coffee with Mr. Sagi about a year and a half or two years ago during a trip to Israel. About the influence of Playtech on William Hill, Topping said, “It’s a misconception in the marketplace that Playtech has been sprinkling magic dust on our company.”

William Hill executives said Sagi has no involvement with the company’s Online joint venture (Playtech has a 29 percent stake in WHO), which is operated out of Gibraltar where Playtech has been licensed.

Murphy emphasized, “He (Sagi) has no day to day control of Playtech.” Sagi’s stock, it was explained, is held in trusts that separate him from any decision-making related to operations.”

Nevada’s attitude toward Playtech will be determined in an ongoing separate investigation that could result in Hill being forced to buy its way out of the Playtech partnership.

Control Board members had no problems with the suitability of top Hill executives who Chairman Mark Lipparelli jokingly referred to as a “bunch of boring individuals, which is a plus.”

But the three Board members admitted to “a certain degree of uncomfortable feelings” about the quality of Hill’s due diligence with respect to its online operations.

For instance, the company shut down its Australian operations only days before the Board was due to meet citing concerns about whether its Australian business was in conflict with current laws.

Murphy said there are about 280 countries in which there may be business. “The nature of the way that this has evolved is that most companies are operating on the basis they accept business until they look at it and decide that they don’t want to take that business. And we are in exactly the same boat.”

Because of conflicting jurisdictional conclusions about what companies are or are not suitable, applicants for online licenses in Nevada are apparently being given an opportunity to “rehabilitate themselves” – the way one veteran gaming lawyer phrased it.

In other words, get in sync with Nevada rules, whatever they may have been doing elsewhere.

Lipparelli made reference to that during the Board’s recent recommendation of IGT for an online service providers license. He commended IGT for dumping online business that came with its purchase of Entraction, a Swedish company doing business in several countries where rules were in conflict with those under which U.S. companies must operate.”

But as my veteran gaming attorney friend said, “Does this mean we could conceivably see the rehabilitation (and licensing) of a company like Full Tilt?” He added, “I think we’re seeing some softened licensing standards.”

And what conflicts may arise if Atlantic City casinos successfully open sports books?

“Everybody is keeping an eye on Atlantic City,” an insider at one of the big Nevada sports book operators said. “You can bet on that.”