Apr 26, 2001 1:43 AM
The Nevada state Assembly on Wednesday paved the way for the state’s largest casinos to enter the multibillion-dollar online gambling business, but debate continued Thursday on a companion bill imposing fees of up $1 million for state licenses to operate gaming sites.

The first bill, which charges the Nevada Gaming Commission with developing a set of rules and safeguards for casinos looking to provide Internet gambling, sailed through the lower house by a 37-2 vote.

The bill stipulates that prospective sites comply with state and federal laws, which are not entirely clear regarding the legality of Internet gaming. Nevada's gaming regulators have stated their belief publicly that the U.S. Justice Department is interpreting existing federal law as prohibiting it. However, that interpretation has been disputed in a recent U.S. District Court case in Louisiana.

Aside from the legal issues, the biggest task facing regulators will be finding technology that ensures the games are secure and reliable and provides a “reasonable assurance,” as the language of the bill requires, that minors will be prevented from accessing the sites. Also, the bill restricts the sites to taking bets from players in jurisdictions where online gambling is legal so sophisticated filtering mechanisms will have to be worked in to enable casinos to positively identify players and track the locations of personal computers around the world. The process could take 18 months or more, according to experts.

The stakes are high. Online wagering last year topped $1.5 billion, according to estimates, and is expected to exceed $6 billion by 2004.

Nevada's gaming operators, eager for a piece of the action, backed the bill through their powerful Carson City lobby. Depending on the outcome of the licensing dispute, they're poised to become the first mainstream companies in the United States to go online with licensed, regulated casinos. It's an industry the big Las Vegas operators are expected to dominate eventually with a marketing combination that parlays internationally recognized names like Caesars Palace, The Mirage and Harrah's with the lure of the Las Vegas Strip.

Not surprisingly, both bills effectively restrict participation to the largest companies. In the state’s two most populous counties, Clark and Washoe, licensees have to be resort hotels with a minimum of 18,000 square feet of casino space, 1,600 slot machines, 40 table games and at least 120 rooms. In the rest of the state, only casinos in existence 10 years or more will be considered for licenses. These properties must have at least 100 hotel rooms and 150 slot machines.

The companion bill, which passed the Assembly but failed to get a required two-thirds majority, would further raise the bar by requiring operators to pay a $1 million license fee renewable every two years. The fee would be levied in addition to the 6.25 percent statewide tax on winnings.

Slot manufacturers are concerned the money provisions of the second bill will freeze them out of the action and have lobbied hard to defeat it. The smaller gaming operators have also protested the high fees.

As currently written, the second bill requires manufacturers to ante up first-time license fees ranging from $50,000 to $250,000. The licenses are renewable annually at fees ranging from $25,000 to $50,000 for every operator with whom a manufacturer shares revenues. They’ll also be charged monthly fees for each revenue-sharing agreement. In addition, they'll be charged state gaming taxes on a sliding scale of 6.25 to 12.75 percent.