State set to bet on the Internet

Jul 3, 2001 8:56 AM

With a favorable federal court ruling, Nevada casinos are poised to jump into Internet gaming - and grab the lion’s share of the action.

The state’s "interactive gaming" law took effect this week, and Tony Cabot, a gaming specialist with the law firm of Lionel Sawyer & Collins, figures that Nevada casino companies "could capture 50 percent to 75 percent of the (Internet gaming) market."

But Net gaming - which Cabot estimates will someday rival old-fashioned bricks-and-mortar casinos for revenue - still faces a series of legal hurdles. Despite passage of Assembly Bill 466, Nevada cannot move forward with interstate gambling until federal issues are cleared away.

Former Sen. Richard Bryan is optimistic. He notes that efforts to outlaw Internet gambling failed in 1999 and that no comparable legislation is on the horizon. "Momentum has waned considerably,’’ he reported Monday.

Cabot, meantime, scored a victory in a Louisiana federal court when he successfully argued that the federal wire act prohibiting credit for Net gambling applies only to sports wagering. The case is now on appeal at the Fifth Circuit Court.

"The Fifth Circuit decision could be a show stopper," Cabot warns. But if the decision is upheld, as Cabot predicts, he recommends that Nevada casinos move quickly. Disney has already developed an interactive site offering million-dollar prizes. Great Britain and Australia have gaming sites up and running.

"Competitors are moving fast. We can’t sit back and look at this issue for two to four years. Just ask Borders about," he says.

As state gaming regulators prepare for public hearings July 31 and Aug. 1, casinos are maneuvering to secure betting websites. Industry analysts say that Nevada casinos hold a strong hand, including recognizable brand names, cross-marketing opportunities and strong customer databases.

Nevada and its counties are also counting on web gaming as an economic development tool. The technology might even be a boon to the state’s struggling rural counties. While a Las Vegas-based Net gaming site must be associated with a 300-room resort, operators in outlying counties have far lighter standards under AB466. This could open the way to joint ventures locating web servers in rural towns.

"Nevada casinos can do a very sophisticated website for $5 million - or about the cost of a porte cochere," Cabot points out.

The growth curve certainly appears steep. Christiansen Capital estimates that online betting, a $3 billion industry today, will double by 2003. Fueled by a proliferation of hand-held digital assistants, cell phones and web-fed TV, the convergence of gaming and entertainment is well under way.

The wild card, says attorney Bob Faiss, is credit. "Credit cards are the key to the virtual casino," he notes. Until the regulations curbing interstate gambling are cleared up at the federal level, Nevada is in a holding pattern. "What Congress does drives what we do," he said.