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UNLV Law: Wire Act loophole permits gaming!

Jul 31, 2001 7:20 AM

With a Capitol Hill showdown looming, Nevada takes another step toward Internet gaming this week. Dean Richard Morgan of the UNLV Law School on Wednesday will issue a legal opinion that the federal prohibition on Net betting applies only to sports wagering. The 1922 Wire Act only bars interstate betting on “sporting events and contests.’’

Exploiting this apparent loophole, the Nevada Legislature passed AB466, which paves the way for Internet gaming. This week, state regulators are conducting hearings on the legal and technical hurdles to implementing the law.

As the first state to enact such legislation, Nevada is on a collision course with congressmen who are offering a half-dozen bills to block bets on the Net. Most of the measures target Net betting by prohibiting the extension of electronic credit.

But, thus far, congressional efforts have stalled. The Bush Justice Department has not taken a position on the issue and has not responded to invitations to testify on the legislation.

“This could be a wonderful opportunity for the state and the federal government to get together on consumer protection,’’ Morgan told GamingToday. “An outright ban (on Internet gaming) won’t solve anything. It’s already out there.’’

By some estimates online gaming is a $3 billion-a-year business worldwide, and Las Vegas casinos are already dipping their toe into the waters.

On the Bellagio website, for example, visitors can click on “Play Games & Win Prizes” to play Krazy Keno or Phantom Belle poker. The games by WagerWorks allow players to earn loyalty points toward free buffets and other comps. Players must fill out a registration form attesting they are over age 21.

Harrah’s Entertainment also has a play-for-fun site available to its Total Rewards members. The site was designed by Chartwell Technology.

Just a handful of states have discussed Internet gaming, giving Nevada an early lead in the online sweepstakes. Only Louisiana has passed a law, which opens the way for Net-based parimutuel betting there. The Casino Association of New Jersey is on record in opposing online wagering.

Nevada, meantime, is lining up allies to generate Net profits. Contradicting nay-sayers, Citibank vice president David Zimbeck says credit can, in fact, be protected and verified online. Similar assurances have come from Visa card officials. A former America Online chief technical officer is also scheduled this week to discuss the tools available to monitor cyberbettors.

Fearing that the strict interpretation of the Wire Act will be upheld by federal appellate courts, some congressmen such as Sen. John McCain, R-Ariz., want an ironclad ban on Internet gambling.

But Bob Faiss, counsel with the law firm of Lionel Sawyer & Collins, said these legislative initiatives have failed to garner widespread support.

“Their efforts to get the Bush administration involved haven’t paid off,’’ he says.

For Las Vegas’ gaming giants, the e-payoff could be huge. “We believe that operators with strong brands and a solid, established customer base will be the most viable,’’ according to a recent prospectus by Bear Stearns.

But the analysis delivered some sobering news. Just one Vegas casino site”” Caesars.com””received enough unique visits to be listed among the top 10,000 websites. Market research from last January showed that Caesars, which had 137,000 unique hits, fell far behind two other betting venues: freelotto.com (16 million) and Australia’s Lasseters.com.au (3.5 million).

Sources say that the likely outcome of the Capitol Hill wrangling will be legislation that regulates ”” and potentially taxes ”” gaming at the federal level.

“In our view, a fully regulated environment must be established for the industry to prosper,’’ said Bear Stearns analysts Marc Falcone, who will follow UNLV’s Morgan on Wednesday afternoon.

The Nevada Gaming Commission’s two-day meeting on Net gaming will be conducted at the West Charleston campus of the Community College of Southern Nevada. The program begins at 9 a.m. Tuesday.