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War games: ’Net battles are getting nasty

May 7, 2002 10:39 AM

Is there a war ahead on the web?

Warning of regulatory pitfalls and competitive concerns, a key tech company is advising Nevada casinos to steer clear of software companies that do business with offshore operators.

"No (gaming) licensees should get into partnerships with these companies. They’re taking business away,’’ said WagerWorks exec Paul Mathews.

WagerWorks CEO Andrew Pascal carried that message to an Interactive Gaming Institute conference at UNLV last week. It was a not-so-thinly veiled shot at Boss Media, the Swedish company that powers several Internet gaming sites worldwide, including Sun International’s CasinoAtlantis in the Bahamas.

There are more than 800 net gambling sites, most of which were developed by a small handful of software companies. These sites generated an estimated $4 billion in gaming revenue last year ”” just short of the $5 billion posted along the Las Vegas Strip. But serious doubts over their security and legality have U.S.-based casinos treading lightly.

"I called one of the (offshore) casinos from Nevada and they said, sure, they’d take my bet,’’ Mathews told GamingToday. Last month, regulators reported they successfully cloaked their computer location to indicate they were betting from Canada.

Mathews likens today’s Net-savvy software salesmen to slot companies that illegally sold games into California for years. He notes that such firms hurt Nevada casinos and endanger the regulatory standing of any gaming company that might do business with them.

  MGM Mirage, which says it could have its Isle of Man casino online by year-end, has pledged to proceed cautiously. "We said from the beginning we weren’t going to go down this road at all without the cooperation and blessing of the respective gaming regulators who govern us," MGM Mirage President and Chief Financial Officer Jim Murren said recently. MGM also holds a small stake in WagerWorks.

Indeed, the tangled web of e-deals can be sticky. And some critics are quietly questioning Station Casinos’ latest alliance with Sun International. Investing $5 million in Sun’s Isle of Man site, Station received a 50 percent share in Sun’s virtual casino in the Bahamas.

Station chief financial officer Glenn Christenson doesn’t see a downside, however. "Sun has the license, the portal and a great reputation. For $5 million we’ll be able to leapfrog some of our competitors,’’ he stated.

Still, skeptics insist that such ventures spell trouble unless vendors can conclusively prove that they have not and are not accepting electronic wagers from underage bettors or illegal jurisdictions.

The hyper-sensitivity of the subject is amplified by antsy industry experts. When asked to comment on the critics, Tony Cabot, an Internet gaming specialist with the powerhouse law firm of Lionel Sawyer and Collins, declined, suggesting that any statement he made could impact his clients’ business interests.