Notes from Track Three

28 May 2002

by HG

Following is an account of the Global Interactive Gaming Summit and Expo through the eyes of an attendee.

The third track of the program for this month's Global Interactive Gaming Summit and Expo in Toronto was geared toward topics that weren't specifically casino or sports-book related and covered issues such as regulation, payment solutions and unique betting options.

The first seminar on day one dealt with legal issues in the United States, particularly U.S. Rep. Robert Goodlatte's (R-Va,) Internet gambling prohibition bill. The panel included New Jersey Assemblyman Anthony Impreveduto, Walton Chalmers from the American Gaming Association and former New Jersey regulator Frank Cantania of Cantania Consulting.

The crux of the seminar was "different year, same scenario." The U.S. government appears willing to do everything in its power to make sure Internet wagering is illegal, including asking banks not to accept offshore gambling transactions and moving legislation that's not enforceable. The one concession the government has consistently given is in the area of horse racing.

Chalmers indicated that the AGA would only give its stamp of approval to the bill if a few concerns are addressed, namely that the bill's horse racing exemption is unfair to the casino industry. While Chalmers spoke in Toronto, however, the final touches were being put on a new version of the bill that addressed the AGA's concerns. On Wednesday, the association announced its support for the legislation after Goodlatte assured that an amended version of the bill would include provisions allowing Nevada sports books to take wagers from bettors in other states and for the operation of intrastate virtual casinos.

Impreveduto last year initiated a campaign to enable New Jersey casinos to offer their products online to bettors within the state and possibly even to bettors all over the world. Impreveduto's bill, reintroduced to the New Jersey Assembly in February 2002, would require that bets go through servers placed on the floor of the casinos in Atlantic City. The philosophy is that betting at online casinos based on these servers would be no different than betting at an Atlantic City casino.

The bill was shot down in the Assembly last year; many argue this was only because Impreveduto stood very little chance as a Democrat of passing his bill in a legislature controlled by Republicans. The balance of power has shifted, though, with the start of the session, and Impreveduto believes his bill will go through.

One thing that was evident during discussions about U.S. policy was a lack of enthusiasm when it came to defending the U.S. government's official position on Internet gambling. No doubt Canadian MP Dennis Mills' comments earlier in the morning in favor of Canada licensing online sports books and casinos emphasized the fact that nations throughout the democratic world are embracing the concept of regulating Internet gambling instead of banning it. While Internet gambling was originally regulated primary out in Caribbean countries, advocates of prohibition tried to dismiss the regulatory model by stating that "The larger free world doesn't agree." That argument is now dead.

The second session involved niche products and covered online lottery games from the Ontario Lottery Corporation, betting exchanges from Betdaq and skill-based games from can (and does) operate its skill-based online bingo games out of Vancouver because the games are not based on chance, and thus not considered gambling in the United States or Canada. Everyone playing skill-based bingo has the exact same cards; the person who notices a winning line first takes the pot. In other words, those individuals with the quickest hand/eye coordination and reaction are the winners.
All stakes go back to the players, and makes its money through advertising.

Betdaq, meanwhile, is one of several new Web Sites offering person-to-person wagering. Others include from England (the industry leader) and Representative from , a relatively new player in the P2P space, had a presence at the conference as well. The group offers its services as an add-on for already existing fixed-odds sports books seeking new options for customers.

The second day of the summit featured seminars on payment solutions and pari-mutuel wagering. The payment solution panel, featuring Charles Crawford from Crown Consulting, Mario Wells from and Melody Wigdahl from Glenkirk West, was clearly the most highly coveted session of the week; the room in which it was held was filled to capacity.

The fact that the seminar was so well attended comes as no surprise considering the ongoing problems with payment processing, the lifeblood of the industry. If players can't make payments into their accounts or withdraw money from their accounts, and if gaming sites can't guarantee that payments are legitimate, the industry would cease to exist. As emphasized by the panel. there are major problems with using credit cards for deposits and the situation is getting worse. Consequently, new payment methods are continuously being explored, and it is believed that within three years, less than half of deposits will be made though credit cards.

The credit card problem is twofold. Most recently, Mastercard has disallowed all third-party transactions. Therefore, casinos must clear the credit card payments in the countries they are located through local banks. This is rarely feasible and has made MasterCard a virtually useless option for offshore deposits. Second, and probably a more serious concern, is the need for any companies engaged in gambling to use the merchant code 7995, which signifies a gambling-related transaction. The decision to accept the transactions is up to the credit card issuing banks, and to the dismay of the industry, U.S. banks have been rejecting the coded transactions across the board. In the months following the implementation of the 7995 policy, a number of merchant banks evaded the restriction by not using the code, but MasterCard rectified that situation in November 2001 when it started auditing online gambling sites and fining banks that failed to comply.

Consequently, the gaming industry is seeking alternate payment methods, and the payment seminar explored various options. The goal is to allow for easy payment methods, along with ones that permit impulse spending (i.e. the chance to make a bet the instant the bettor wants to). If a bettor has to wait a few days for a deposit to clear, he probably won't make the deposit. The most promising option seems to be private-label debit cards, with which players can deposit to a pre-paid card, which will be held by an offshore bank. The prepaid card is read to a merchant, who then credits the card for the amount of the deposit. The cards also are ideal because they can often be used at ATMs. Still another option explored was online checks.

Despite negative developments of late, the overall theme of the seminar was optimistic: The industry is currently under siege by the U.S. government, but in the end, bettors will find a way to gamble, and the industry will do what it can to make the transaction process as easy and painless as possible.

The second seminar on day two addressed advances in pari-mutuel wagering. The panel included Keith Cullen from eBet Online, Christophe Dufournier from PMU of France and Nick Eaves from Woodbine Entertainment Group (formerly the Ontario Jockey Club). Attendees learned about the PMU's and Woodbine's plans to make horse racing more viable in France and Canada (respectively) through online and interactive television wagering.

Dufournier pointed out that more race bettors in France wager on racing through wireless media and interactive TV than those who wager via the Internet. The Ontario Jockey Club, meanwhile, doesn't utilize interactive television but does have horseplayer interactive (, which enables bettors to wager via phone and watch the races on a specialized horse racing channel in Canada.

Overall the event was very successful and adequately addressed the industry's key issues. Additionally, delegates had ample networking opportunities and plenty chances to discuss the gambling issues of the day and compare notes. The summit gets bigger every year, and that should be another indication that the online gambling industry is here to stay.

Related Links
Global Interactive Gaming Summit & Expo (GIGSE) 2002