TORONTO – One of the most striking contrasts at the recent Internet gaming conference here was in the language that government officials used in discussing regulation. This growing industry is mostly unregulated, of course, but the tone of officials who do regulate it – or, as in the case of Nevada's Brian Sandoval, hope to regulate it – revealed attitudes ranging from tough to conciliatory.
The session that drew the largest crowd at the Global Interactive Gaming Summit & Expo was the one devoted to efforts in Nevada and New Jersey to license and regulate online casinos. Sandoval, chairman of the Nevada Gaming Commission, and Anthony Impreveduto, the Assemblyman who led an unsuccessful attempt to legalize Internet gaming for New Jersey casinos, both took a tough line.
Sandoval cautioned the audience that before any licenses are issued, Nevada regulators have to consider pending federal court decisions, potential federal legislation and the stance of the U.S. Department of Justice, all to ensure that Nevada would not be running afoul of federal law.
But Sandoval also gave a clear indication of what the regulatory climate would be if Nevada is able to proceed.
"We will have our own interactive gaming lab and we will inspect every piece of every system," he said. "We will require employees of manufacturers of interactive gaming systems to obtain work permits, which requires a background check."
Operators of gaming sites and the software developers will have to meet standards of suitability that "will be as stringent as the standards for a non-restricted gaming license," Sandoval said. "We will review the historical business practices of our applicants. We will review the personal background, including criminal, financial and social associations of the person who applies for a gaming license in the state of Nevada.
"We will look to see the record of compliance with other regulatory authorities. We will look at the previous locations of the applicant's operation."
Impreveduto said his bill, which he expects to succeed when it's re-introduced in January, would permit licenses for Internet casinos to be issued only to land-based casinos that are already licensed in New Jersey. He boasted that New Jersey has "one of the most strict licensing procedures."
"The check is very intense," he said. "For you to get a license to own a casino in New Jersey, they will know your history, your grandfather's history and the history of your children yet to come!"
The same scrutiny would apply to operators of virtual casinos, Impreveduto said. "The regulatory body must be able to ensure the consumer that Internet gaming operators are legitimate, the games provided are fair, they have the financial stability to pay winnings to their players and they respect the privacy of their players."
His bill stipulates that the server for an online gaming site would be located on the floor of the land-based casino, "in full view of the gaming enforcement people." Regulators would be authorized to test the site's software any time.
For an Internet casino found to be cheating players, Impreveduto said, the stakes would be high: "You not only lose your virtual license, you lose your land-based license. . . ."
"All the Tens will be in the Blackjack Deck"
"So we know the game will be safe, we know the game will be fair," Impreveduto said. "We know that all the tens are going to be in the blackjack deck. We know that not every seventh roll of the dice is going to be seven."
The next day, some speakers at the "International Regulators Panel" were much less aggressive about regulation. Sfiso Buthelezi, chief executive of the National Gambling Board of South Africa, said a report commissioned by his organization had called for an "easy but stringent licensing process."
That would seem to be a contradiction in terms. But Buthelezi added that laws being drafted to govern interactive gaming in South Africa will contain strong player protection measures, including a ban on credit betting and truth-in-advertising requirements.
He concluded by saying that the board is "convinced that the future of dealing with Internet gambling is to regulate, regulate and regulate."
Like Sandoval and Impreveduto, Buthelezi was talking about the future, for none of their jurisdictions is ready to start licensing online casinos. This week, Nevada's governor signed an enabling bill, but experts say it could be 18 to 24 months before a license is issued. Things have been moving slowly in South Africa, but Buthelezi said the first license for a virtual casino could be issued before the end of this year.
Another member of the international panel, however, an official from the Caribbean government of St. Kitts and Nevis, which has been issuing licenses for several years, had nothing to say about rigorous background checks or testing software.
Perry Peets, director of the ministry of consumer affairs and commerce, which processes applications for online gaming licenses in St. Kitts-Nevis, was trying to sell the gaming site operators in the audience on basing their operations in those islands. And he seemed to want to assure them that regulatory concerns would not go too far.
". . . we have structured our regulatory framework to be flexible, yet firm," Peets said, "because to many of us (in the Caribbean) the offshore sector is not a game. It is a serious bread-and-butter issue. . . .
"We want to forge a partnership with your industry. In the Caribbean, we are your allies."
Peets was filling in for Dwyer Astaphan, the St. Kitts-Nevis minister of tourism, information, telecommunications, commerce and consumer affairs, who became sick just before the conference. Peets read a speech prepared by Astaphan.
St. Kitts Not Impressed by "Recent Efforts at Feigned Morality"
"Internet gaming means opportunity for us," according to Astaphan's text. "We respect the regulatory approach to this and any other business, as we are aware that every game must be played by rules. But we are not overly impressed by recent efforts at feigned morality, by declarations about harmful practices and the like. We suggest a proper regulatory environment and we also want to be practical.
"We must all carve out a living, and small nations like mine with limited resources have to depend more on service industries to sustain our economies. This industry suits us fine."
After outlining the advantages of operating online gaming in St. Kitts, Astaphan's remarks concluded by saying: "Please note that we do not offer red tape, we offer red carpets to reputable players."
Questions directed at Peets were handled by Wayne Wattley, manager of net.kn, a private company that works with the St. Kitts regulators. Wattley said the government has issued 20-25 online gaming licenses. About half of those licensees have sites that are in operation.
But don't look for a list. One of the services that St. Kitts-Nevis offers, Wattley explained in an interview, is secrecy.
"We provide anonymity for persons who want that," he said.
Another advantage that the minister wanted him to mention, Wattley said, is speed of licensing.
"Once the paper work is submitted, you can have a license in two to three weeks," Wattley said.
It's hard to imagine Sandoval, or any gaming regulator in the U.S. or Australia or Great Britain, making such a promise.
To be fair, the context for regulating online gaming differs sharply between Caribbean countries and the First World. As the Astaphan speech spelled out, a country like St. Kitts sees e-commerce as a golden opportunity for a poor nation to nurture a new industry, to attract foreign investment and revenue, and to train its young people in technical skills.
New Jersey and Nevada put far more emphasis on protecting consumers. But they also want to protect their huge land-based gaming industries, which fear that any kind of scandal involving gaming could come back to haunt them. The land-based casinos don't want to lose business to the Internet, but they want Internet gaming to be as regulated as they are.
Lawmakers in New Jersey and Nevada believe that players will be attracted to gaming sites that are rigorously regulated, giving their home-state Internet casinos – assuming they are allowed to license them -- an advantage in competing against sites in loosely regulated, or completely non-regulated, venues.
As the colorful Impreveduto told a somewhat unappreciative audience in Toronto, "If in fact there was a place to play that you knew was safe, why would you go somewhere else that you have no idea. . . . Would you play a street-corner crap game, would you play three-card monte in New York City? You'd be a fool, if you don't know if it's legitimate."