Wagering sites wary of Las Vegas casinos

A skirmish in the war over online gambling comes to a head Monday, the deadline for Nevada legislators to approve a measure that could lead to legalizing the practice in the state.

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A skirmish in the war over online gambling comes to a head Monday, the deadline for Nevada legislators to approve a long-shot measure that could lead to legalizing the practice in the state.

The bill is not expected to pass, but it has garnered new attention as some big-name casinos have switched their position regarding the Net, for the first time seeking to legalize online wagering.

Many established Las Vegas casinos once opposed Internet gambling, fearing it would eat into their market share. But as they've watched online casinos rake in cash from people who never need to leave their computers to make a bet, several companies have changed their minds and are pushing for a regulated way to get in on the action.

Marc Falcone, an analyst with Bear Stearns, said that regardless of the Nevada legislature's decision, it could be a while--if ever--before consumers see an influx of land-based casinos on the Web.

"At this point, I don't think that there's anything for the existing casinos to be worried about," Falcone said.

However, should the land-based casinos jump into the game, win a favorable regulation scheme, and set up sites of their own, the fate of online gambling companies could change. "Then I think they're in trouble. The brand affiliation associated with land-based casinos is tremendous," Falcone said, rattling off names such as Caesars, Harrah's Entertainment and MGM Mirage.

Until then the world of Web gambling is in a legal tangle--partly because casinos are supposed to take into account not only the age but the location of their customers. Though many people argue that online gambling is technically illegal for U.S. residents under a law that bans gambling over telephone lines, Americans make up more than half of the gamblers who visit online casinos, according to the Interactive Gaming Council.

As these numbers grow, some land-based casinos have lobbied for a bill in Nevada that would lay the ground rules for legal Internet wagering. They're also hoping to stall passage of some federal legislation that would outlaw Web gambling.

On one hand, a push by well-known casinos to set parameters for legal Web gambling could pave the way to a more legitimate industry, which now consists mainly of offshore casinos accepting bets from people who may not be permitted to gamble by their country of residence.

But some betting sites fear they will lose their constituency as brand names such as MGM or Harrah's go online. What's more, the Nevada bill, which failed passage over the weekend but still could have a slim chance of revival, would require companies to pay large licensing fees to establish legal online wagering sites, a move that could put a chink in the earnings of a start-up Web casino.

Regardless, major casinos are expected to eventually enter the online market, and existing gambling sites are watching the moves of their real-world brothers with a skeptical eye.

"I don't think anyone who got into this business early on didn't think at some point you would see Las Vegas name brands in this," said Sue Schneider, chairwoman of the Interactive Gaming Council, an online casino trade group.

Many online casinos are looking forward to a reprieve that could come if the Nevada bill doesn't pass by Monday. If the legislation fails, it can't be reintroduced for more than a year because the state's legislature only meets every other year. Some online casinos say such a break would let them attract even more of a constituency while avoiding bigfooting by the brand-name sites.

Even if the Nevada bill passed, casinos probably wouldn't go online for at least a year, while state regulators write rules outlining online gambling procedures.

What's more, the bill would put severe limitations on who could bet at the state's Web casinos. Nevada-based online casinos may only be able to do business legally with people they are sure live either within the state or outside of the United States, depending on how the bill is interpreted.

Legislators across the globe are working furiously to ban online wagers. Lawmakers in Australia are pushing legislation that would prohibit their citizens from gambling online. The California Assembly on Thursday passed a measure that would fine both gamblers and gambling sites participating in online wagers.

Add to that the federal efforts to outlaw online betting in the United States. Rep. James Leach, R-Iowa, has reintroduced a bill that would prohibit banks from processing transactions from gaming sites. And within a couple of weeks, Rep. Bob Goodlatte, R-Va., plans to reintroduce his own online gambling ban.

Goodlatte spokeswoman Michelle Semones said land-based casinos aren't necessarily united in their efforts to legalize online gambling. She pointed to a vague statement issued after last week's board meeting of the American Gaming Association, a trade group comprising the major casinos. The AGA said it's not ready to endorse Web gambling because of the lack of adequate regulations and technology.

However, "we do feel that they're definitely still open to the passage of Internet gambling legislation," Semones said.

Then there are the credit card companies that have been clamping down on online wagering. Both Discover and American Express, along with some other companies, have policies of not doing business with betting sites.

As legal issues are debated in the United States, several regions of the world have welcomed Internet wagering, including many Caribbean islands, South Africa and even the United Kingdom.

Still, Joel Bess, CEO of ShockWave Marketing, which runs the VegasLobby.com portal for online wagering sites, said he'd welcome the entry of land-based casinos.

"Having land-based casino Web sites will lend an additional level of credibility and will probably introduce online gambling to people who previously were not online players," he said. "The great equalizer in online gambling is the quality of the experience. You can be a huge casino but if your site is subpar, people will go elsewhere. If the 'little guy' delivers a great site--and promotes it adequately--he can compete."