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Fourth Quarter Politics in Illinois

Illinois is proving a good example of what many of the 50 states may eventually experience. The problem is that internet gambling issues do not exist in isolation but coexist with brick-and-mortar gambling issues… and a myriad of other issues besides.

The Illinois legislature has four days until its target adjournment date, but there remains an unresolved budget crisis. The State risks suffering a lowered credit rating if legislators cannot fix failing programs for public employee pensions and Medicaid obligations.

Throughout the current legislative session, legislators and lobbyists for the gaming and horse racing industries have conferred with the governor’s office over the prospect of gambling expansion. Language related to internet gambling has never been part of the brick-and-mortar bill, but internet gambling has surely been part of the discussion.

As for the brick-and-mortar gambling bill, I pass no judgment but refer to various opinion articles published in the State Journal-Register of Springfield, Illinois.

The SJ-R itself takes an official position against brick-and-mortar expansion:

We, too, have opposed this bill (SB 1849), mostly because it purports to turn the law of supply-and-demand on its head. Casinos in Illinois have been struggling since the recession hit. Demand has fallen drastically. This bill claims that opening five more casinos, plus turning horse racing tracks into casinos, suddenly will create 20,000 new jobs and bring in $200 million to state coffers annually. We’re just not buying that all that wealth is not now reaching the state because people can’t find enough casinos. (Our Opinion: More gambling a bad bet (SJ-R)).

But see also: Point: Gambling expansion bill is based on ‘supply and demand’ by Rep. Lou Lang, D-Skokie, deputy House majority leader. And also: Counterpoint: Gambling expansion bill is a continuation of failed policies by Anita Bedell, executive director, Illinois Church Action on Alcohol and Addiction Problems, Springfield.

On May 15, Senator John Cullerton, President of the Senate, offered a separate bill that would legalize internet gambling. This bill, HB 4148, proposed to give broad market and decision-making control to the Illinois Lottery. The bill explained that the Lottery would manage an “internet gaming platform,” but it lacked clear language indicating whether casinos or horse racing companies could participate. They could not have been happy about it.

But then on May 23 the brick-and-mortar gambling expansion bill was approved by the House. And then two days later on May 25, Senator Cullerton revised the internet gambling bill to clearly specify that Illinois casinos and horse racing operators can become licensed to participate in the Lottery’s gaming platform. The revised bill just might make enough people happy.

Nonetheless, there is disappointingly sparse amount of mainstream media attention being given to the internet gambling legislation. The brick-and-mortar bill continues to generate controversy and opinion, but the importance of internet gambling to the discussion is not talked about.

Governor Quinn is silent about internet gaming, but he does continue to publicly oppose the brick-and-mortar expansion. A veto threat could be a somewhat viable negotiating chip on some issue or another. See: Quinn says he can’t support gambling expansion bill (SJ-R) See: Quinn dismisses gambling as ‘shiny’ distraction (SJ-R)

Four days remain, and a lot can happen in four days. See: Statehouse nearing the finish line (SJ-R) And: What’s Been Done? What’s Yet to Come? (Illinois Issues Blog)

Author Bradley Vallerius is an Illinois attorney specializing in gaming and video gaming licensing and compliance.

Weekly industry report: Malta and Ontario agree to share info; EGBA offers manifesto for a European policy

Highlights include financials from 888 and  IGT, an information sharing agreement between regulators in Malta and Ontario, and an EGBA manifesto for a European approach to remote gambling policy

Trade show in California

Hundreds of people attended the Global iGaming Summit & Expo (GiGSE) in San Francisco, California this week. California is one of the states leading the way toward progressive internet gambling legislation, and the San Francisco Bay region is home to some of the country’s most talented software companies. A look at the program agenda reveals prevalent themes and questions in the gaming industry today. Legislators from California and other states spoke at the event, and hopefully stayed a while to learn some things.

To read the perceptions of attendees on Twitter, search Twitter for #GIGSE2012. A few of the attendees gave thorough accounts of what they heard in conference sessions and what they experienced generally throughout the course of the three-day program. These include Chris Krafcik of Gambling Compliance, Scarlet Robinson of The Innovation Group, Vin Narayanan of Casino City, and Victor Rocha of Penchanga.net.

Identifying customer location

Cantor Gaming, an affiliate of Cantor Fitzgerald that provides remote gaming and betting technology, has contracted with LocAid to verify the location of customers using its mobile products in the U.S. Identifying customer location is important because ultimately the law of the state in which the customer is physically located controls. See VentureBeat article: Spoof-proof location authentication to help legitimize mobile gambling.

Regulatory information sharing

The regulatory authority for gambling in the Canadian province of Ontario (Alcohol and Gaming Commission of Ontario) has entered into an agreement with the regulatory authority for gambling in the Mediterranean country of Malta (Malta Lotteries and Gaming Authority). The Memorandum of Understanding between the two agencies stipulates terms and conditions under which they will share information with each other.

According to an article on Tax-News.com:

“The MoU with the Alcohol and Gaming Commission of Ontario provides for the exchange of information on eligibility assessments of applications as well as compliance and regulatory assurance activities with respect to gaming. Both jurisdictions have also agreed to possible joint, cooperative and collaborative inspections, investigations and enforcement activities.”

Malta’s Lottery and Gaming Authority has entered two additional agreements for the sharing of information in recent days with the European Sports Security Association and FIFA.

European competition issues

The European Gaming and Betting Association has published a manifesto containing a policy plan for remote gambling that it would like to see implemented across all of Europe.  The major issues in Europe are concerned with how to control competition among all of the member states. Part of the problem is that some member states allow for the licensing of an unlimited number of operators while others let only one or two government controlled operators into the market. EGBA’s membership consists of private enterprise operators.

Secretary General of EGBA, Sigrid Ligné, said:

“Our Manifesto is designed to be a timely input to the [European] Commission as it prepares its EU action plan for online gambling. We are calling for the introduction of European rules to ensure proper protection for consumers while affording fair and transparent licensing conditions for EU operators.”

The Manifesto declares that an effective EU framework to regulate and ensure responsible online gambling should be based on 5 priority actions:

  1. The European Commission fulfilling its role as Guardian of the Treaty.
  2. Structured regulatory cooperation among national authorities.
  3. An EU legal framework for online gambling.
  4. Problem gambling prevention measures based on evidence.
  5. EU action to fight sport fraud.

For an article explaining why United States policy for internet gambling will likely avoid the cross-border problems that plague Europe, see: States’ Rights and Fragmented Internet Gambling Markets, Nov. 2011, by attorney Bradley Vallerius.

888 Financials

888 Holdings PLC released its key performance indicators for the first quarter of 2012. Overall revenue for the quarter was $94 million, a 4% increase over Q4 2011 and a 25% increase over Q1 2011.

888’s CEO Brian Mattingley said:

“Our focused strategy has led to another excellent quarter, with ongoing strength in Poker driving March to the highest ever monthly revenues in the history of 888. Poker has continued its robust performance in the early stages of Q2, with our other product areas seeing an expected return to seasonal patterns. As stated at our full year results, there are significant growth opportunities offered by the liberalisation of new markets, which will take investment to realise. We will continue to invest throughout 2012 in order to buildmarket share.”

IGT Financials

Interactive Gaming Technology released its results for the second quarter of fiscal 2012. Total quarterly revenue reached $541 million, a 13% increase over the same period last year. Revenue from gaming operations increased 11% to $300 million in the second quarter, “primarily due to increases in the interactive businesses and installed base.”

New Jersey S1565 passes Senate budget committee

A bill to license and regulate internet gambling within the territorial borders of New Jersey easily passed a vote by the State Senate’s Budget and Appropriations Committee on April 3 by a vote of 11-0 (with 1 not voting and 1 abstention).  Now the bill heads to the floor of the Senate.

Senate Bill 1565 seeks to legalize internet gambling by way of supplementing New Jersey’s Casino Control Act with provisions related to the regulation of games on the internet. Casino games and poker would be permitted but not sports betting. The only entities that would be allowed to operate games on the internet are licensed Atlantic City casinos.

Sponsored by Senators Raymond Lesniak and Jim Whelan, S1565 is very similar to a bill that moved swiftly and easily through the legislature last year but failed to become enacted after Governor Chris Christie refused to sign it. In recent weeks there has been much speculation in both industry journals and mainstream media as to whether Governor Christie might now be ready to sign an internet gambling bill, but his office has not issued a statement on the matter.

No action on S1565 has been scheduled on the floor of the Senate yet, but a vote seems certain.

Legalized Games

S1565 would enable licensed Atlantic City casinos to operate all of the same games on the internet that they operate in their brick-and-mortar casinos.

Eligible License Applicants

The only entities who would be able to operate internet gambling in New Jersey are licensed Atlantic City casinos. Operators would be required to locate all equipment for conducting internet wagering in a secure location in Atlantic City.

Taxes and fees

Operators would be taxed at 10% of gross revenues from internet wagering. This compares to an 8% tax on gross revenues from brick-and-mortar operations.

The initial license fee would be at least $200,000 and then subsequent annual renewal fees would be $100,000.

Agency Duties

New Jersey’s Division of Gaming Enforcement would be responsible for recommending internet wagering regulations to New Jersey’s Gaming Control Commission. Additionally, the Division of Gaming Enforcement would create an Office of Internet Wagering to perform duties related to internet gambling regulation.

Survey data shows UK remote gambling participation

The UK Gambling Commission has published the results of a survey conducted to show the prevalence of various gambling activities in the UK, both offline and online.

57.1% of the 4,000 adults surveyed said they had participated in at least one form of gambling in the previous four weeks. Of those same adults, 11.9% said they had participated in at least one form of remote gambling. Half of those participating in remote gambling purchased only National Lottery products.

Other key findings:

This figure of 11.9% compares with the 2010 calendar year figure of 11.1%, the  2009 calendar year figure of 10.5%, the 2008 calendar year figure of 9.7%, the 2007 calendar year figure of 8.8% and the 2006 calendar year figure of 7.2%.

The growth in participation in remote gambling is explained very largely by increased online participation in the National Lottery. If those only playing National Lottery products remotely are excluded, 5.6% of respondents had participated in remote gambling in the year to September 2011, compared with the figure of 5.7% in 2010, 5.7% in 2009, 5.6% in 2008, 5.2% in 2007 and 5.1% in 2006.

Many informative tables and figures accompany the survey data, which was compiled by ICM Research and is available on the UK Gaming Commission’s website: Survey data on gambling participation – October 2011.