Internet gaming’s future debated

David Strow

Thursday, Sept. 16, 1999 | 11:14 a.m.

When Las Vegas-based American Wagering Inc. was formed in 1995, Chief Executive Vic Salerno decided the Internet would be the future of the bookmaking business.

Problem was, it was illegal for the company to offer online sports wagering anywhere outside of Nevada.

"As we evaluated it more and more, we decided to go Down Under," Salerno said.

In November 1998, American Wagering's Australian subsidiary, Mega$ports Pty Ltd., received a 15-year license. Today, it operates as one of only two sportsbook operators offering online wagering under the Australia Capital Territory's 1998 Interactive Gambling Act.

"I hope the state of Nevada will change its view and become the center of online gaming," Salerno said. "But right now, the ACT is the one.

"There is no way to prohibit online gaming. Australia is so right on this."

Salerno, together with the top sports betting regulator in the ACT, spoke Wednesday at a session of the World Gaming Congress and Expo. In their view, the Australian territory has put together a regulatory model the United States would be wise to follow as it tackles the online gaming issue.

"Australian regulations will be the standard for all First World Internet (gaming) legislation over the next four years," said David Freemon, a Los Angeles marketing and consulting firm specializing in online gaming. Freemon moderated the session.

Brian Gordon, manager of racing and betting at the ACT Gambling and Racing Commission, said Australian officials had a difficult time with the issue, but decided eventually that banning online betting would be a mistake.

"It is a difficult and vexing question ... that's no different in Australia than in the U.S. or the rest of the world," Gordon said. "But our view is that prohibition is not an effective long-term solution to any problem.

"We do not regulate the Internet. We regulate the activity of licensed operators."

The ACT's Interactive Gambling Act, passed last year, is seen as merely an extension of legalized gaming activity within the territory. Rather than receiving a license specifically for online gaming, licensed operators request permission to operate an online betting business as an extension of their operations. In the government's view, Gordon said, Internet-placed bets are essentially identical to bets placed over the telephone.

Operators in the territory are required to pay a tax of 1.25 percent of handle, or all bets accepted. The annual license fee is A$10,000 ($6,500).

For Salerno, the decision to head to Australia made sense, though it created a tricky situation for a company licensed in Nevada.

"We were in a very precarious position," Salerno said. "I was told by one Nevada regulator, 'Be careful. You're walking into a minefield wearing clown shoes.'

One of the largest mines was Australia's position on betting by Americans. Australian law does not prohibit companies operating online gaming operations to accept bets from American citizens, and Gordon said that the only other operator licensed for online betting in the ACT, Canbet Sports Betting, derives virtually all of its online revenues and one-third of its total handle from American citizens, Gordon said.

"As long as they are abiding by the regulatory framework, we don't have a concern," Gordon said.

On its website, Canbet advises users to ensure that they aren't violating local laws by placing wagers through the system.

Still, American Wagering decided to sidestep problems back home by declining to world."

At this point, Salerno said that Internet betting doesn't account for a very large chunk of American Wagering's revenues. The company reported $1.8 million in wagering revenues in the quarter ending June 30, up $500,000 from the year-ago quarter, but said that the increase was primarily caused by five new sports books added to the company's Leroy's Horse & Sports Place chain.

Ensuring that each player is of legal age is a priority, Salerno said. Players are required to present a major credit card held by a person over 18 years of age. Later, players must present evidence of age, such as a birth certificate or passport.

Salerno also urged Nevada companies to reconsider their decision not to get involved in online wagering, saying that the business was hardly a threat to the casinos, since players will always want the physical and social experience of casino gaming.