Internet gambling no threat to Vegas casinos

Robert Macy

Tuesday, Jan. 18, 2000 | 11:06 a.m.

Internet gambling is "on the verge of exploding" with revenues expected to triple in two years, but the growth will not hurt Las Vegas or other casino cities, according to a new industry report.

A total of 650 Internet sites now offer gambling and that number is growing daily, according to Jason Ader, senior managing director and gaming analyst for Bear Stearns & Co.

The industry recorded $1.2 billion in revenue last year and that could jump to $3 billion by 2002, Ader said in the report.

The growth could be hampered, however, by concerns of credit card companies that Internet gambling poses a legal quagmire.

Ader cited the case of a California man who refused to pay $70,000 in gambling debts he incurred on his Mastercard, citing "bettor's remorse." A court absolved him of the debt.

In another case last year, a Marin County, Calif. woman had $115,000 in online gambling debts wiped out after suing Visa, Mastercard and the companies that had issued her 12 credit cards.

In a telephone interview Friday, Ader said he did not see Internet gambling as a threat to the casino industry.

"You've got $50 billion in infrastructure in Las Vegas alone," he said. "And there are too many gray areas in Internet gambling. There's no regulation, and many questions about the integrity of the games. Consumers have no confidence in the odds, the payoffs."

Some people are "a bit skeptical betting on cards and slots that they cannot feel and touch."

And the Internet cannot duplicate "the incredible atmosphere you find at many of the traditional casinos," Ader said.

Steve Wynn, chairman of casino giant Mirage Resorts Inc., agreed.

"I don't think people who go to casinos give a darn about being hung over a computer terminal," Wynn said Friday. "They're interested in the social and entertainment features that casinos offer.

"Our Asian players are not interested in playing baccarat on the Internet at $150,000 a pop," Wynn added.

Nevada casinos are not allowed to participate in Internet gambling because of regulatory concerns. The Nevada Gaming Commission is studying the issue.

"I know they'd love to figure out a way to regulate it," Ader said, "but I don't see that happening anytime soon."

Meanwhile, the Internet gambling industry will continue to grow, Ader said.

"It is clear the dynamics are there for this industry to succeed," Ader said. "People are spending more time on line, they are becoming more comfortable with e-commerce and they love games of chance."

As the industry grows, so will the problems, Ader said.

"You've got the potential for credit card fraud, underage gambling and other regulatory issues. But at the end of the day, the technology is way ahead of the law."

Congress is likely to take on the issue again this session. But it is limited in what it can do since many companies are located in countries such as Antigua, Australia and Sweden.

"Thanks to the borderless world of the Internet it is extremely difficult to keep those companies from serving customers in the U.S.," Ader said. "Whatever Congress decides, they will want to do it quickly because of the rapid expansion in the popularity of these sites."

An estimated 14.5 million people gamble over the Internet, most of them U.S. citizens using credit cards.

Credit card companies could put a damper on Internet gambling if stung with more lawsuits like the two California cases. Some are already changing their policies.

"Internet gambling is a relatively new phenomenon," Laurie Cole, vice president of corporate communications for Providian Financial in San Francisco, said Friday. "As a result of our own research into the area, we determined, for business reasons, that we would not accept charges that emanated from gambling on Internet websites."