Nevada ruling limits promotional Internet gaming

Cy Ryan and David Strow

Wednesday, Jan. 3, 2001 | 11:29 a.m.

Nevada casinos cannot offer free gambling over the Internet if the player receives a prize based on the outcome of a game, even if the player did not wager any money, an Attorney General's opinion says.

The legal opinion released Tuesday defined what casinos can do in offering promotional gaming on their Websites.

"We don't think it's a big problem, but we want to make sure it doesn't become a problem," said Dennis Neilander, a member of the state Gaming Control Board.

Some casinos have sites on the Internet now that may not conform to the opinion of the attorney general, and they will have to be taken down, Neilander said, noting that the board asked for the opinion because of the uncertainty in the law.

The opinion, written by Senior Deputy Attorney General Jeffrey Rodefer, emerged after announced plans by MGM MIRAGE, Silicon Gaming and WagerWorks Inc. to develop a website offering online, "for-fun" casino games. Questions arose about its legality.

The decision could affect more than just one company, however. While MGM MIRAGE has yet to launch its Internet games, both Park Place Entertainment Corp. and Harrah's Entertainment Inc. currently offer such games on their websites. And Park Place's site apparently does offer prizes based at least partially on the outcome of for-fun Internet casino games.

Internet gambling in Nevada is illegal, Neilander said. And there are different interpretations about whether federal law bars Internet gambling. The U.S Department of Justice considers gambling on the Internet illegal, Neilander said.

It would be legal for a casino to offer over the Internet "play credits" to a customer to wager in a free casino game if there was no prize awarded. It would also be permitted if the casino offered awards such as free rooms, entertainment, food, airline miles and cash prizes for visiting the website as well as for the time spent playing a game.

But the games would be illegal if the casino offered prizes or awards based on the outcome of a game such as blackjack, roulette, slot machines or craps. Even though the customer is not betting his own money, this is considered a wager under the law, said Rodefer.

"...play credits could be risked, at least in part, upon the uncertainty of a winning outcome that would entitle the patron to receive a redeemable 'ticket.' Therefore, a wager would exist and the activity of playing a game, albeit on the Internet, would constitute gaming or gambling," the ruling reads.

That would require prior approval by the Nevada Gaming Commission, Rodefer said. But as Internet gambling is illegal in Nevada, such approval wouldn't be given, Neilander said.

The legal opinion also deals with the case where a player wins on the outcome of a game and he or she receives a redeemable "ticket" that makes them eligible for a sweepstakes or drawing. Rodefer said, "Until such time as the commission licenses the Internet games, any drawing, sweepstakes or related prize distribution associated therewith is impermissible as a matter of law."

But MGM MIRAGE or other casinos could award prizes or entries into sweepstakes or drawings on a random basis, as long as the player does not have to win at a free game. Rodefer said, "If a wager is absent, then no gambling is taking place nor is a gambling game being exposed for play."

MGM MIRAGE plans to offer prizes to users of its Internet-based casino games. But its plans won't be affected by the attorney general's opinion, since the prizes would be based solely on the player's time on game, company spokesman Alan Feldman said.

"This was always based on the amount of time based on site, not whether they won or lost," Feldman said. "It simply confirms our plans are acceptable under Nevada statute, as we understood them to be."

The company has also licensed its Mirage, Bellagio and Treasure Island brands to Microsoft for use in a casino software game, and a demonstration version of this game is available on Microsoft's Internet site. The game offers players the chance to win imaginary comps at the Mirage, not real ones, so that is unlikely to be affected as well.

Harrah's offers games on its website for its "Total Rewards" members, but no prizes are awarded for play, said company spokesman Phil Levine.

"The purpose is just for people to learn the games and become more familiar with them," Levine said. "Obviously, this decision wouldn't impact us."

But one company that could be affected by the decision is Park Place, which offers registered visitors the chance to play in online video poker contests. Though no cash is wagered in the games, credits "won" in these games count toward a monthly contest. The website indicates prizes are awarded to the highest per-game scorers each month.

Park Place officials couldn't be reached for comment on whether the decision would affect their Internet offerings.