Station Casinos shelves ‘Net plans

By Liz Benston (contact)

Monday, Aug. 26, 2002 | 10:57 a.m.

Locals' casino operator Station Casinos Inc. is deferring its planned $5 million purchase of an online gambling enterprise over concerns that Internet gambling regulations under development in Nevada aren't clearly defined enough.

Station has converted its purchase of a 50 percent interest in Kerzner Interactive Ltd. into a $4.5 million option to buy, according to a recent quarterly filing with the Securities and Exchange Commission. Kerzner Interactive, the online gambling business of Kerzner International Ltd., was formerly known as SunOnline Ltd.

The company, along with MGM MIRAGE, which is developing its own Internet gambling site, has been one of the most aggressive Las Vegas casino operators to pursue online wagering opportunities abroad.

After a series of hearings that began in early summer to discuss Internet gambling, Nevada gaming regulators "couldn't clearly articulate the standards that Nevada licensees would be able to be held to," Station Casinos' Chief Legal Officer Scott Nielson said.

Last year, state lawmakers approved legislation allowing regulators to craft rules governing online gambling for Nevada license holders. Like competitor MGM MIRAGE, Station Casinos' investment applies to betting activity outside the United States, where Internet gambling remains illegal.

The uncertainty surrounding the regulations is a function of the issue's complexity and isn't the fault of the state Gaming Control Board, Nielson said.

"We thought this would happen much more quickly. I think everyone sort of underestimated how difficult it would be to get our arms around the technology."

Technology can now pinpoint gamblers' identities and whereabouts -- thus allowing adults to gamble legally in places where it is allowed, he said.

Still, he said, no system is "bulletproof." Nielson also agrees with the Gaming Control Board's assessment that such technology isn't cost-effective.

Station Casinos is committed to pursuing Internet gambling ventures, he said.

"We still have a great deal of confidence in Internet gaming (and) we want to be a leader and first mover in that segment." The company also is bullish on Kerzner International, he said.

Kerzner International, controlled by South African casino developer Sol Kerzner, owns Casino Atlantis Online, an online casino based on the firm's Atlantis casino resort in the Bahamas.

The move allows Station to extend its option through 2004, Nielson said, though the company hopes regulations will be defined before then.

Kerzner Interactive holds one of three online gambling licenses issued last year by the Isle of Man, a small island nation off the coast of Britain that has developed its own regulations governing Internet betting. MGM MIRAGE has said it expects to build an Internet gambling site, based in the Isle of Man, by the end of the year.