Companies showcase online gaming products

David Strow

Thursday, Feb. 14, 2002 | 11:15 a.m.

Until casinos can answer three questions about customers who gamble over the Internet, the odds of Nevada companies getting into the business are very slim.

The questions are fairly simple, but in the world of the Internet, they seem nearly impossible to answer: Who's playing? How old are they? And where are they playing from?

"Those are the real crux of Nevada moving forward," said Richard Fitzpatrick, chief executive of the Interactive Gaming Institute, a Las Vegas-based non-profit agency.

The IGI is trying to start the process of getting those questions answered. On Wednesday the organization hosted the first of six planned seminars covering various technological, financial and regulatory aspects of the online gaming industry. Thirteen companies showcased the technologies they say can help Nevada casinos ensure that only players who are legally allowed to gamble on the Internet can do so.

Answering that question is critical for Nevada companies interested in the business of online gambling. Since the legality of Internet gambling in the United States is questionable, Nevada companies must ensure that American players can't access their products.

Even if the Internet casino is based entirely outside the United States, Nevada operators could face disciplinary action -- and, theoretically, the loss of their Nevada gaming licenses -- if American players get through.

Casino operators aren't the only ones interested in answers to such questions. Las Vegas Mayor Oscar Goodman, for example, has been considering the possibility of licensing the city's name and seal to an Internet casino.

"If that assurance can be provided, then we'd have to explore a potential deal so the city could benefit from this," Goodman said. "But I want to assure myself the city would never be embarrassed by such a relationship."

That assurance would have been impossible just years ago, but Fitzpatrick insists the technology exists today that could allow the casinos to move forward. Many of the companies presenting their technologies at UNLV Wednesday didn't even design their products with the Internet gambling industry in mind.

"Anyone who watches these 13 companies make their presentations will see that the technology unquestionably exists today," Fitzpatrick said.

Sense Technologies Inc. of Fort Lauderdale, Fla., for example, showed a device that can make a perfect identification of a player based on a fingerprint. An online casino can give a player a small, mouselike device that attaches to his computer; the player then puts his or her finger on a small plate on the device to play. The device could be sold for less than $200, said Dore Scott Perler, the company's president and chief executive.

It can't tell you where a player is located, Perler said. "But who the player is, absolutely," he said.

Another solution came from Net Nanny Software International Inc. of Bellevue, Wash. Instead of a hardware device, the company offers software that recognizes the individual keystroke patterns of a computer user -- and only accepts a password if the pattern matches the user pattern on file.

Such systems offer almost absolute certainty in identifying players. Identifying players' location is a tougher problem.

One solution that's been proposed is using a GPS device to pinpoint the player's location. Such a device could identify a player's location with an accuracy of 6 feet, Fitzpatrick said.

Combine GPS with a "biometric" identification product, and an online casino could offer a foolproof system for identifying a player safely. That would cost several hundred dollars per player, but Fitzpatrick estimated the average online gambler loses $900 per year.

"The pricing is simply a function of how much it's worth to a casino to acquire that player," Fitzpatrick said.

Not everyone, however, is convinced the cost is worth it. Tony Fontaine, vice president of interactive gaming for Station Casinos Inc., points out that a customer could simply leave after playing only once or twice, leaving the company with a loss on its device.

"I'm not sure it's economically feasible, from what I've seen so far," Fontaine said. "GPS is a nightmare, and it's expensive. What I'd like to know is, can we do it with software?"

Several companies did present their software solutions to the location problem. But while such solutions come close to 100 percent accuracy, they aren't perfect.

Virtgame Corp. of San Diego, for example, has provided an online gaming system to Coast Resorts Inc. of Las Vegas for several years. But the system is not accessible through the Internet -- to ensure players can't access the system from other states, a player can only access the Coast system by dialing directly into it from a location in Nevada.

"That's the first step in showing it (secure online gaming in Nevada) can be done," Virtgame CEO Scott Walker said.

Virtgame now offers an Internet-based system that uses Internet protocol (IP) addresses to get fixes on player locations, using a technology licensed from Digital Envoy, a company in Malibu, Calif. Virtgame is also partnering with Sense Technologies to create a system that could positively identify players.

The Virtgame system offers 99.999 percent accuracy, but can only screen out players by country.

"Over the Internet, I can't differentiate between states ... I can only exclude U.S. customers," Walker said.

Offering online gaming to U.S. customers is a far trickier proposition, one wrapped in legal questions. Though Nevada gaming regulators have the ability to legalize Internet gambling in the state, they have indicated they won't do so until these legal questions are resolved.

The Department of Justice has declared that the Wire Act, passed in 1961, applies to Internet gambling -- and therefore, Internet gambling is illegal under federal law. But last year, a federal judge in New Orleans ruled that the Wire Act applied solely to Internet sports betting, not casino games.

"The federal court's decision sets a precedent," said Richard Morgan, dean of the University of Nevada, Las Vegas' school of law. "The opinion of a federal judge is persuasive stuff, but it is not binding. Other courts don't have to pay attention to it."

The decision is being appealed to the 5th Circuit Court in New Orleans. But even if that court upholds the decision, it would only become a legal precedent within the 5th Circuit, comprised of Texas, Louisiana and Mississippi. For a company operating an Internet casino in Nevada, that would do

"A 5th Circuit decision will not be binding on the courts of Nevada, but it will be persuasive," Morgan said. "Not until there's a ruling from the U.S. Supreme Court or the Ninth Circuit (in San Francisco) will there be a binding precedent in Nevada."

But even if declared legal under federal law, Internet gambling would still be illegal in states that prohibit casino gambling, Morgan said -- and, with the exception of tribal gaming, most states do have such bans.

"We're still a long way from having legalized Internet gaming in the United States," Morgan said.