State not likely to tackle ‘Net issue this year

Liz Benston and Kevin Rademacher

Tuesday, May 27, 2003 | 11:16 a.m.

With the end of the Nevada legislative session fast approaching, it's all but certain that legislators won't tackle the issue of Internet gambling -- leaving the issue in limbo for the time being.

Two years ago, the Legislature passed a bill allowing state regulators to adopt rules allowing Internet gambling in compliance with local and federal laws.

That effort -- aimed at raising additional casino tax revenue from Internet operators now making money offshore -- was nearly halted last year when the Gaming Control Board received a letter from the U.S. Department of Justice stating that the federal government has determined that Internet gambling is illegal.

The board has continued to discuss the prospect of allowing Internet gambling within Nevada for in-state residents only.

Because that wasn't the intent of the original legislation, lawmakers could have considered legislation on "intra-state" Internet gambling, Gaming Control Board member Scott Scherer said.

But no one in the Legislature has introduced such a bill, nor has the board pressed for it, board members say.

Internet gambling regulations aren't likely to move forward anytime soon, though some forms of "interactive" in-state gambling involving secure phone lines and defined customers already are offered, Gaming Control Board Chairman Dennis Neilander said.

The Internet transfers packets of information over the path of least resistance, which often means crossing state lines and using methods that are difficult to track, Neilander said.

Such systems would likely run afoul of federal laws barring interstate gambling across state lines, he said.

"Because of the way the Internet works, I don't believe it could be (legal)."

Allowing Nevadans to gamble on the Internet also raises policy concerns lawmakers haven't yet addressed, he said. Over the past decade, the Legislature has aimed to restrict access to convenience gambling in neighborhoods, he said.

In the meantime, an MGM MIRAGE executive said Friday that a federal effort to regulate Internet gaming will limit legitimate companies while allowing unscrupulous offshore operations to continue.

Sen. Jon Kyl, R-Ariz., is opposing Internet gaming for the eighth consecutive year, but Bill Hornbuckle, president of MGM MIRAGE Online, said the Kyl bill merely reduces payment options for such activities.

"What he has tried to do is take the banking and financial institutions out of Internet gaming," he said at a gathering Friday of the Financial Executives Gaming Forum.

The bill would ban the use of credit cards and bank debit cards in Internet gaming. Without such payment methods available, MGM MIRAGE's Isle of Man Internet gaming operation would not be able to expand to serve U.S. gamblers should other legal hurdles be cleared.

It would do nothing, however, to limit other, unregulated offshore Internet sites from soliciting U.S. business.

Those operations use unregulated online billing plans to operate customer accounts, and because Kyl's bill was pared down in an effort to gain momentum, the bill lost its enforcement strength, Hornbuckle said.

That will encourage the unregulated sites to more aggressively pursue the U.S. market, he said.

In the end, the Congressional effort illustrates a lack of knowledge of the gaming industry, he said.

"The core issues here are not understood," he said. "If you are going to try to control Internet gambling, I suggest you please try to understand it. This won't stop Internet gambling."

As it stands, Hornbuckle said MGM MIRAGE's Internet gaming efforts market to about eight countries. Those countries, he said, are the only ones that have no statutory regulations banning or limiting the activity.

Before the operations were launched, the company established more than 3,000 pages of operational procedures, he said. That effort was necessary to ensure the jurisdictions that licensed MGM MIRAGE casinos in the United States -- Nevada, New Jersey and Mississippi -- would be comfortable with the operation, Hornbuckle said.

"The task at hand was to tell how we are going to do this business and how we can make it work," he said. "What we had at stake was our reputations and our licenses. ... We've proven that we can regulate the space."

That is done, Hornbuckle said, by treating the Internet casino like a Strip operation.

"We treat the online casino as if it were the casino sitting out front of the Bellagio," he said.

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