Experts say online gaming in U.S. still a long shot

By Richard N. Velotta (contact), In Business reporter

Fri, Nov 27, 2009 (3 a.m.)

A survey of 260 gaming industry professionals indicated most expect the legalization and regulation of Internet gambling in the United States would be the world’s top industry story in 2010.

But 17 Internet gambling experts surveyed by the American Gaming Association think otherwise, giving long-shot odds on the passage of either of two pieces of federal legislation addressing online gambling despite the millions of dollars in tax revenue and licensing fees that could be generated.

Several panels at last week’s Global Gaming Expo addressed different aspects of Internet gaming, but most participants think online gaming won’t be a reality in the U.S. anytime soon.

Most think Congress has too much on its plate with health care reform, budget deficits and the brewing climate change mitigation fight to consider any gambling measures next year. In addition, some suggest lawmakers won’t want to choose sides on gambling issues in an election year.

Still, supporters point to the pot of money that would be generated if Internet gambling were legalized and the fact that online gambling is popular despite U.S. laws banning and discouraging it.

Rep. Barney Frank, D-Mass., in May introduced a bill that would legalize and regulate many forms of Internet gambling in the U.S., but of the 17 experts surveyed by the gaming association, only one considered passage in the next year “somewhat likely,” with most considering it “somewhat unlikely” or “very unlikely.”

Sen. Robert Menendez, D-N.J., in the summer introduced legislation that would legalize, regulate and tax games of skill such as poker. Five of the experts said the more palatable Menendez bill would be “somewhat likely” to pass in the next 12 months, but most say it’s unlikely.

Jan Jones, senior vice president of communications and government relations at Harrah’s Entertainment, was even more blunt: She said Frank’s bill has no chance of passage next year or maybe ever. But Menendez’s bill has a better chance, something that would benefit Harrah’s, which owns the World Series of Poker.

While Americans are estimated to have wagered $5.9 billion online in 2008 despite 2006’s Unlawful Internet Gaming Enforcement Act, most of the experts think the market will grow to $8 billion to $20 billion within five years. Many are skeptical that the United States would lure companies operating offshore because of lower tax rates and operating costs elsewhere.

Several tax rates have been proposed in various bills, most suggesting 1 percent or 2 percent at the federal level. States that don’t opt out on Internet gambling could impose state taxes as well. But several conventiongoers at G2E argued that foreign outlets, such as the Isle of Man near Great Britain, have lower tax rates, which would discourage Internet gambling operations setting up in the U.S. The Isle of Man’s rate is 1 percent.

Michael Waxman, a spokesman for the Safe and Secure Internet Gambling Initiative, a Washington-based organization working to educate the public and insure that safeguards are in place if Internet gambling is approved, said he thinks American casino brands with solid reputations in their brick-and-mortar operations would go online if only to expand their marketing.

He thinks that the level of online play has been underestimated and that lawmakers will soon realize how tax revenue generated by online gaming can help fill numerous budget holes.

Waxman added that Frank’s legislation has support from 62 co-sponsors so he’s not counting out the possibility that the issue would be aired next year.