Bill to Permit Gambling Sites on Internet Pushed in Nevada

Nevada casinos may be the first in the nation to launch Internet gambling sites under legislation moving easily through the state Legislature.

The bill, which has no opposition so far, would mark a major step toward the day when gamblers might place nonsporting bets with the likes of Caesars Palace, Harrah’s and Mirage over the Internet.

The bill was approved unanimously Monday by the Nevada Assembly’s Judiciary Committee in Carson City, and now moves forward for a full Assembly vote, perhaps this week. It would then head to the state Senate with bipartisan support and the backing of the casino industry--which a few years ago viewed Internet wagering as a threat. A spokesman for Republican Gov. Kenny Guinn said he has not yet taken a position on the bill.

But even swift passage of the bill won’t change the gambling landscape for years, experts warn, because of a multitude of technological, legal and regulatory questions.

The proposed legislation comes even as Congress debates whether to ban, or limit, Internet gambling in the United States.

About half of the states have laws that ban residents from gambling on the Internet, and California legislators are debating a similar prohibition. But on the federal level, the legal picture is murky.

The U.S. Department of Justice contends that existing laws ban American companies from offering Internet wagering. But while the department has prosecuted Americans operating off-shore Internet gambling companies under the 1961 Federal Wire Act, it has not gone after individuals in this country who place bets.

In February, a U.S. District Court judge in New Orleans ruled that non-sports Internet gambling is not illegal under federal law. His decision was hailed by the casino industry as clearing the way for the next evolution in gambling, although others warn that higher courts have yet to weigh in.

The Nevada bill authorizes the state’s Gaming Control Board and the Nevada Gaming Commission to set up the regulatory framework to allow casinos to extend their reach into the Internet.

Only after the Gaming Control Board is confident that Nevada casinos can conduct Internet gambling without violating U.S. laws, and have the proven technology to screen out illegal bettors, will it bless the move into cyberspace.

“There are a lot of legal clouds out there that would have to be cleared up,” said Dennis Neilander, the board’s chairman.

Already, armchair gamblers can turn to about 1,400 Internet sites to place wagers, said Marc Falcone, a gambling industry analyst for Bear Stearns, a Wall Street investment firm. Internet gambling is expected to generate $5 billion in business within two years, he said.

The vast majority of Internet gambling sites, however, are operated by little-known and largely unregulated off-shore operators, and gamblers complain of difficulty in collecting their winnings.

Last fall, the city of Las Vegas considered forming a partnership with a company in operating an Australian-based Internet gambling site. In exchange for the city regulating the site and lending its credibility, the company promised hundreds of millions of dollars in shared profit. The company, however, withdrew the proposal after it failed to win widespread political support.

The presence of Las Vegas brand names on the Internet, regulated by Nevada’s renowned Gaming Control Board, would be a strong magnet for gamblers.

“If you have the best gaming control people in the world writing the guidelines by which we would live on the Internet, that will translate into credibility in the world marketplace,” said John Marz, a vice president of Mandalay Resort Group, which operates five large casinos on the Strip.

The casinos are hungry for an Internet presence not only for its potential revenue, but because it allows them to effectively and cheaply market to their target audience, and collect a detailed customer database. A number of casinos already host play-for-fun sites as promotional tools.

For its part, the state of Nevada would collect a 6.25% tax on the gross revenue generated through Internet wagering, as it does now with existing casinos.

The state also would assess each Internet casino a $1-million license fee every other year to ensure, state officials say, that only the healthiest casinos enter the new and volatile market.

Casinos executives--although eager to take gambling to a new level--say they will move cautiously because the Internet gambling arena is choked with legal land mines.

Among them: how to make sure gamblers are at least 21 years old, and can legally place bets in the state, province or nation where they live, as the Nevada bill requires.

Violation could mean loss of a casino’s Nevada gaming license.

“Before we rush to bring casinos into homes, we as industry leaders and those who serve on regulatory bodies must ensure that access to Internet gambling can, in fact, be limited to those who are legally allowed to gamble,” said Thomas E. Gallagher, president and chief executive of Park Place Entertainment, the world’s largest gambling company.

Possible technology includes touch-sensitive screens to record fingerprinting, and cameras mounted on bettor’s computers that will allow casinos to identify their customers through digital facial recognition.

More troublesome will be the casinos’ burden in making sure that bettors can legally place bets where they live, said I. Nelson Rose, a professor at Whittier Law School in Costa Mesa who specializes in gambling laws.

The casinos will have to be confident that a gambler’s home nation--or province, state or county--does not ban Internet wagering before accepting a bet, Rose said.

“Could a casino take a bet from New South Wales or Tasmania?” Rose asked. “It would take an enormous amount of research by casinos before they feel comfortable with this. If they violate the laws of the country where the bettor lives, they could lose their license to operate in Nevada.”