Issue 317
October 9 - October 15, 2006
Volume 6
page 1
 

This Issue

Gaming News

Casino City's October Sweepstakes

Lawyer: Net Betting Ban Violates WTO Ruling

Green Valley Ranch Resort Opens Third Major Expansion

Yonkers Raceway Opening Postponed Again

Harrah's Receives Acquisition Proposal

Show Time Elton John performs at The Colosseum, at Caesars Palace.

Column The Unlawful Internet Gambling Enforcement Act of 2006 Analyzed by I. Nelson Rose.

Check out our entertainment highlights & upcoming tournaments

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Congress Deals Poker Fans a Hand They Can't Bet
By Liz Benston, Our Partner at the Las Vegas Sun

Fallout from the Unlawful Internet Gambling Enforcement Act of 2006 may land hard on two of Las Vegas' biggest gaming companies, Harrah's Entertainment and MGM Mirage. Each has tapped poker fans who love Internet play and then turn to Vegas for the real action.

When those gamblers try to log onto their PartyPoker.com account, they'll soon discover they can no longer place a bet. And that will chill tournament play on the Strip.

For nearly a decade, the campaign by conservative members of Congress to outlaw online gambling remained on the fringes in Washington.

But with Republican lawmakers nervous about the Nov. 7 elections and eager to find issues that will please conservative religious groups, Senate Majority Leader Bill Frist and other Republican leaders saw an opportunity to adopt the ban. They attached it to an unrelated port security bill, which was approved by Congress on Saturday.

Once a small, tight-knit group of hard-core sports bettors, Internet gamblers, attracted by celebrity players and incessant television coverage of poker tournaments, have grown into a largely mainstream group of amateur bettors. But in the eyes of the U.S, they have joined the ranks of people who transport illegal drugs or sell unregistered firearms.

Online operators had largely ignored the Justice Department's opinion that all forms of online gambling are illegal. It was a weak legal position, they said, that was unsupported by federal law and largely unenforceable because online betting operators are based outside of the United States.

With the bill, a "gray area" of gambling just got a lot clearer by making it a felony to process Internet bets generated by Americans.

British operator Partygaming, which owns PartyPoker.com, said it would cease operations in the United States by blocking American bets. Other companies publicly traded in Europe, trying to salvage shares that have already tanked by more than 50 percent, could follow suit.

That means American players could soon be gambling on black market Web sites and reverting to a time when no-name sites operated in an online Wild West of sorts.

A more likely outcome will be an increasingly creative cat-and-mouse game between the remaining Internet gambling sites and regulators who now have the authority to shut down Web sites and go after third parties. Those include Internet service providers that link to gambling sites and a growing number of affiliate sites that make money from referring business to Internet casinos.

Nevada interests have been ineffective in fighting the legislation. State regulators don't want to run afoul of the feds. The state's most powerful legislator, Sen. Harry Reid, opposes Internet gambling on the basis that it can't be adequately regulated. Even Nevada casinos, which have reaped the benefits when online gamblers are teased to real poker rooms, weren't willing to go to the mat on a prohibition bill.

The American Gaming Association, which represents the largest land-based casinos, says the bill's passage won't mean much for its members, which aren't in the business of online gambling.

That may be true for most members that aren't profiting much on poker. They may rather fill those rooms with more profitable slot machines.

But that's probably not the case for the association's two biggest members, MGM Mirage and Harrah's Entertainment. Both companies host the world's largest poker tournaments and have lobbied for regulating and taxing Internet gambling.

As many as half of the entrants in Harrah's latest World Series of Poker qualified for their $10,000 buy in to the final event by playing satellite tournaments hosted by online gambling sites. Similarly, MGM Mirage hosts some events for the World Poker Tour, a global poker tourney that attracts big money from online bettors who qualified for the events online.

Both tournaments will likely now attract fewer entrants.

The ban will have further implications in Las Vegas, the de facto hub for online bettors and support industries such as magazines, Internet portals and other businesses that made money catering to the online poker and betting industry.

"It's like a death," said Jan Fisher, a poker writer, tournament announcer and partner in a company that produces a cruise ship tourney for online operator PartyPoker. "This didn't just stop people from playing online. This touched literally everyone I know. I'm afraid for the industry."


Lawyer: Net Betting Ban Violates WTO Ruling
By Tony Batt, Our Partner at Las Vegas Gaming Wire

WASHINGTON, DC -- An Internet gambling ban approved by Congress violates a ruling last year by the World Trade Organization and could interfere with U.S. trade policy, a lawyer who represents the online wagering country of Antigua said.

"What Congress is really doing is putting the U.S. on a clear collision course with free trade and the WTO," said Mark Mendel, an attorney in El Paso, Texas.

Mendel represented Antigua in a dispute with the United States about whether the Caribbean island could legally accept Internet gambling wagers from customers in the United States.

In April 2005, a WTO court in Switzerland ruled the United States could ban Internet gambling within its borders. But the court also decided U.S. law was inconsistent because it allowed Internet operations for horse racing and state lotteries.

Both the U.S. Trade Representative's office and Antigua declared victory after the WTO decision, but it's still unclear how the ruling affects Internet gambling, which has become a $12 billion industry with more than 2,300 Web sites.

Mendel said the ban Congress approved would allow Nevada and other states to conduct Internet gambling within their own borders.

"That flies in the face of the WTO ruling," Mendel said.

Gretchen Hamel, a spokeswoman for the U.S. Trade Representative, said her agency is still reviewing the ban that passed Congress on Saturday. She declined to comment further.

The ban, which was attached as a rider to a port security bill, was submitted to President Bush Wednesday. He is expected to sign it within the next two weeks.

Mendel said the WTO may decide by January or February that the Internet gambling ban means the United States is not in compliance with its international trade agreements.

"I have always believed the United States has too much at stake in the WTO to let it all blow up because of this one case. I think ultimately, they will have to work something out with us," Mendel said.

Mendel said he and several high-level government officials from Antigua were in Washington last week to lobby against efforts by Senate Majority Leader Bill Frist, R-Tenn., to pass the Internet gambling ban.

"We talked to members who had a pretty good record on free trade, and most of them didn't understand the implications of this Internet gambling ban," Mendel said.

The group did not visit any lawmakers from Nevada, he said.

Although many Internet gambling companies are panicking in the wake of the ban, Mendel predicted the prohibition will have little effect.

"We have (Internet gambling) service providers in Antigua who have been consumer-complaint free for 10 years now," Mendel said. "Gamblers think those businesses offer a better deal than Las Vegas or a corner bookie."

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