Positive signs on US legalisation for internet gambling

Two positive but unrelated opinions on the legalisation of online gambling in the United States were given this week, adding credibility to a growing optimism that this year will see the United States joining other progressive Western nations in permitting controlled and regulated betting over the Internet.

The first opinion comes from the highly respected business analysts at investment bankers Goldman Sachs, who have issued a note to investors predicting that the Americans will legalise and regulate the online gambling industry, woth up to $12 billion a year according to a report from The Examiner.com.

The note covers the latest attempt by Barney Frank, chairman of the House Financial Services Committee, to introduce legislation that recognises the rights of individual states in legalising and regulating carefully vetted online gambling providers. If passed this bill would largely negate the controversial Unlawful Internet Gambling Enforcement Act which has cost the industry billions.

Goldman Sachs advises investors "We believe it is logical to assume that the US market will eventually regulate, given the potential implications for US tax take, if nothing else."

“Based on a simple ‘grossing up’ of PartyGaming’s rake relative to its 9 percent market share, the US poker market alone was worth $1.5 billion in 2008,” the report noted.

“Were the market to be legalised, we believe that the size of the revenue opportunity could increase materially,” it continued. “Based on an assumption of 30 percent penetration of offline poker players and $300 gross gaming revenue (GGR) per player, we estimate that a legal poker market could be worth $3 billion a year.”

“Were GGR to increase to 45 percent and GGR per player rise to $400, the size of the poker market alone could be worth $6 billion. We also estimate that the casino market could expand to a similar scale, based on various offline penetration assumptions.”

But US players will have to be patient, it appears. There is a strong likelihood that online poker may be legalised in a number of states before the federal government makes any changes to the current laws, the analysts opined, noting that Florida and California in particular could be possible early adapters. And the Franks legislative proposals to liberate the US online gambling market have been delayed until September due to pressure of other work in Congress, and may not be politically debated until the new Congress.

“The momentum at state level, where widening state budget deficits are ratcheting up financial pressures, is clearly building,” the report pointed out. “Indeed, if California and Florida move forward with legislation to legalise online poker, this could prove the catalyst for other states to follow suit”.

The second perspective came from the highly experienced Canadian online gambling executive Mitch Garber, who until recently headed up Party Gaming and is now managing the new online gambling division of Harrah's Entertainment.

In an interview with EGR Garber was bullish about the future of the online gambling industry in Northern America, opining that the egaming scene would be dominated by “a few strong, global operators” where Americans would be free to gamble online legally.

“The future of online gaming is going to be not dissimilar from the current situation with land-based gambling," Garber predicted. "There will be a few, very strong global operators that dominate, and obviously it is Harrah’s strategy to be one of those leading global operators, and to leverage our brands and the expertise of the people that I’m bringing on board to see that that happens.

“Caesar’s, Harrah’s and the World Series of Poker are all strong brands and part of our strategy is to leverage those. Caesar’s, Harrah’s and the WSOP are the most powerful brands globally, and even if you don’t see them in Europe they are still strong and we will use them online.”

Garber emphasised that Harrah’s is not yet a global business. “The idea is that ultimately Harrah’s will be a global business,” the executive explained. “Today it is not yet a really global business because online gaming is an activity not yet legal in the US, which is the biggest internet market in the world, but the UK and the rest of the EU and the positions they have taken are creating a positive market for opportunity, and we are exploring those opportunities.”

Commenting on US regulation, Garber said: “I’m very confident that legislators will see that this is an industry that can be properly regulated, and that the technology exists to alleviate concerns about money laundering or age verification.

"It boils down to the activity being properly regulated and properly taxed. Gaming is an important revenue source in the USA and interactive gaming could be an important extension of that.”

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