While the oldest profession is fairly well agreed upon, my guess is the world’s oldest pastime might just be gambling. Constraints against freedom to legally exercise these instincts vary widely, depending on your location. If Macau is one of the more libertine places on the planet then in comparison, here in America our laws might be considered downright prudish.
As it stands right now, according to federal law, Internet Gambling is basically illegal. While the 2002 Wire Act doesn’t explicitly prohibit internet wagering, the Justice Department takes the position that it covers all forms of gambling. The 2006 UIGEA (Unlawful Internet Gambling Enforcement Act) clarified and expanded on the 2002 Wire Act and spelled the death knell for many internet gambling sites. In 2011, the government flexed its muscles when the FBI, in a widely publicized sting, shut down the three largest online poker sites concurrently detaining and charging eleven people including the sites founders. Besides claims of violating gambling laws, charges included bank fraud and money laundering. These were questionable arrests at best as numerous lawmakers, including New York Senator Alphonse D’Amato protested that online poker was not a crime. Classified as a “game of skill” the thought was online poker does not belong in the same pot as games of chance like roulette. (More on this later)
Current regulations however do not preclude individual states from passing legislation superseding federal statutes. So the result has been state by state webs of byzantine codes that may, for example, allow horse betting but disallow online poker or casino games. As of today, three states have officially legalized online gambling: Nevada, New Jersey, and Delaware although only Nevada has sites actually up and operating. Many other states including some biggies like California and Pennsylvania have online gaming proposals grinding through respective legislatures.
The efforts to circumvent the state patchworks and legalize online gaming at the Federal level have recently gained some impetus. New York Republican Congressman Peter King, in early June introduced the long winded Internet GamblingRegulation, Consumer Protection Act of 2013. According to King, this bill would create “a common federal standard (to) ensure strong protections for consumers………make it easier for businesses, players, lawmakers, and regulators to navigate and freely participate”. This makes some sense. The gambling lobby rightly argues that uniform standards will make it much easier for global casino operators to confidently develop expansion strategies and gear up for legalization. With this potential good comes a new office of “gambling oversight” attached to the Treasury Department. It also raises my antenna anytime I see the words “consumer protection” in a bill. Is that an invitation to people like the nanny state unconfirmed Consumer Financial Protection Bureau chief wonk Richard Corday to attempt to expand an already dubious mandate?
Games of skill already have a specific carve-out in the 2006 UIGEA explicitly approving them, subject to state approval, for online consumption. Online poker, as of May 1, 2013, is officially up and operating in Nevada but is only available to Nevada residents. The main offering area in the skilled gaming arena has always been Fantasy Sports. These season-long affairs have long been dominated by juggernauts like Disney (DIS) subsidiary ESPN , Yahoo ! (YHOO) Fantasy Sports, and CBS Sports. While very financially successful, having to endure an entire season deprives gamblers of the greatest of all pleasures, namely instant gratification. In the past few years the still nascent daily fantasy sports wagering has been successfully filling this void.
Daily fantasy sports lets you draft your team, place your wager, and get paid, all in one day… and you can play almost any day of the year. Play against one opponent or many in a league format. Offerings can satisfy all addicts’ cravings including the NFL, NBA, NHL, MLB, PGA, and NCAA basketball and football. While still considered a niche this industry is growing at triple digit rates.
One of the big debates surrounding legalizing online wagering is what might be the always dreaded unintended consequences. One of the big naysayers is billionaire CEO of Las Vegas Sands Corp. Mr. Sheldon Adelson, perhaps the godfather of gambling in America. “Click your mouse, lose your house” quipped the head of the world’s largest gaming organization. Mr. Adelson calls internet gambling “fool’s gold” adamantly opining that its expansion will come solely at the expense of brick and mortar casinos. By his unsubstantiated arithmetic 400,000 jobs would be lost (200,000 direct in casinos and 200,000 indirect) if this bogeyman were legalized.
Mr. Adelson views a “societal train wreck waiting to happen” referring to is predicted wave of new gambling addicts online wagering will facilitate. To the contrary, an enormous Harvard Medical School 40,000 person study concluded “the overwhelming majority of online gamers play in a very moderate manner, spending minimal amounts on gaming”. Further it is far easier to police “addiction” on the internet versus at a live casino.
Mr. Adelson notes that the outcome of this debate doesn’t really affect him much as the bulk of his Las Vegas Sands Corp. profits are derived overseas notably from his Macau Venetian, the world’s largest casino. It is difficult to know the real thoughts Mr. Adelson. Perhaps he does mean what he says but billionaires think a little differently than you and I do. Certain laws of nature appear inapplicable to the ultra-rich.
Even if there is some cannibalization from brick and mortar to cyberspace, then won’t there be a void to be filled by thousands of computer programmers and other technology skilled based jobs? Currently online poker worldwide is a $15 billion enterprise with an estimated $ 6 billion emanating from the U. S. shores. American poker players pay a heavy price for accessing illegal overseas based websites. Besides the usual vig (house take) these houses have very onerous penalties to withdraw your money…..sometimes up to 15 or 20 percent. As the dust settles, and legislation becomes more transparent, for sure many of those players will migrate back to America.
According to the Fantasy Sports Trade Association Season long Fantasy Sports has an 32 estimated million players in the U.S. and Canada alone. Daily fantasy sports wagering is starting to chip away at the seasonal franchises of the ESPN’s of the world. The blanket legalization of online gaming would create a far more competitive landscape for all aspects of gaming whether skill or chance based.
The daily fantasy sports sites are gearing up for a rough fight. The five hundred pound gorilla in the space right now is FanDuel.com which just received an $11 million investment which was led by Comcast Ventures, an investment arm of cable provider Comcast Corporation (CMCSA). DraftKings.com the number two player took in $7 million of new funds in a round led by Atlas Ventures. Another rapidly growing entrant, FanThrowdown.com sold a 63 percent controlling stake for which valued the firm at $4 million to patent monetization firm MGT Capital Investments (MGT). Like all new industries there are many new entrants to this niche which will in short order will be a multibillion dollar industry.
Passing a comprehensive federal law means a mini gold rush for the big gaming casinos…Caesars Entertainment Corp. (CZR), Sands, and MGM Resorts International (MGM). They will offer every kind of online game imaginable. Interestingly, Native American tribes, charities, even the NFL are watching these debates closely.
My big gripe against prohibiting any form of online gambling is the boundless hypocrisy of lawmakers. I hang my hat on the example of lotteries happening daily across our nation. Worries of addiction and consumer protection have a hollow sound when advertisements abound enticing the populace to play games that amount to little more than the ultimate form of regressive taxation. Did you know the odds of winning the June 29 “power ball” lottery in California, according to lottery officials are 1 in 175 million? Conversely, according to the National Weather Service your odds of getting killed by a bolt of lightning in a given year are a comfortable 1 in 8.9 million, while your chances of just getting struck by lightning go up to 1 in 700,000…..kinda makes you want to stay indoors.