While three states permit intrastate online gambling, an Oklahoma-based tribe is looking to conduct Internet gambling involving international players.
The Cheyenne and Arapahoe Tribe of Oklahoma has an agreement with the state whereby they would operate an Internet site called pokertribes.com that would attract players from around the world. But, even though state officials approve of the idea, the federal government does not.
Last month, the U.S. Department of the Interior blocked the activity saying Oklahoma can’t offer exclusive access to a market outside the U.S.
The tribe, agreeing the compact with Oklahoma is “pretty groundbreaking,” filed suit in federal court, naming Sally Jewell, secretary of the Interior, and Kevin Washburn, assistant secretary of Indian Affairs, as defendants.
It was Washburn’s intervention that stopped the tribe from enticing foreign gamblers.
Tribal leaders point out that the Cheyenne and Arapahoe Tribe is the only Native American tribe that has an agreement to operate a gambling website from tribal lands with international players. They have spent some $9 million in setting up the website.
Their plan differs completely with the Internet gambling currently taking place in Nevada, New Jersey and Delaware. In those states, online gambling is restricted to people who are physically within the states’ borders. Their hope has been that Congress will act to permit Internet gambling across state lines.
“In Oklahoma,” said Richard Grellner, an attorney representing the tribe, “we have the Native American culture we can sell to the world, and the state and the tribes can really benefit.” It was estimated the tribal plan could generate $132 million annually by 2018, if the website attracts just 2 percent of the worldwide online gaming market.
And the benefits to the state would be substantial, as well, they noted. The agreement calls for the tribe to pay the state 4 percent of the first $10 million in annual net revenue, 5 percent of the next $10 million and 6 percent of any subsequent amount, plus a monthly 10 percent from non-house banked card games, or games in which the casino or host has no stake in the outcome.
Internet gambling is shaping up as the “Battle of the Behemoths,” now that information regarding major investments by well-known hedge fund operators has been made public.
In a piece for Forbes on Monday, Nathan Vardi identified billionaires George Soros, John Paulson and Leon Cooperman, known in the financial world as three of the most successful investors, as having “quietly participated in a rights offering” last year in Caesars Acquisition, Co. (CACQ), the spinoff of properties owned by Caesars Entertainment Corp. (CZR).
Caesars Acquisition also owns portions of Planet Hollywood on the Las Vegas Strip and the casinos being built by Caesars Entertainment in Baltimore but has a major focus on online gambling through Caesars Interactive and the World Series of Poker.
As Vardi describes it, the Soros, Paulson, Cooperman investments put them in direct competition with billionaire Sheldon Adelson, founder, chairman and CEO of Las Vegas Sands Corp. (LVS). Adelson has vowed to “spend whatever it takes” to stop the growth of online gambling in the country.
Currently, a full slate of online gambling is offered in Delaware and New Jersey, and online poker is available in Nevada. But, in each instance, the states require the participants be physically within the state’s borders.
Other major investors have joined the fray, according to Vardi. They include private equity managers Leon Black, David Bonderman, Marc Rowan and Joshua Harris, as well as Kirk Kerkorian, the largest single stockholder in MGM Resorts International (MGM).
There was no indication as to why the investments of such high-profile Wall Street figures were not publicly reported before the Forbes article.
But certainly the investments, so far, have been profitable with shares in CACQ moving from $10.34 to a high of $12.32. CZR shares had dipped as low as $7 each, prior to a resurgence in interest that pushed it to a 52-week high of $26.57 per share.
Battling for the attention of Congress are some political heavyweights on both sides of the issue. When the movement toward legalization of online gaming began, one of the principal voices in favor was ex-Sen. Al D’Amato, who used his celebrity to support the cause in numerous visits to popular television talk shows.
More recently, Adelson has hired two heavyweights to spread the word against online gambling. They are George Pataki, the popular former New York governor, and ex-Sen. Blanche Lincoln of Arkansas. They were joined by former Denver mayor Wellington Webb.
Based on share price popularity, the pro movement seems to be winning but the battle is far from over.
As Vardi pointed out, Adelson’s billions give him an ample opportunity to keep up the battle but his opponents are loaded, as well.
The shape of Atlantic City’s future as a seaside casino town may become apparent this month as analysts await the first full month of statistics with their clues about the early impact of Internet gaming.
Gov. Christie’s helpful nudge of the last week underscores the significance of whatever the numbers suggest. The dwindling number of optimists who have watched Atlantic City’s casino-based business tumble from the heights it once occupied contend Internet operations have the potential to pump new enthusiasm into the business.
It could not come at a better time.
Pessimists contend the success of Internet action that includes the full spectrum of casino games may generate higher casino revenues, but it is probably too little too late, what with new competition from all sides pressuring the beleaguered casino business.
Christie threw his considerable weight behind Atlantic City’s rush to get into the Internet business but it was apparent last week there is a limit to the governor’s patience. The south Jersey casinos have to start generating evidence of a turn-around or face the specter of competing casinos elsewhere in the state, probably at the Meadowlands.
Atlantic City is in the fourth year of a five-year moratorium on casino development elsewhere in the state.
The number of Internet accounts opened since Nov. 26 is close to 150,000, give or take a few thousand. Of course this figure says nothing about how many unique individuals the figure includes since it is widely accepted that many players have opened multiple accounts at the half-dozen or so casinos where Internet play is allowed.
The still-to-be answered questions involve a number of significant issues, for instance, which games are getting the most attention – slots, blackjack, what? There has been a lot of new slot product dedicated to New Jersey’s Internet stage and the careful review that casino staffs give these figures will determine the shape of marketing campaigns during coming months.
Caesars spokesman Seth Palansky promises a ton of marketing during coming months as the company begins the run-up to the next World Series of Poker at the Rio in Las Vegas in May. Caesars is using WSOP.com as the primary vehicle for its Internet poker operations both in Nevada and Atlantic City.
Another issue: Atlantic City needs Internet gaming to show that it is a positive and will not lead to more players logging on from home or wherever they may be with their laptops inside the state’s borders.
The history of recent marketing trends involving the Internet has pretty much established the ability of sophisticated marketing techniques to lure online visitors into the brick and mortar businesses where they become cash customers for whatever the resort has to sell.
Caesars has become a leader in the Internet’s social gaming industry. MGM has also made significant headway in its exploration of its potential and Wynn Resorts is known to be exploring the possibilities for turning Internet visitors into cash customers with a social gaming venture of some kind.
Building databases of people with a predisposition to spend on casino-related experiences is what it is all about.
“We’re talking about a marketing challenge,” Caesars CEO Gary Loveman says.
The degree to which Atlantic City benefits remains to be seen. Lots of companies are making long distance guesses about the shape of things that might evolve, but too much standing around waiting for others to react could put Atlantic City past the point of no return.
Change is an ongoing process and reluctant learners get left at the station as the future exercises its gravitational pull on companies with the imagination and willingness to embrace passing opportunities.
Whatever happens at secondary properties, MGM remains a favorite to resume its co-ownership role at the Borgata with its 50 percent partner Boyd Gaming. They have the bulk and necessary marketing networks to continue doing well.
The same is certainly true of Caesars. Brands such as WSOP.com and its industry leading Total Rewards program seem to guarantee continued success. Its much-discussed debt load is, of course, a significant issue, but no casino company does a better job of reaching customers where they live with marketing offers tailored to individual players.
It’s too bad other Atlantic City casinos have let opportunities slip away as competition gains ground.
The number of Internet gambling accounts created in New Jersey continues to grow and is nearing 150,000.
New Jersey authorized Internet gambling last year to give a boost to Atlantic City’s struggling casino industry, which has been beset by increasing competition for the past seven years. It began with a five-day trial period on Nov. 21 and launched publicly on Nov. 25.
As of Monday, 148,487 accounts had been created, though the state’s Gaming Enforcement Division notes that individuals often create separate accounts on more than one site.
The state will issue its first report next week on Internet gambling revenue won by the casinos.
Seven casinos are offering online gambling. They are: the Golden Nugget Atlantic City; the Borgata Hotel Casino & Spa; the Tropicana Casino and Resort; Trump Plaza Hotel and Casino; the Trump Taj Mahal Casino Resort; Caesars Atlantic City and Bally’s Atlantic City.
Resorts Casino Hotel also has received approval to offer Internet gambling. But its online partner, PokerStars, has been suspended from offering Internet gambling in New Jersey for two years due to an indictment against its founder.
State gambling regulators said PokerStars can reapply for approval before then if its circumstances change enough to bring it into compliance with New Jersey regulations.
Online betting marks the biggest expansion of gambling in New Jersey since the first Atlantic City casino opened in 1978. The state lets gamblers play any of the games offered in its 12 casinos including card games and slots, but online poker has proven especially popular in the early going.
New Jersey is the third state in the nation to offer Internet gambling, after Nevada and Delaware.
It remains to be seen if the $200 million to $300 million that Wall Street analysts predict Internet gambling may bring in over its first year will be new business, or whether it will simply cannibalize walk-in business at the brick-and-mortar casinos.
Revenues at each of Ohio’s four casinos declined in December, leading to the worst statewide showing in the nine months that all were open, according to figures.
Statewide, revenues declined 9.8 percent at the casinos, located in Cincinnati, Cleveland, Columbus and Toledo, according to figures released by the Ohio Casino Control Commission.
The Cincinnati casino opened March 4 and the others opened in 2012. The statewide December revenue of $63.2 million was the lowest full-month total since all four were open.
For December, revenues were off 19.1 percent in Cincinnati, 9.6 percent in Cleveland, 5.8 percent in Columbus and 3.9 percent in Toledo.
New racinos, horse racing tracks with slots-style video lottery terminals, opened in December north of Cincinnati and near Cleveland , expanding gambling options.
The December declines may reflect both a traditional slow pre-holiday period for the industry and the addition of more racinos to the gambling mix, according to David Schwartz, director of the Center for Gaming Research at the University of Nevada Las Vegas.
Additional racinos scheduled to open this year in the Youngstown, Cincinnati and Dayton areas could further cut into casino revenues, he said.
“This tallies with some of the earlier results. It looks like when you have more competition, you’ll see the existing places suffer,” he said.
Ohio collects 33 percent in taxes from the casinos and distributes them to the state’s 88 counties, its school districts and host cities, among others.
Local officials have approved casino giant MGM Resorts International’s plan for a new 20,000-seat indoor arena on the Las Vegas Strip.
The Clark County Zoning Commission approved the project’s land use and zoning applications Wednesday.
The $350 million project is being built in partnership with the entertainment company AEG. It will be located behind the New York-New York and Monte Carlo casinos.
Developers expect to break ground in the spring.
The facility will be privately financed and is expected to open in 2016 for concerts, boxing, mixed martial arts, award shows and other events.
Planners also hope to lure professional basketball and hockey teams, but no commitments have been announced.
Renderings show a sweeping 12-plus story glass and steel structure with a light-emitting display on more than 5 acres.