Last April, the Northern Territory officially licensed Lasseters Casino in Alice Springs to run an online gaming site and made history by becoming the first industrialized nation to regulate Internet gambling. The other six states also are in various stages of licensing online casinos and seven sites are expected to begin operating this year.
"The states believe you can't effectively prohibit Internet gaming," said David Ohlson, executive manager of Lasseters Online (www.lasseters.com.au).
Ohlson said Lasseters Online spent more than two years developing its site, and for much of that time the government was vetting the company's software and conducting background checks on its 250-employee staff.
"It was a very tough process," said Ohlson, who added the government will continue to oversee his operation and act as a third-party arbiter should any disputes with customers arise.
Business has been brisk. It its first eight months of operation, Lasseters Online served 35,000 players from 176 countries who placed almost $15 million in bets. The site's revenue grew 39 percent in November 1999 alone.
Internet gambling is currently sanctioned by numerous governments, but most are in third-world countries not particularly known for zealous regulatory oversight. Many are in the Caribbean, including Antigua, Belize, Costa Rica and the Dominican Republic.
"In most Caribbean countries you pay US$100,000 for the right to operate. There is no license," said attorney Anthony Cabot, author of the Internet Gambling Report.
For this reason, the Australian experiment is being closely watched by American gaming companies, both brick-and-mortar and those based in cyberspace. The stakes are huge. Bear Stearns predicted the online gaming market will be worth US$3 billion by 2002. Currently, about 250 companies operate 650 wagering sites worldwide.
Instead of pushing for U.S. regulation of Internet gaming, American land-based casinos have circled the wagons to try and kill what could be sizable competition from online sites. The industry has been largely supportive of the Internet Gambling Prohibition Act sponsored by US Republican Senator Jon Kyl
"We are against any kind of gambling that doesn't guarantee tough regulatory oversight," said Frank Fahrenkopf, president of the American Gaming Association (www.americangaming.org), which represents brick-and-mortar casino operators in Washington, D.C.
Online gambling executives and industry watchers agreed that U.S. casinos are being stubbornly short-sighted, ignoring a clear window of opportunity.
"They decided they preferred to protect their core business," Cabot said. "If you don't support [online gaming] you're leaving the industry to non-U.S. participants."
Ron Carter, chairman of the watchdog group called the Internet Gaming Commission (www.internetcommission.org) agreed: "This [head start] is allowing offshore operators to gain credibility and branding."
But Fahrenkopf said the blame lies with state gambling regulators in New Jersey and Nevada, which currently outlaw online gaming: "We're the creatures of our regulatory bodies. Before any of our major companies can get involved in cyberspace, regulatory authorities have to agree to it," he said.
Fahrenkopf was not aware of any groundswell among land-based casinos to ask for regulatory relief and said state agencies aren't interested.
Dead set against it is probably more accurate. Vic Salerno, chief execuive of American Wagering (www.americanwagering.com), a Las Vegas sports betting house, is in hot water with state gambling authorities. His company was licensed last year by the ACT to run an online betting service called MegaSports from Canberra. Salerno was prohibited by Nevada state law from taking bets at the site from Nevada residents. Someone snuck in and placed a bet, and now Salerno's brick-and-mortar Nevada license is in jeopardy.
