Federal online poker not a good bet in 2012

20 February 2012

LAS VEGAS, Nevada -- A Wall Street gaming analyst told investors Friday that debate over federal legislation that would legalize Internet poker has most likely been pushed into 2013 after lawmakers didn't attach an online gaming bill to the payroll tax cut extension.

However, Macquarie Securities gaming analyst Chad Beynon said in a research report that Nevada stands to benefit from the inaction because it may be the only state that allows Americans to gamble online this year.

Earlier this week, Nevada gaming regulators finalized the state's minimum internal control standards for interactive gaming, which could become effective in a month.

"We think the standards were written in a way that will allow for small adjustments as the process moves forward," Beynon told investors. "At this point, no firm date has been set, but 13 companies have now submitted for an operating license."

On Thursday, Sen. Harry Reid, D-Nev., ended speculation that online poker legislation would be attached to a bill that renewed the payroll tax cut through the end of the year. Reid, the Senate Majority Leader, did not give a reason Internet poker legalization was omitted from the bill.

The payroll tax cut was approved Friday by Congress and sent to President Barack Obama for his signature.

Beynon said the major gaming operators and suppliers would continue to push for federal legalization of Internet poker because they believe Washington D.C., is better equipped than individual states to regulate online gambling.

He thought gaming companies looking to break into the online wagering field in the United States would look in two directions: Nevada, which has the laws in place, and social gaming on various "play for fun" sites.

"Nevada's Gaming Control Board continues to methodically roll out legalized intrastate gaming and we believe their regulatory board has a great handle on what's to come," Beynon said.

Also, he expects New Jersey, Iowa and California to adopt online gaming legislation this year. He expects other states and "potentially the federal government" to use Nevada's Internet gaming regulations as a template for further legalization.

Three social media gaming site's -- Zynga's Texas HoldEm Poker, Slotomania, which operated by Playtika through an agreement with Caesars Entertainment Corp., and Double Down Casino on Facebook, which is being acquired by International Game Technology -- draw more than 1 million daily users each, Beynon said.

The Double Down website has also been under construction at times because of what Beynon said are additional changes IGT is making.

"Currently, multiplayer blackjack and roulette, slot machines and video poker are available, but we expect additional slot games as well as community poker games to be added in the near term," Beynon said.

Washington, D.C., insiders speculate Internet poker legislation could resurface during Congress' lame duck session after November's presidential election. Two years ago, Reid and Arizona Republican Sen. John Kyl tried to push Internet poker legalization during the lame duck session.

Whatever shape or form Internet poker legalization takes, Beynon said Nevada gaming companies will benefit.

He said Caesars Entertainment, which owns the World Series of Poker, could be well-positioned if the U.S. were to push through some type of regional pooling or federal legislation.

Beynon said land-based casino operators, such as Caesars, MGM Resorts International and Boyd Gaming Corp., have the best opportunity with state gaming legislation, depending on how the laws are written. Lottery vendors also would benefit because they have existing infrastructure and state contracts.

"In both cases, we believe slot vendors would be able to generate fees from both content licensing and platform design, but we note that, with a piecemeal rollout, initial revenue and profits may be minimal," Beynon said.

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