By Warwick Bartlett

The UK government has announced in the Queen’s Speech that a ‘place of consumption tax’ (POC) will be introduced for the providers of online gambling services. It is to be done to create a level playing field amongst those that are licensed in the UK and for the Gambling Commission to have greater control for the protection of the consumer. It will, naturally, also raise more tax.

The inference is that the gambler will get a fair deal. If regulation could achieve that then we would not have had a banking crisis.

There was an interesting article in the Money Week newsletter in February 2013 by Bengt Saelensminde entitled “Some people deserve horsemeat.” He goes on to say that this food scandal has many parallels with the financial world.

It would seem that this horsemeat scandal is rooted in the fact that people are finding life hard and supermarkets are trying to meet the people’s budgets by finding ever cheaper sources of protein. Inflation has led to higher prices and in trying to beat inflation producers have gone too far.

Parallels can be drawn with what has happened in the intensely regulated financial markets.

The buyers of investments do so with the knowledge that the market is regulated in the UK by the Financial Services Authority (or at least it was until the FSA was split into two new bodies). Yet none of this stopped the bubble that occurred in 2007 leading to the collapse of Lehman Brothers, the Great Recession, and higher unemployment.

The problem is that the public believes that the Government is doing its job of oversight 24/7. The public takes it for granted that if a company is operating in a regulated environment all will be well.

This is clearly not the case. But rewind to a world without regulation. The citizen in those days used to be a wary buyer. He used to do his own investigation before a purchase was made.

That is how it used to be in the betting and gaming industry. You made sure that when you placed a bet you did so with a firm with a decent track record of paying out. The expectation now is that the Gambling Commission is doing its job 24/7 and that the sports are being run honestly and fairly.

In our last newsletter we covered the case of Wilson Raj Perumal, a man on the move from Singapore to Finland. In our globalised world oversight in the UK is of no consequence when crimes are being hatched in Asia where the UK Gambling Commission has no jurisdictional power.

The point, though, is that the UK consumer actually believes the Government spin that protection is 100% when the reality is that match fixing is beyond the power of the Gambling Commission because the perpetrators are not in the UK.

But in market where there is intense regulation how could this have possibly happened?

The answer I am afraid to say is in regulation.

By Warwick Bartlett

Watching TV the other night I couldn’t help but notice the number of adverts for gambling services. This was not only during ad breaks in football matches but adverts for bingo and casino were appearing on the major channels and some of the lesser known Sky channels as well.

With retailers suffering during the recession and consumer products in less demand this new income from gambling companies must be a most welcome contribution for broadcasters.

The switch away from traditional newspaper advertising has been remarkable.

To combat the challenge from online media many newspapers have invested heavily in their own news websites which are predominantly free to access. That is the problem. The moment something is offered free it is considered a right and people baulk when they are asked to pay. The Wall Street Journal and Financial Times have been able to get away with it but others have floundered.

With falling print sales, newspapers have thus moved on to selling advertising online. But the figures are less than impressive. According to the investment newsletter Fat Prophets, US newspapers in 2012 gained $1 in advertising revenues from online for every $16 lost from its print products.

It would seem that the Internet upstarts have been winning market share of the automotive, employment and real estate classifieds spending, while retail advertising dollars have gone to TV, outdoor platforms, Google search and social networking sites.

Such a loss of revenue from traditional sources has had a knock on effect with newsroom employees in the U.S. falling below 40,000 for the first time since 1978, and is 30% below the peak of 2000.

The UK’s Daily Telegraph and Financial Times are still maintaining their broadsheet format but this is against the trend, as more newspapers are going tabloid.

Those calling for restrictions in gambling advertising need to be aware that media companies would be hard pressed during these economic times to find replacement revenue.

Over the past several years, in shopping malls and behind storefronts across the United States, in Internet cafes and adult arcades, computerized sweepstakes games have grown into a massive business, big enough to draw the ire of the commercial casino industry, which says they’re nothing but illegal gambling. As more cases involving them make their way into the courts, judges are tending to agree. Yet few states actually regulate the cafes or have laws pertaining to them and they’ve largely been ignored by law enforcement. That is until an epic scandal erupted in Florida earlier this year that now finds them squarely in the crosshairs of lawmakers, prosecutors and police.

The cafes, which can be found as standalones or tucked within amusement arcades and other businesses, follow roughly the same model. They sell time, not gambling per se. Usually it is Internet or phone minutes which come with “promotions” or “bonuses” in the form of sweepstakes entries or chances at lottery-like draws. Purchasers participate through the medium of electronic terminals or PCs that mimic poker or keno or casino-style slot games. No betting takes place. Not in a conventional sense. The prizes are the entries, which the customer may win or (of course) lose. Or players may be awarded retail products or “gifts” exchangeable for cash.

This “elaborate masquerade”, as the American Gaming Association calls it, has grown into a US$10 billion industry which Businessweek magazine estimated in a 2011 report at upwards of 5,000 venues across at least 15 states. Florida alone has been home to 1,000 of them. They’ve even been found in Utah, the most anti-gambling state in the nation.

There are legal defenses for them, and operators have not been entirely unsuccessful in pressing these. The argument most frequently heard is they’re no different than the contests offered by McDonald’s or Coca-Cola and other big consumer brands. Opponents say this is ludicrous and cite as proof the industry’s own estimates that revenue per terminal can range as high as $5,000 a month. Before things got ugly in Florida in March, they were legal in the Sunshine State as charities, and operators there have won jury verdicts in at least two cases. In Ohio last year, a judge in Cleveland’s Cuyahoga County took the controversial step of actually halting the prosecution of several individuals and companies after they’d been indicted on charges of illegal gambling.

The cafes have also fought back with the more subtle argument that shutting them down violates their First Amendment right to free speech, a pitch that’s been rejected by federal judges in Pennsylvania and Florida but prevailed for a time in North Carolina, where a state appellate panel last year allowed that operators were constitutionally protected against North Carolina’s gambling laws, a ruling the state Supreme Court reversed in December in the course of upholding a 2010 law banning sweepstakes games. The constitutional defense has been tried in Ohio, South Carolina and Arkansas, too, and additional cases are pending in Florida and Pennsylvania.

Some of the industry’s more enterprising minds have come up with the highly marketable idea of linking the games up with charities and non-profits as a fund-raising tool. One of the pioneers of this model, HEST Technologies out of Texas, was a leading software supplier of these “sweepstakes promotional systems” before it was indicted and ordered to close last year by the Texas Attorney General’s Office. The president of the company had pled guilty to illegal gambling and money laundering charges.

But the mash-up that occurred in Florida in March 2013 was in a class by itself. Forty-nine people were arrested, more than 60 were charged and more than $64 million was seized in 23 counties and five other states in raids by state and federal agents on a charity called Allied Veterans of the World, which prosecutors say was a front for a massive illegal gambling ring run out of some 50 sweepstakes parlors across Florida. Between 2007 and 2012, these venues generated a reported $300 million for charitable work on behalf of military veterans—except only about $6 million of it went to veterans, the charges state; Allied’s executives paid the other $294 million to themselves and their confederates. An Oklahoma software provider netted $63 million from its involvement, according to federal investigators. The husband-and-wife owners have been charged with racketeering and conspiracy.

Alarms were being raised for years over the proliferation in Florida of sweepstakes “charities,” but as they are lawful, and as the parlors are popular among the state’s large population of senior citizens, whose votes help maintain the Republican Party in power, these were not addressed. Allied was able to protect its operation and its status as a tax-exempt non-profit by lavishing donations on the election campaigns of state and local politicians and spending huge sums on lobbyists, which paid off last year when the state Senate shot down legislation that would have outlawed the cafes.

The most publicly prominent of Allied’s friends in Tallahassee was Lt. Gov. Jennifer Carroll. A retired naval officer and former head of the Florida Department of Veterans’ Affairs, she had a PR firm when she served in the state House of Representatives whose biggest client was Allied. As lieutenant governor she appeared in a glowing television ad promoting the company and its charitable work.

By the time the news of the arrests broke, she had already resigned. She has not been charged.

The investigation isn’t over either, according to reports, which may explain how the Legislature managed with stunning alacrity last month to get a bill to Gov. Rick Scott, who promptly signed it, outlawing various types of electronic machine games popular in Internet cafes. Which has confused nearly everyone about what is now lawful and what is not, and opponents, who include the Florida Arcade Association, representing businesses employing some 14,000 people, have hired lawyers to prepare a challenge in the courts.

In December, California’s Bureau of Gambling Control issued an advisory that sweepstakes games offered at Internet cafes are illegal under state law, prompting raids across the state that have shut down five cafes and seized more than 300 computers and game terminals, cash and ATM machines. Several people have been arrested.

In North Carolina, sheriff’s deputies in March arrested the owners of three locations and seized computers and other equipment.

In Ohio, Cuyahoga’s prosecutor has petitioned the state Supreme Court to stop the judge who quashed last year’s indictments from enforcing her orders, and state Attorney General Mike DeWine, an avowed enemy of the sweepstakes parlors, has joined the suit.

The problem for opponents, who include police and prosecutors, a majority of the state House of Representatives and Ohio’s four casinos and seven racetracks, is that no law specifically prohibits the cafes. There is nothing permitting them either, which could pose a unique problem for law enforcement since to classify them as gambling might require, under the state Constitution, that their status be submitted to a voter referendum. In the meantime, there is nothing on the books requiring them to be licensed and no licensing mechanism even if they were. Their suppliers aren’t licensed or regulated either. There are no technical standards for machines and no laboratory approval processes. The locations cannot even be formally inspected because they don’t serve alcohol. Not surprisingly, they’ve sprouted like mushrooms. Currently, there are more than 800 of them. And while they are clearly flourishing, no one really knows to what degree, since they’re not audited either. In a recent interview with The Associated Press, executives of listed operator Penn National Gaming, which runs Hollywood Casino in Columbus, said they have had a “material impact” on the casinos, which operate more than 9,000 machine games of their own.

What is known is that the sweepstakes lobbying machine is well-financed and effective. A bill passed in the House last year to regulate them out of existence died in the Senate. A similar House measure passed in March is expected to meet a similar fate. However, the Senate is expected to join with the House to extend a one-year moratorium on new cafes that is scheduled to expire in June, and the president of the upper chamber, Republican Keith Faber, has urged his members to return campaign contributions from the cafes.

The casinos, certainly no slouches in the lobbying department, have mobilized a response aimed at voters called Ohioans Against Illegal Gambling. The racetracks, which are looking to add video lottery terminals, support the campaign.

DeWine, in the meantime, is reported to have shared information with Senate leaders that tie the cafes to an interstate gambling syndicate with involvement by criminal groups overseas, and armed with a recent appeals court ruling upholding the convictions of two Cleveland sweepstakes parlor owners, he has created an Internet Gaming Advisory Unit within his office to help local police and prosecutors pursue the cafes—in effect, a declaration of war.

“This is not the easy way to do it. This frankly is the hard way,” he said.

On April 19, a grand jury in Cleveland handed up indictments against 11 people and eight companies on charges of illegal gambling involving Internet cafes. The day before, six Cuyahoga cafes were raided by a team of local and state agents. Earlier this month, state investigators searched a café in Richland County and seized evidence, including bank records. Search warrants also were executed at a company and a private home in New Jersey.

The word from Japan is that Prime Minister Shinzo Abe’s government may include casino development in a new national economic growth plan to be drawn up in June 2013.

English-language daily The Japan Times, citing unnamed but “informed” individuals, reports that Abe may propose special zones for investment in privately operated resort complexes featuring hotels, casinos and other attractions. He told the Budget Committee of the National Diet’s House of Representatives in March that lifting the country’s longstanding prohibition on casinos is an idea with “merit”.

Advocates have been pushing gaming’s potential economic benefits for the better part of a decade with little by way of political traction to show for their efforts. However, this time round they appear to have the requisite consensus and have secured an influential former chief cabinet secretary, as their leader, Hiroyuki Hosoda, a veteran of the ruling Liberal Democratic Party and said to be a confidante of Abe’s.

The news that Trade Minister Toshimitsu Motegi and Education Minister Hakubun Shimomura have been appointed to advise the pro-casino caucus in the House would also indicate that legislative momentum is building toward introduction of an authorizing bill, but not before elections in July to the House of Councillors, the Diet’s upper chamber, which is still controlled by the opposition Democratic Party of Japan and where a coalition led by the LDP hopes to seize a majority. The non-partisan caucus says it wants to submit a bill by the autumn with a view to securing legalization within two years, according to a recent Reuters report.

“You need both sides of the equation before things really get moving. We want to make that happen this year,” said the caucus’s deputy leader, Takeshi Iwaya, another prominent LDP lawmaker who served in Abe’s first government in 2006.

Given Japan’s sizable urban population and high propensity to gamble, the viability of casinos in the world’s third-largest economy has never been in doubt, and global names of the likes of Las Vegas Sands, MGM Resorts International, Genting Group and Caesars Entertainment have expressed interest in investing a lot of money. The country has long hosted thriving racing and lottery industries, and a machine gaming sector centered on the pinball-like game pachinko.

Tokyo Governor Naoki Inose has hinted at his support for a casino resort, and it is reported that Osaka’s popular pro-casino Mayor Toru Hashimoto, a founder of the rightist Japan Restoration Party, also wants to sponsor a casino bill.

In a conference call for investors hosted by Nomura Securities last month, Takashi Kiso, who heads the International Casino Institute, a Japanese advocacy group, said the market could evolve into as many as 10 resorts nationwide with initial investments at around US$4 billion each and a gaming tax rate between 20 and 30 percent.

That said, a multiplicity of divergent political interests together with a history of governmental instability have been major obstacles, especially when combined with the country’s inherent social conservatism. Advocates hope to finally overcome these with the backing of Abe, who was returned to power in December 2012 and has been winning popular points with his aggressive approach to tackling the country’s chronic economic malaise.

If there is anything to the wisdom of stock markets and the tabloid press maybe this really is the time.

Pachinko manufacturing giant Sega Sammy Holdings has seen its share price rise more than 50 percent this year despite a big drop in profit for the 12 months ended 31st March and a subsequent lowering of its earnings forecast. Mizuho Securities, for one, told Reuters it likes Sega Sammy’s prospects along with those of Fuji Media Holdings, a broadcaster located in a section of Tokyo considered prime territory for casino development.

Sega Sammy, which owns a stake in a casino in South Korea, stated a desire as far back as 2007 to invest in casinos in Japan should the opportunity arise and last February purchased a resort in Miyazaki Prefecture. Two months after that acquisition was announced, company President Hajime Satomi reasserted the company’s intentions, saying, “Of course, [a casino] is what we have in mind

By Warwick Bartlett

I always thought from inception that the e-gaming business model was so strong that it would convert governments to the Internet model of providing goods and services in real time at a discounted price to the benefit of consumers.

I was wrong. I realised that in 2008. But companies found it difficult to extricate themselves from previously adopted legal and political positions.

Chief executives are now facing up to the new world with candour. Norbert Teufelberger, CEO of Bwin.party, said on 22April 2013 that his company was to focus all future expansion plans toward regulated markets.

“In the past we have just done too many things at the same time and we have done them all mediocrely, so what we are trying to do now is fewer things, but do them really well,” Teufelberger explained.

William Hill and Paddy Power have only taken bets from regulated markets and have done very well by doing so. But their principle regulated markets are Ireland and UK and trading offshore into those markets carried a reasonable rate of tax. The new regulated world of mainland Europe is somewhat different.

I recall a story of a fast-food businessman suffering from a hike in VAT.

Imagine you sell fish and chips and take £100 pre VAT. The government introduces VAT at 15% and you pass that on to your customers. You should take £115 but your customer is not earning an extra 15% so your takings remain static at £100 and the government is taking £15 in VAT leaving you with £85.

Margins get squeezed. The shop owner has to increase prices sufficiently to cover the VAT and the loss of business from those who cannot afford the new price has to be made up from those who can. You are now charging £125 for what was £100 worth of fish and chips. The fish and chip shop industry contracted.

The UK’s point of consumption tax will probably yield £275 million. That money will either come from bookmakers’ profits or punters. Money will leave punters or the online gambling industry never to be returned.

This kind of realism and honesty in the industry was never more apparent than at 888 Holdings.

The steep rise in 888 shares, over 100% this last twelve months led to an inevitable correction. On 12 March 2013 the shares dipped 7% in a single day.

Brian Mattingly, 888’s Chief Executive, said he was “really not unhappy” about the fall in the share price. “We were valued at 11 times EBITDA – that’s far too much. I believe it’s good we are settling back to a share price valuing us sensibly” he told the Financial Times.

Looking back at this innovative industry and all the cases at the European Court of Justice, the inevitable deflection in management time and attention, and the cost to profits, you have to ask what would have happened without it and was it all worth it? No it could not have been.

But if you are someone who believes in fair play it had to be done, but if you are cynical like me you believe you cannot win taking on government, if you do win they change the rules so you don’t.

The court case 32Red v William Hill highlights the futility of going to court. 32Red won, in fact they won very well. But the judge ordered compensation for the trade mark infringement of only £150,000.

Now this case must have taken years to come to court plus another year to argue over damages. I would guess that the legal fees would be around £3 million in total. 32Red, the victor, would be able to claim costs but not all costs are paid so I estimate that even with compensation and most fees paid they would be out of pocket. How can one side win but both sides end up losing in a commercial case?

Mark McCormack was the founder of International Management Group (IMG) and he managed many of the world’s great sporting stars. He wrote the book “What they don’t teach you at Harvard Business School”. There is one chapter every Chief Executive should read: Don’t Sue the Bastards.

He says that, whatever the dispute, go and see the other party and if necessary camp outside their office until they will see you and reach a deal whatever the cost. It will be cheaper than going to court. What was Mark McCormack’s profession? He was a lawyer.

By Warwick Bartlett

Loveable East End ‘geezer’ Ray Winstone’s appearance on the BBC’s satirical current affairs programme Have I Got News For You neatly demonstrates the power of brand and advertising and will have pleased online betting firm Bet365 greatly.

During the 30-minute programme on primetime Friday night billing they mocked up the Bet365 TV advertisements offering odds on certain events, without the Bet365 logo of course, but most viewers will have associated them with the Bet365 adverts, so ubiquitous have they been.

Bet365’s adverts use Winstone as the central character to promote in-play betting and live streaming of sports events.

http://www.youtube.com/watch?v=wSnlvd5xj5Q

The resurgance of 888.com is also worthy of note. The adverts are classy and feature former Australian cricketer Shane Warne who, under the influence of Liz Hurley, looks not only thinner but fitter.

http://www.youtube.com/watch?v=KXj6hbqjdDY

When the law changed in the UK to allow e-gaming companies to advertise on TV some of the adverts were dire. But they have come a long way since then. 32Red’s farmer with his ‘gambling potatoes’ and pimped tractor is light hearted and inoffensive.

http://www.youtube.com/watch?v=-LIWZQKo1Vc

http://www.youtube.com/watch?v=2TUeN7fJ39k

32Red’s revenue was up 28% in 2012 but profits were down slightly.

Bwin have capitalised on their sponsorship of Real Madrid and Inter Milan. In the Premiership Bet365 sponsor Stoke City, 12bet sponsor Wigan Athletic, and Genting Casinos sponsor Aston Villa. Some companies, however, have tried shirt sponsorship but seen their deals come to an end for one reason or another e.g. Mansion, 32Red, SBOBET, and Bodog.

Shirt sponsorship ties up capital for the duration of the contract whereas TV advertising runs only for the duration of the campaign giving management more control.

But, the use of celebrity in advertising works, as the Coates family’s (owners of Bet365) position in the 2013 Sunday Times Rich List can testify.
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Mixed Messages from E-gaming Directors

According to the Financial Times two directors of Bwin.Party purchased shared to the value of £736,054 in March 2013. On the same day the FT reported a sale of £697,500 for directors of 888.

It is said that the directors of companies know more about the prospects of the company than anyone else. So director purchases and sales are watched closely by the market. To be fair 888 shares have had a good run up 106% in twelve months. Bwin. Party on the other hand are down nearly 13% but with the prospects of the U.S. opening up the directors clearly think the shares are undervalued. We shall see.

The 8th edition of the Global Gambling Report – Raising The Stakes includes the following new features and updates:
• Full global gambling appendices for 2011 (sequence now runs from 2007 to 2011)
• Updated gambling forecasts until 2017
• Key Markets Database with data from 2001 to 2017f (in local currency and US$)
• A new “at a glance” spreadsheet” of operators by category for each jurisdiction
• Gambling spend per capita
• More photos of gambling outlets and venues

http://www.gbgc.com/2013/04/global-gambling-report-8th-edition-raising-the-stakes/

The report includes company summaries for the likes of: Camelot (UK), Churchill Downs (US), Codere (Spain/Latin America), Las Vegas Sands (US), OPAP (Greece), SJM Holdings (Macau), amongst others.

Updates include:

Asia

Cambodia: unregulated sports betting in the Poipet region of Cambodia

Japan: latest developments on the progress of casino legislation in Japan

Macau: data for the gambling sector in Q1 2013

Nepal: the Nepalese casino sector is still in dispute with the government over licensing and fee arrears

Taiwan: Intralot is selected as Taiwan’s new sports betting contractor; news on the progress of the casino legislation in the offshore islands and casino tax

Vietnam: a new casino is planned as part of a resort in the Dong Van highlands in the north of Vietnam

Latin America

Brazil: more information added on the illegal but popular ‘animal game’

Europe

Albania: Austrian Lotteries will launch Albania’s national lottery

Bosnia: decision to ban internet betting is retracted

Croatia: data added for betting revenues by operator

Cyprus: news of a bill that would allow for a casino resort in southern Cyprus

Germany: details of the companies that have been short-listed for one of 20 internet sports betting licences that are available in Germany

Greece: update on the sale of the government’s stake in gambling monopoly OPAP

North America

California: the rise and closure of illegal sweepstakes cafes; legislative bill to remove ban on sports betting

Florida: a bill is proposed to allow internet lottery subscription sales; illegal gambling ring broken up and sweepstakes cafes closed

Michigan: investigations into the state’s charitable gaming lead to suspensions and possible tax increases

Nevada: details of deals done for internet poker in Nevada; revamped Plaza sportsbook opens; comped meals to be taxed

New York: speculation on new casino sites; illegal gambling business busted

New Hampshire: progress of legislative proposals to allow casinos

Rhode Island: a proposal to raise the legal gambling age is suggested; Newport Grand will not be able to add table games

Texas: a legislative proposal to allow internet poker is introduced

Wisconsin: proposal to sell US$30 instant win lottery tickets; Beloit sells land to Ho-Chunk for native American gambling

Lottery duty – the government receives 12% of lottery sales – rose by 7% in 2012, sending GB£ 817 million to the Treasury’s coffers.

At that rate the government will receive GB£ 1 billion in lottery duty by 2015.

Global Betting and Gaming Consultants’ Director Lorien Pilling commented: “Since 2007 the lottery duty the government has received has increased by 42% and the last few years have each seen record-breaking amounts of duty generated by the National Lottery’s performance.”

GBGC UK Lottery Duty Forecasts

On a global basis, lotteries have performed very well over the recent years, given the economic situation and fragile consumer confidence. In 2012 the global lottery market was worth US$ 122 billion in revenues and GBGC’s Global Gambling Report forecasts this will rise to US$ 150 billion by 2017.

GBGC Global Lottery Revenues 2011 to 2017

“The strong performance of lotteries is good for governments because many rely on the proceeds of their state lotteries to fund various areas of public life from welfare to education. In the UK the forthcoming ticket and prize increases will spur further sales increases and, therefore, increase the amount the government receives in duty. In the current economic climate GB£ 1 billion will be most welcome even though it won’t solve the UK’s fiscal problems.”

Lottery Ticket Price Increases and Bigger Jackpots

Camelot, the operator of the National Lottery, announced major changes to ticket prices and prizes at the start of the year. The cost of a Lotto ticket will increase from £1 to £2 from Autumn 2013. This is the first ticket price increase since the game launched in 1994. In addition, the prize for matching three numbers correctly will be increased from £10 to £25. Camelot also said that the Lotto jackpots would be bigger – around £5 million on Saturdays and £2.5 million on Wednesdays. Lotto’s jackpots have been falling as players are enticed by the much larger prizes offered by the Euromillions game.

Global Betting and Gaming Consultants (GBGC)

GBGC is a specialist, independent gambling consultancy based in the Isle of Man. Since 1998 GBGC has worked with clients on every continent: helping governments develop their gambling policy; advising gambling companies of all sizes on their strategy; and assisting investment banks and private equity with due diligence work.

GBGC also publishes the comprehensive Global Gambling Report, currently in its eighth edition – essential reading for gambling industry executives.

Find out more here:

http://www.gbgc.com/

http://www.gbgc.com/about/gambling-statistics-data/

http://www.gbgc.com/publications/global-gambling-report/

In New Jersey Governor Christie signed his state’s i-gaming bill into law after the Assembly and Senate approved it by 68-5 and 34-1 votes respectively. In Nevada Governor Sandoval hurriedly signed a similar bill as the two casino states vie to become the focal point for internet gambling in the US.

New Jersey permits existing licensed casinos to offer all games currently offered in New Jersey casinos, including poker. The new Nevada legislation permits only poker at the present time.

New Jersey’s online gambling tax rate is 15% of gross profits and the law will be reassessed in the state senate after a period of 10 years. The actual operating conditions are still to be finalised but it seems likely that online gamblers will have to appear in person at a casino to undertake KYC checks before they can play. The bill allows gamblers in both other US states and even other countries to place bets in New Jersey as long as such gambling activity is not prohibited by any federal or other state’s law.

In Nevada the internet gambling licence fee is currently set at US$ 500,000 with a US$ 250,000 renewal fee but the amended AB114 bill sets a minimum of US$ 150,000 and a maximum of US$ 1 million for the licence fee. The tax rate is 6.75% on gross gaming revenues.

“This is an historic day for the Great State of Nevada. Today I signed into law the framework that will usher in the next frontier of gaming in Nevada. This bill is critical to our state’s economy, and ensures that we will continue to be the gold standard for gaming regulation,” proclaimed Governor Brian Sandoval.

Licences to a number of companies have already been approved by the Nevada Gaming Commission including: IGT, WMS, SHFL Entertainment, and South Point Poker. Interestingly, AB114 also authorizes the state of Nevada to enter into compacts with other states to offer Internet poker.

Global Betting and Gaming Consultants has compiled some forecasts for internet gambling revenues in the two states based on what is known at present. The two states have small populations (8.8 million for New Jersey and 2.7 million for Nevada) and the real success for these states will come if they can secure agreements to combine populations from other US states – or further afield – to form larger poker networks. New Jersey permits a wider range of e-gaming activities with its new legislation than Nevada. Under the current regulatory set up GBGC anticipates combined e-gaming revenues of around US$ 330 million in the two states in 2015.

GBGC Nevada New Jersey Egaming Revenues

“Both jurisdictions have been through difficult times in recent years for a variety of reasons, with gambling revenues falling from their boom year peaks of 2006-2007. The need to diversify and find new sources of revenue for both gambling operators and the state governments is essential for both New Jersey and Nevada,” commented GBGC Director Lorien Pilling.

New Jersey has been hit harder than Nevada by the financial crisis. New Jersey’s casino revenues peaked at US$ 5.22 billion in 2006 and have since fallen to US$ 3.05 billion in 2012, a drop of 42%. By contrast Nevada’s casino revenues peaked in 2007 at US$ 12.46 billion and fell to a low in 2010 of US$ 10.11 billion. In 2011 and 2012 Nevada has seen the beginnings of a recovery with gambling revenues rising from the 2010 low to US$ 10.49 billion in 2012.

GBGC Nevada and New Jersey Casino Revenues

The economic situation has undoubtedly played a large part in the casinos’ woes as customers cut back on non-essential spending and the financing of new projects and existing debts was withdrawn by financial backers.

But the problems in New Jersey appear to be more deep-rooted than just the current financial crisis. Attempts to reinvigorate Atlantic City have struggled and the much vaunted new Revel casino and resort has filed for bankruptcy just a year after it opened. Revel is looking to restructure its US$ 1.5 billion in debts so that it can continue operating. Atlantic City also had to contend with Hurricane Sandy in October 2012, which forced the closure of the casinos, and did nothing to help Revel’s first year of operations.

The financial crisis in the US has also meant that both New Jersey and Nevada are facing increased competition because other state governments are turning to gambling regulation and expansion as a means of generating more revenues for the state coffers. All around New Jersey, the likes of New York, Pennsylvania, Maryland, and Delaware have been expanding gambling activities. The overall result is that Atlantic City becomes less of a draw as a ‘gambling destination’ for the surrounding population.

Against such a backdrop of economic and social factors the importance of the revenues and licensing fees that e-gaming could bring each state cannot be overstated. One measure of the importance was the speed with which Nevada acted when New Jersey announced its legislation. There is an opportunity for one state to become the focal point of regulated internet gambling the US, and it is one that neither can afford to miss.

The global gambling spend per adult is the equivalent of just US$ 82, despite all of the gambling expansion – both online and land-based – that has taken place around the world over the last decade.

Global Betting and Gaming Consultants (GBGC) has compiled data for the world’s gambling markets as part of the research for the 8th edition of its Global Gambling Report. GBGC calculates that the global gambling market was worth US$ 430 billion in 2012.

GBGC’s gambling data shows that there is great regional variation in the per capita amount spent on gambling activities.

The amount spent per capita on gambling ranges from just US$ 7 in Africa through to more than US$ 700 in Oceania and there is a definite split in spend between emerging and developed gambling markets.

There is also great variation on gambling spending between countries within the same region. The gambling spend per adult in the United States is around US$ 400 but is US$ 620 in neighbouring Canada. Similarly in Hong Kong the figure is US$ 500 but only US$ 16 over the border in mainland China.

GBGC Gambling Spend Per Capita Comparison

GBGC Gambling Spend Per Capita By Region

“There is clearly a great deal of scope for growth in gambling spending in many regions as their economies develop. The low spend in gambling per capita is also heavily influenced by the fact that there is limited access to regulated gambling activities for people in many regions of the world,” commented GBGC Director Lorien Pilling.

Global Gambling Report 8th Edition – Raising The Stakes

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