iGaming Show Offered Insights and Interesting Debate

The fourth annual iGaming North America conference (IGNA), held March 19-21 at Planet Hollywood in Las Vegas, showed an increase in attendee numbers from the previous year. About 650 delegates hailing from commercial, tribal and international gaming sectors attended this year, compared with about 500 last year.

The event, produced by BolaVerde Media Group, Lewis Roca Rothgerber LLP, The Innovation Group, eGamingBrokerage.com and iGaming Business North America, drew a robust tribal gaming operator turnout despite tribal conferences occurring elsewhere simultaneously, demonstrating an apparent dedication to having a presence and gaining a better understanding of the i-gaming space.

Opening Event
One of the much-anticipated events of the conference was an opening day debate about online gaming titled “Visionaries’ Perspective—Is I-Gaming the Problem or the Solution,” presented by Andy Abboud, vice president of government relations for the Las Vegas Sands Corp., and Mitch Garber, chief executive officer of Caesars Interactive Entertainment. The event brought in a packed house, and attendees seemed to agree that it was noble of Abboud to take part in such a visible discussion, knowing that approximately 99 percent of the room would weigh in on the side of Caesar’s Interactive pro-i-gaming stance.

A good portion of the dialogue focused on why Las Vegas Sands CEO Sheldon Adelson, also the head of Coalition to Stop Internet Gambling, is pouring so much money into lobbying and legislation aimed at prohibiting and/or restricting i-gaming. Abboud claimed that the Las Vegas Sands’ position is all about regulation; he indicated they are concerned about all the “bad actors” that will potentially permeate the industry if allowed to carry out i-gaming via state-by-state regulation. Abboud held up a stack of papers he said were lists of illegal operators and claimed that more bad actors will put up websites unlawfully and operate without adhering to i-gaming regulations because they don’t have the brick-and-mortar license and large real estate holdings at risk.

Garber countered with an argument that stated that, unlike land-based operations, i-gaming actually provides more regulatory data, tracking and tracing due to sophisticated technology used in offering and regulating such gaming. “You can age verify and ID everyone, track every dollar, replay hand history and track the money trail with much more sophistication than in a brick-and-mortar operation,” Garber said. He added that he didn’t need to hold up any studies or papers because he knew the realities after having been in the i-gaming business for 20 years.

Both speakers said they support strong regulation of the i-gaming industry, but Abboud made a point of calling out concerns about smaller companies. “It’s not Sands or Caesars we’re worried about, but all the smaller companies and bad actors out there.” Abboud stressed that smaller gaming companies and tribes shouldn’t even attempt to participate in the online sector. “The large online tech companies will end up dominating this space anyway,” Abboud said. “Google, Facebook and Zynga will clean your clock.”

He continued to deliver a doomsday message aimed at tribes and small operators. “I’d say the luckiest guy in this room is the guy that works for Facebook. The unluckiest people in this crowd are the Indian tribes and the smaller gaming operators—there is never going to be a market for you. Ever. Either it’s going to crush your brick-and-mortar, or you just won’t be a part of it. The really smart operators are going to partner with the gentlemen from Facebook or Google or any of those companies because they know it better than any of us. The rest of you probably don’t have much of a shot, and you should know that upfront.”

After the discussion several of the tribal gaming delegates, as well as a contingent from the Virgin Islands Gaming Commission, discussed Abboud’s comments. Without exception, the indigenous gaming attendees were offended by his remarks. As one tribal delegate from a successful tribal gaming operation in the northern Midwest commented, “Abboud made it sound like we don’t know what we are doing in the gaming space.”

The remarks were reminiscent of comments made by Donald Trump in the 1990s during a Senate hearing where he suggested the U.S. should not allow tribes to have the privilege to offer gaming on their reservations because they wouldn’t be able to handle the regulatory or business requirements, and there was potential for rampant organized crime infiltration.

Now two decades later, tribal gaming is a flourishing, well-regulated industry that generates approximately $28 billion in annual revenue and provides thousands of jobs and tribal government self-sufficiency. All U.S. tribal gaming facilities are regulated by tribal gaming commissions adhering to strict regulations in relation to the National Indian Gaming Commission.

Tribal attendees interviewed at the show disagreed vehemently that their deserved place in the business sector or their current stringent regulatory adherence should be any different for online gaming. Most said i-gaming should be open to licensed operators commercial and tribal, similar to brick-and-mortar gaming. They indicated that licensing, strict regulations and certain restrictions are needed, but large and small entities should be allowed to participate.

Tribal I-Gaming
A session titled “Case Studies of Tribal Online Gaming Operations” focused on a handful of tribal ventures poised to enter the i-gaming space. Two of the panelists, the Winnemucca Indian Colony represented by Chief William Bills and Tribal Internet Gaming Alliance (TIGA) represented by Jeffrey Nelson, have partnered with professional technology partners to assist with their launch. TIGA partnered with C2 Rewards and created a “treaty” system of sovereign gaming among tribes on Indian lands.

The Winnemucca partnered with GeoBet from Canada and are active in the legal U.K. and Canadian markets and are working with Nevada Gov. Brian Sandoval to seek licensing rights. Great Luck LLC, represented on the panel by CEO Joe Valandra, has a true sovereign model, having created all their proprietary technology and are based on the Alturas Indian reservation.

Great Luck is formulated on the legal position of proxy play whereby the Class II games are located on Indian lands but available to online customers via a Virtual Private Network (VPN). Great Luck is still preparing for its launch by completing all of its certifications as officials realize they must be very stringent in their compliance, knowing they will be scrutinized, Valandra said. Perhaps the best news from the tribal panel in light of Abboud’s remarks about smaller tribal operators not having a chance at the online gaming business is that all of these first movers are prepared to help smaller tribes once they are established through some form of affiliate programs.

IGNA has grown rapidly over the years as the i-gaming sector exploded on the U.S. and North American scene. Not only has the attendance increased dramatically, but there were also more than 30 panels and workshop sessions—many simultaneously scheduled over the three-day conference. There were international experts, case studies, a mock trial and so many “must-see” events that it was a scramble to cover it all, even with the help of my fellow reporter (and husband) Curt Mohl.

Two of the most interesting tracks proved to be the social gaming and finance tracks.

Social Gaming
The social gaming track was particularly robust this year, especially with the presence of many new companies offering slick, state-of-the-art social gaming products. There was a consensus amongst the presenters that in general, social gamers on the World Wide Web only have about a 10 percent conversion rate to real money gambling. However, when offered play for fun on gaming facilities’ websites, those numbers increase dramatically (up to about a 23 percent conversion rate). There is also agreement that most social gamers prefer mobile applications. Social gaming can be a revenue-generating model (in addition to bringing in new player loyalty members and increasing awareness) through the sale of virtual coins, chips and time online. We met with three companies offering social gaming to tribal entities and were impressed by the products and sophistication of the games. Operators conducting research in the space may want to check out the offerings of NYX (http://www.nyxgaminggroup.com), Foxwoods Interactive/Game Account Network (http://foxwoodsinteractive.com) and Big Stack Technologies (http://bigstk.com). All of these companies allow the operator to retain their player data and offer branding and customization of their web pages on the game “skins.”

Even with the recovery of the capital markets, tribal gaming finance remains a tough sector with stringent due diligence, added scrutiny and longer lead times. Brick and mortar facilities are particularly challenged due to the visible defaults during the market dislocation, larger amounts required and hesitancy related to sovereign immunity issues.

However, the good news for tribes that came forth during the investment and finance forum discussion is that as a new and developing sector, online gaming finance is a creative space with interesting strategic partnerships being formed for financing purposes more so than traditional finance. Strategic partnerships look at the possible synergies when financing an online gaming operation instead of simply considering traditional leverage, pricing and earnings ratios.

Steve Rittvo, one of the IGNA conference organizers, said, only partially joking, that when he creates projections for online gaming companies, he often “throws a dart at the wall” simply because it is too new of an industry. David Shapton, a finance professional from the U.K., provided statistics of a more mature European financial model, but even so he pointed out that his spreadsheet had changed overnight due to some recent regulatory filings. Because of the newness of the space and the excitement for the growth trajectory, most of the finance panelists believed that smaller, well-priced online operators and entrepreneurs can identify financing if they are smart, focused and logical in their approach.

While this review touched on several high-interest sessions, there were many more worthwhile sessions than we could cover here. One thing, however, is certain: I-gaming is clearly a sector that is growing exponentially and, judging from the success of this year’s event, IGNA will continue to be a must-attend event for the foreseeable future.