This month, Casino Rankings tackles the big topic of Internet and mobile gaming. Speaking with several organizers of the iGaming North America conference and other industry experts, we examine its current legal status, regulation, technology, implementation and many other related topics. Below is the lineup of those who participated in the discussion. On the following pages, you’ll read the conversation exactly as it happened. You can also hop on our website to listen to our audio recording of the call. The conversation was interesting and informative, and we hope you find it insightful.

Things change frequently, but as of right now, what’s the current legal status of Internet gaming in the U.S.? What developments do you expect to see come down the pipeline in the coming months or year?

Tony Cabot: When you talk about the legal status of Internet gambling, you need to look at the various types of gambling. There’s sports wagering, horse race wagering, games of pure skill—which can be broken down into either lotteries or casino-style games—and games of mixed chance and skill like poker. The law around each of those is different. Horse racing has the broadest exemption under federal law. The Internet Horse Racing Act allows interstate account-based wagering on pari-mutuel horse racing between states where it’s legal.

A number of states have very vibrant industries in this respect, such as Oregon, where people who are based and licensed in the state take wagers from up to about 35 different states. Sports, on the other hand, is effectively limited to Nevada at this point because of the Professional and Amateur Sports Protection Act. Although New Jersey is challenging the constitutionality of that act, the only interactive-type wagering on sports is conducted in Nevada. Regarding games of chance, whether that be casino-style games or lottery games, each state can make a decision as what to permit on an intrastate basis only. Federal law does not prohibit legal interstate wagering on games of chance and lottery products, and states conceivably could enter agreements, called compacts, to allow that type of activity between two states. Then finally, we have games of mixed chance and skill, like poker, which is substantially like games of chance, where it’s going to be up to the states to make a determination whether to allow it.

Whit Askew: Given what we know of how the lame duck concluded just a few weeks ago—there had been considerable news and buzz in the media—Sens. Reid and Kyl had been working for multiple months to put together legislation that would address Internet gambling, specifically online poker, and obviously no bill was ever introduced. The lame duck produced a few bills tied to the fiscal cliff, and and now we’re already in the 113th Congress. Looking back at that, I believe Kyl—who, quite frankly, for a number of years has been, as I would describe, an anti-Internet gambling advocate given his role with UIGEA—and his staff understood that UIGEA, coupled with the Wire Act of 1961, had not necessarily done what they had hoped for it to do; essentially outlaw gambling on the Internet of all sorts. But he saw that there ended up being deficiencies in that legislation, which is why he had been motivated to try to find a remedy in working with Sens. Reid and Heller and others to address the problem once and for all. But even now that he is retired from the United States Senate, I have heard in various interviews at the end of the lame duck last December and as recently as this week, that Reid, Heller and other members of Congress, are certainly still interested in trying to pursue this issue.

In a pretty challenging legislative congressional environment, such as the one we’ve been in for the last few years, and given the status quo result of the election, it may be unlikely for much change over the next two years. Consider how you would put this type of legislation and good public policy into place, versus the rapid time frame of what the states are doing as a result of the interpretation of the Wire Act. With regard to the estimation of what we can expect, long story short, I think that there still is an appetite to pursue federal legislation with regard to online poker, while also restoring some elements of the Wire Act and clarifying the Unlawful Internet Gambling Enforcement Act. But we’ll see if the champions in the House and Senate are willing and able to do that.

Sue Schneider: I’ve been pretty skeptical all along that anything would happen on several levels because our Congress doesn’t seem to be able to agree or get much of anything done, and it’s hard to imagine this bubbling up to the Capital. I think given the opposition that was beginning to emerge from both the lotteries, as well as states like Delaware that have gone ahead and legalized casino games online—and not just poker—there would have to be some substantial changes to the design of the bill. Otherwise, you’re going to have a lot of different states that are going to continue to organize themselves to put the products online that they want to, so I think it’s still a long shot out on the federal level.

Steve Rittvo: I agree with Sue tremendously in that as we deal with state legislators and state legislatures, they see this as a new revenue source for them, and they’re not necessarily looking to split it with the federal government. I think on that basis, they’re influencing their congressmen to not necessarily be supportive of this at this point in time. Sen. Wright introduced his bill in California again and I think you’re going to see states looking at fairly large potential revenue sources and not being willing to give it up to the feds at this point.

WA: Just to clarify, my understanding of the legislation that Reid and Kyl had been working on was that while it created the minimum standards for federal regulatory consumer protections, it ultimately would allow for the states to be the licensor, the regulator and the tax collector. Now that might be broken up between a state where the bettor may be, versus a state where the licensee may be. But as far as creating some type of federal tax component revenue stream, this bill would not have done that. The revenues, by and large, would have stayed at the state level, with the exception of maybe some type of licensing fee or some type of fee to create the Office of Online Poker Oversight, but that was more of a tribal element, given the sovereignty concern. So to clarify, it wouldn’t have been a splitting of the pot between states and the federal government. Most of those funds would have all remained at the states that were involved in the enterprise.

SR: On that level, probably, the beneficiary probably being the state of Nevada to the greatest degree. Because as you say, it was a potential split between the source and the bettor.

WA: It would be any state that was essentially the licensee, coupled with the state where the bettor may be. With an opt-in approach, which is, I believe, what that legislation required. Again, it was never introduced, but the legislation that circulated in media circles in the fall of last year did outline it as if a state were to opt in. Then, if there were a bettor from the state that had opted in playing with a licensed company, or whatever entity it may be, there would be some split, and that was the breakdown. It did not define what states may or may not have a leg up, so it was not Nevada-specific or any other state-specific. But again, the legislation was not introduced either.

Orrin Edidin: I think it is less of an opinion or perspective and more of an observational reality that regulated online gaming is slowly evolving on a state-by-state basis, as opposed to the federal level. The precedent of land-based gaming should be studied; people lose sight of the fact that land-based gaming evolved over the better part of the last 50 years on a state-by-state basis against a disparate regulatory background. The federal government has demonstrated its reticence to regulate in the area of gambling, having only done so a handful of times in the last 60 or 70 years. Therefore, it should not come as a big surprise to anybody that online gaming seems to be developing in a similar fashion. It is not outside the realm of possibility that the feds could see inconsistencies in the way states are approaching online gaming, or may see the need to facilitate multi-state compacts for liquidity and pooling purposes and to want to legislate in the area. I think that is probably the impetus for federal legislation, as we see the interstate or multi-state compacts that are formed as states aggregate their gaming populations to provide liquidity to players.

When do you think, if you can estimate, the U.S. may see i-gaming legislation pass realistically on a federal level?

WA: I think we answered that the best as any of us can, given the fact that we don’t have a crystal ball. There’s an opportunity for something to happen on the federal level, but there’s just as much other opportunities as we’re clearly seeing states forge ahead, regardless of whether Congress acts or not in the short run. I would suggest, being here in Washington and speaking to the folks on the Hill on a daily basis, that the AGA and some of our partners are going to continue to advocate for a federal solution—to have those minimum standards—under the guidelines we’ve been advocating and educating people on for the last two years, but still protects states’ rights and the ability to opt-in and choose if they want to license, regulate and tax online poker. This has been the basis of our advocacy since I’ve been with the AGA. But at the same time, states are clearly moving ahead, and maybe that may organically put additional pressure on the Congress to act in a more timely fashion. But the crystal ball is still a bit hazy at this point.

SS: I think the driving factor is going to be some of the larger population states coming in. If you get a California that passes it, then I think you’ll get the attention maybe of some of the congressmen. But until that time, who knows how long that’s going to be. I’m not sure California is ready yet. They have a whole variety of competing interests and may make it a challenge to get anything passed there.

On a state level, which jurisdictions should we watch in 2013? Some say Iowa and California might legalize Internet poker next year, and once Nevada, Delaware and New Jersey launch, there could be a lot of action in the state legislatures. How will competition amongst states affect this?

Bill Lerner: We’re watching New Jersey pretty closely from a couple of perspectives. One, consensus suggests the governor will veto—I think on Feb. 3—and we suspect that there’s a decent chance that the veto will be a conditional one that sends it back to the legislature. So I think we still have a shot in New Jersey. And perhaps there’s a required referendum there in November as well. It will be interesting to see what online entities look to engage in that market, and perhaps that’s what the conditional veto is trying to preclude but, at any rate, I think it’s going to be interesting to see behavior, should New Jersey pass, from online entities and how they will want to link up with land-based folks in market and in destination markets like Las Vegas.

TC: We have to keep in mind that you have two different types of states: states that have strong casino industries like New Jersey, where the legislation will allow those licensees and potentially other licensees to offer interactive wagering, and then you have the lottery states: those are the states with strong lotteries and either a weak or no casino industry. You have to watch those states carefully because in many of those states, the lottery has more flexibility to offer, particularly, games of chance online without necessarily having to go back to the legislature-specific legislative authorization. You may have some states that are going to gear up their interactive divisions where their state lottery is and get online much quicker than the casino states can.

SR: Tony, as a corollary to that, if you look at Illinois, which had the lottery trying to move forward and got a lot of push back from the casino industry because they were trying to control it, and the bill, while it moved forward, some of it died in the legislature there. And I think you’re right—there are those states that are lottery-centric, there are those that are casino-centric, and as you look more and more, there are states that have both elements. How they work out the nuances between the lottery and casino interests is interesting—is the lottery providing a platform; is it providing a legal framework; will the casinos be able to operate their own websites? Some of these things are slowing down movement through state legislature as there are some competing interests, the same way Sue spoke about California, there are a variety of really competing interests and a variety of identities. While the bill has just recently been introduced, I think it’s probably the fourth time that it’s been introduced and I don’t know if it’s any closer now than it was three years ago. Again, because there is still really no alignment across the interests. Do you want to touch on tribal sovereignty as it relates to this and some of the contact issues?

TC: I wasn’t planning on it, but I do want to respond because I think it’s an interesting point. I agree, the most interesting and probably most complex thing about this entire equation is that once you have states doing this on a state-by-state basis, with regard to games of chance and games of mixed chance and skill, the political dynamics of the whole situation are going to be very different, depending on which state you’re in, because of the different constituencies. So it is not only fascinating to watch because you don’t know how things are going to come out in any given state, but also because it’s kind of confounding from a regulatory perspective, because now you have different regulatory processes in the various states, depending upon how this comes down from a political perspective.

OE: The most progressive states appear to be Delaware and Nevada. Arguably, Delaware has more progressive legislation because it does enable both poker and casino products for online, but Nevada is ahead in the game with regard to promulgating regulations, and accepting and reviewing applications for licensing for both operators and/or providers of online gaming systems. Williams Interactive is licensed as both an operator and supplier. It seems to be somewhat of a crowded field in Nevada when you consider it has one of the smaller state populations in the country, and there are probably three or four dozen applicants and/or licensees at this point. The current legislation is going to necessitate amendment to facilitate the effectiveness of these licenses because the current legislation requires an opinion issuance from the Department of Justice as to legality. There is a proposed amendment to remove that requirement from the statute that will go before the upcoming legislature this session; I anticipate approval. It will be interesting to see what Nevada will do in their effort to facilitate and effectively compact with other states and the types of approvals those compacts may require. Certain compacts require congressional approval and that could eventually bring the feds into the picture as they come to term with these interstate compacts. California is getting active, and it is a market that could sustain an online poker model on its own, theoretically at least, so that is an exciting opportunity.

SS: I think you’re going to have a lot of different models. Looking at how Nevada has done it versus how New Jersey or Delaware may be doing it, or even Iowa and some of these states that have had bills in place last year, they’re all very different models, which actually is very interesting. It goes back to where there are either strong lotteries or a strong private sector industry infrastructure, or some hybrid. If you look at how Delaware is doing it, the lottery is actually going to be the regulatory body and provide the platform, but their private sector operators are going to be able to plug in and bring in … they’re almost like an affiliate marketing relationship. I don’t think it’s bad that there’s going to be these different models. It might be a way to look and see what are best practices after two or three years of operating, and allow people to adapt.

WA: One of our concerns has been that if you create a patchwork quilt—which is essentially what we’re talking about here, because the nature of the Internet is inherently different than the brick-and-mortars that exist and/or lottery operations—there will not only be confusion for the consumer, but also confusion in law enforcement communities since there’s so much technology that’s going to be required to put these different regulatory regimes into place, as there are potentially 50 different ones. I understand Utah already opted out, if you will, so we’ll say 49 states. While there may be best practices, there certainly will be some concerns as well, just given the interstate nature of the Internet. That’s been one of the reasons why the AGA has been focused on consistency, as opposed to having that patchwork.

Technology often impacts us in ways we don’t anticipate. With respect to i-gaming, how do you see it impacting the brick-and-mortar commercial casino market?

OE: Our most progressive customers are embracing online gaming as a natural and new channel to market their brand, foster loyalty and distribute gaming products and services. Land-based casinos have a distinct advantage over incoming online operators because they have a ready-made community of loyal players. The larger operators have marketing systems in place that allow them to communicate with and follow the player wherever he is gaming, whether it is online, mobile or back at the land-based casino. I think it is a natural extension of land-based gaming to want to leverage that online channel of distribution.

What about the slot and table game equipment manufacturers?

OE: First and foremost, WMS is a game company and content house. Online technology enables a new channel of distribution through which we can leverage our award-winning content. When we develop and operate an online-branded site for our land-based customers, we effectively replicate authentic casino content, because players are looking for a familiar, yet unique experience. On the other hand, table games tend to be more commoditized: blackjack is blackjack; roulette is roulette. As proprietary tables represent only a minority of total table play, slot suppliers have the advantage with proprietary content on a land-based and online basis.

What do you think might be next thing we could see in terms of technology implementation for the Internet?

OE: Consumers are cutting the umbilical cords from their desktop PCs, leaving their laptops at home and throwing their tablets in their pocket or briefcase. An excellent form factor for gaming, the tablet is especially well suited for slot game play. Yes, you can play slots on your smartphone, but the tablet offers a far more enjoyable and satisfying experience because there is more real estate, it is portable and ultra-convenient. We expect continued advancement and growth of the tablet segment within mobile, and consider it a major driver of technology in the coming year.

All industries have it because they need it, but getting there can be messy. Who will develop and control standards and measure utilized in Internet gaming?

BL: You think of Delaware from an incorporation perspective, but I think Nevada would like to play that role. From an economic perspective, that’s perhaps what they have in mind. But it speaks to the patchwork issue; if we end up with all these different states, each with varying degrees of regulation, it would be problematic.

TC: I think you have two different issues. The first is when you say standards; you can talk about technical standards. One of the things that we’re lucky to have is the European experience. They’ve been doing this for quite a long time now and were a great source, at least for Nevada which was the first regulatory agency to look at this, with regard to what should be best practices when it comes to technical standards. Where Bill is correct is on the issue of the other standards, and that is the licensing standards, and that’s where you’re going to have some potentially large variations between two jurisdictions. Some jurisdictions are going to be relatively strict, and some jurisdictions may not be so strict, and you may have inconsistencies between who can get licenses and what jurisdictions based on past history.

In a brief overview, how does the U.S.’ Internet gaming status compare around the world?

SS: We are woefully behind. I don’t know how else to put it. I’ve been monitoring this industry since 1995 and I cannot believe that we are still having regulatory discussions and a fear of it since we are here in what is probably the biggest market. We don’t have to look far. I mean, look at Australia and various European countries that are way ahead of us, both on what their lottery systems and their public sector gaming operators may be doing or their private sector. We’re not reinventing the wheel here. We’ll be able to pick and choose as we go through our process; we just have to get over the fear and the stigma, frankly.

SR: I would’ve assumed, almost made the corollary, the U.S. has been an ostrich. It’s really just put its head in the ground and tried to ignore it. I think there’s a lot to be learned from Europe. You’re right about Australia. We can even look north; Canada was probably, in a strange way, not that far ahead of us in what they were doing. They had some fits and starts in the beginning. They learned from their own mistakes and probably made some vast improvements, and I’m not sure that they don’t represent a model that potentially works for us as well. They operated on a provincial level as opposed to a national level, which is probably very parallel to our state level, and yet they have been able to put together some inter-provincial agreements. I believe they moved forward, so there’s a lot to be learned from them. They’re an element that’s relatively similar to us and they have not been in the game that long either.

Because the U.S. has been unable to offer Internet gaming because of UIGEA, does that put us at a disadvantage compared to the rest of the world?

WA: I would absolutely say that yes, we, as a country, have been at a disadvantage, no question. There are still millions of Americans who are gambling online with all these offshore companies, and I can assure you they’re not paying federal income tax on their winnings. When you look at the revenues to the states, the states are missing out on a big opportunity, and quite frankly the federal government is too. That’s all staying overseas. Same thing with jobs, and we’re talking about thousands of potential jobs that could be based right here in the United States that are not. In a time where states are starved for revenue and this country is desperately trying to create more jobs, we’re on the short end of the stick here. So this is an opportunity. Not only can we have the chance to protect these Americans who are still playing with offshore entities, but we can finally keep revenues and jobs right here on our shores as opposed to overseas.

Who do you see as the winners and losers when it comes to i-gaming?

BL: I think the companies that have intellectual property can monetize it on a high margin basis, and by that I mean applicability for consumer-facing sites. IGT, with some of their slot brands—and the same goes for the other gaming suppliers like Bally, WMS and SHFL entertainment—have great applicability online; that’s from a consumer-facing perspective. In terms of the business-to-business piece of it, I think some of the gaming suppliers are doing a nice job there or have started to. Again, high-margin licensing and consulting-type of fees for businesses that generally don’t trade at above market valuation; it’s a pretty creative story for a lot of the gaming suppliers. On the casino operator’s side, there are obviously different strategies to monetize existing player databases and land-based brands. From our perspective, this is sort of marginally impactful for most of the casino operators out there. There are some instances where it’s a little more meaningful, like in New Jersey, if it happens as we talked about before, for Boyd’s equity. But generally speaking, it’s marginally helpful for the land-based casino operators.

SS: The other thing to consider is in terms of some of the suppliers or those that are supplying the lotteries, because then the lotteries get into this in a bigger way, either just for online sales, lottery tickets or some of the lotteries that are looking to expand into other products. The GTECHs of the world, and some of those supplier companies that tend to work more with those public sectors or operators, are certainly going to be the ones to watch. They’re going to be very aggressive. I think the other thing to look at is the social games. That whole intersection between Facebook-type social games and gambling is going to continue to grow and merge, and kind of all mush together in some ways, so watching some of those kind of companies will be important in order to see what that intersection’s going to be.

SR: I agree with Bill. I think for the land-based casino companies, except in limited instances, it really will be marginal. There is not a tremendous overlap between the brick-and-mortar player and the i-gaming player at this point. I believe that the absolute winners may not be on the playing field right now. I think it’s going to be who can really develop stickiness on their sites. I mean, if brick-and-mortars are at times perceived as commodities, I think the Internet activities are even going to be more monetized and become that much more easily accessible. I really do believe that a brand of some sort, in something that will allow for an Internet gaming player to fulfill his desires but that offers a broad range of experiential activities, will be the winner. I’ve always had my druthers, and thought that if I could get an American Express Internet casino going and I had this universal currency of American Express points, they would be the ultimate winner in this. Some of the casino research we’ve done has sort of shown that there’s not this great affinity for casino brands, because what they’re offering to retain and maintain player loyalty is not necessarily what players are looking for. In this context, I do believe that Caesars has done a great job in modifying their Total Rewards program to serve both Internet and brick-and-mortar players, and create that desirability of participating with their brand.

What do you see as the biggest opportunity for the gaming industry when it comes to the Internet?

WA: Taking a look from our perspective, the biggest opportunity is if we can be a part of this market in a regulated legal way. This will then give us the ability to understand our customers better, to better communicate with them and to protect them. The fact is that the Internet makes it easier to know your customer, as opposed to someone who is just sitting at a table where you have little of their personal information. The issue with regard to online play, given the lack of face-to-face interaction, is to make sure that the customers are protected. Quite frankly, with the current environment that this country is in, until something happens—such as federal or states legislation moving ahead—players are vulnerable. So I think that [being part of the market in a regulated legal manner] will strengthen our ability to understand our customers, protect them and better communicate with them. And then there certainly would be other outlets when you consider marketing, with regard to brick-and-mortars, because—I don’t know if I’m basing this on science that I have in front of me—the type of player that likes to play online—or at least play poker online—is certainly different to the type of player that is going to play lottery online and maybe even different to the type of player that’s going to travel to a brick-and-mortar facility. So there might be some additional business opportunities that yet we are not seizing that will certainly be on the horizon if online gaming does in fact come.

How do you see regulation of i-gaming unfolding, whether on a federal or state level?

TC: I think regardless of whether we have federal legislation, primary responsibility for the regulation of Internet gambling will be at a state level. Federal legislation would likely identify and qualify state regulatory agencies for purposes of regulating and granting licenses. Now the challenge we’re going to have in the regulatory perspective is whether we are going to have consistent regulations. This is going to become really critical in this area because suppliers and others go from jurisdiction to jurisdiction and may have to have a completely different system in one state as opposed to another state, because the regulatory requirements, technical standards, internal controls and other things of that nature are different. So as we do progress in this industry, it would be most beneficial if the states begin to cooperate so that things that are relatively easy to agree on—like geolocation verification, age and identity verification, technical standards for the systems—can be standardized. It will make it a lot easier for this industry to grow much quicker.

SR: Don’t you think that’s really what’s going to happen though? I mean in the technical term, we look at the same thing. There’s also a state regulation on slot machines but they really come together.

TC: They’re starting to come together. If you’re a slot manufacturer, you have a very intense compliance division to make sure that you’re shipping Illinois-compliant devices to Illinois and not to Iowa. We’re right in the start of a new industry, which gives us the opportunity to say, let’s get all this stuff consistent so that the systems they’re using in different states are the same and they’re not different versions for different states.

SR: While I agree with you, I don’t see that happening instantaneously. I guess I see it evolving over a relatively short-term period, but I don’t think there’s an organization or consortium or anything else at this point that’s going to bring the states together. And at this stage, people are still feeling their way. I think it comes back to what you spoke about originally; is it a lottery lead, is it a casino lead that’s going to be the implementer in a given state? And I think that’s going to shape it in the early stages. My perception is that there will be this evolution that is occurring in gaming regulatory activities right now—I hope on a faster basis than what is occurring right now. I see it as, not to be pejorative, but as a hybrid and not moving on the sort of uniform basis at all. I think even as Whit said, the federal legislation has passed, it’s still going to be on a state regulatory basis to a large degree. I don’t know if I see that uniformity being implemented at that point either. You’re right. It should happen. But I don’t see it evolving for a while. Do you see a different perspective, Tony?

TC: No, I don’t. But I think that to the extent that the different jurisdictions can be sensitive to it, toward it and to work through it. Whether it be the North American Gaming Regulators Association or AGEM, it behooves everyone to work toward better standards.

SS: I think the good thing about being a late bloomer, which we in the U.S. definitely qualify as, is that you can learn from others. There are increasingly some inter-jurisdictional compacts in Europe. You certainly have the model for that in Australia back in the late ‘90s, so there are prototypes. If you’ve ever been to any of the gaming conferences, you always hear operators talking about all the headaches they get with compliance—from dealing with all the different jurisdictions and all the different rules—and there are attempts by the International Association of Gaming Regulators and groups like that to try to find some standards that they can agree on to try to cut the red tape on both sides. But I think Tony hopefully is correct in that this is sort of a new method and a new model, that we can try to speed up that process, but it’s going to take advocacy and one voice. That will be really hard to get in this industry—to get one voice across suppliers, manufacturers, operators, regulators and probably most importantly the policymakers, but the state legislators are the ones who need to be educated. If we can just get two states to say, ‘OK, I’ve got the regulatory model and the regulatory structure, but I’m a little tiny state and I’ll basically work with you to try to do something.’ If you could get two states to come together, you would have a good model and something that would grow from there.

How do you think land-based casinos can best utilize and implement i-gaming into their operation? Obviously this may differ for the size and scope of each property.

SS: You’re seeing some of this already. You’re seeing operators, whether they’re tribal, private sector operators or corporations that are the gaming operators, they’re starting to have free play sites. They’re starting to integrate that into their loyalty programs so when the time is right they can flip the switch and go to real money play. That’s the first step and that’s how that integration is going to come together.

OE: Land-based casinos should view i-gaming as the newest marketing tool at their disposal, whether it’s for a legal jurisdiction, in preparation for the possibility of legalization or in anticipation of that situation; and they need to be building their online player communities today. Williams Interactive has a full offering of play-for-fun and B2B white-labeled social solutions that land-based operators can now use to build their online communities. When legalized online wagering comes into effect, our customers will be prepared to offer online casino gaming to a population of players who are devoted to the casino brand, while driving traffic back to the casino with rewards for their loyalty and online achievements.

What about suppliers—how can they harness it and offer it to their customers?

OE: Many land-based operators are looking for the complete suite of online gaming products and services. Some land-based operators want a complete turnkey solution, including the marketing and operation of the entire online casino, along with marketing analytics. Others want a subset of offerings, including the capability of play-for-fun in a branded social gaming environment. It is about offering a very comprehensive online solution and educating the customers on how they can best utilize those assets and tools to maximize the opportunity for their player base.

WA: Obviously a big slice of our membership consists of gaming manufacturers from whom you’ve already seen proactive efforts, both being involved overseas and also in possible partnerships here in the United States, for the back-end technologies and platforms. Whether it be with operators, lotteries or whatever, there’s absolutely a major role that some of the manufacturers are going to play. Some have already even received licenses in Nevada. As far as offering to their customers, very similar to the brick-and-mortar system, competition will rise and will work its will, and the best product to partner with is more likely to move forward.

What new types of challenges do you see emerging once it is legalized in the U.S.?

OE: I think there are going to be challenges. If you look at the way other legal jurisdictions have evolved, there tends to be a lot of competition among many online operators at the front end, followed by a consolidation of experienced operators who can control and manage the liquidity necessary to drive managed poker and casino sites. Successful operators will be those who have the deepest and most advanced marketing and analytical tools and can acquire, retain and manage players while integrating land-based loyalty, accounting and financial transactions systems, for a single view of the player, whether she’s online, in the casino or mobile. I think another big challenge will be the ability of regulators, whether at a state or federal level, to keep up with the speed and the rapid evolution of Internet technology tools and products.

How will federal, state and local politics interact with Internet gaming?

WA: Let’s just face it, this is not a new issue. While it’s not up there with tax reform and the debt ceiling, it is certainly a hot issue. It’s interesting because you could argue lots of different ways. You could have a very Libertarian view at any elected level, where they believe that all types of gambling online should be allowed, because law-abiding adults can make any decision they want. Then you could have those who are fearful of a large expansion of gaming. I deal with this a lot talking with folks in Congress because they do have some major concerns with regard to what happened with the Department of Justice interpretation, coupled with the fact that states are going to be moving forward with the likely patchwork of possibly inconsistent regulation. They’re concerned that we could see the largest expansion of gaming in our nation’s history literally within a short period of time. So there are a lot of different schools of thought with regard to online gaming itself. Then you’ve got the other entities. Take an organization like the National Association of Convenience Stores. They don’t really have a whole lot in common with the commercial gaming industry from a business sense, but they are very concerned and they are very active at the local, state and federal levels. If all of a sudden there are multiple state lotteries operating online and selling tickets online, they will have major business concerns. There could potentially be fewer consumers walking into their convenience stores buying gasoline, milk or whatever it may be; those customers typically were going in to buy lottery tickets. So there are a lot of moving parts at the federal, state and local levels.

Do you think that the major online players are going to be the major U.S. land-based operators? Could the foreign operators and suppliers be stuck in supporting roles? What about Zynga and the other large non-gambling Internet operations?

TC: As this is going to happen on a state-by-state basis, at least in the short term, you have to look at the politics of the state to determine what’s going to happen with regard to who can be licensed and in what capacity. In a lot of states, there is going to be a natural bias—whether it be for political reasons or regulatory reasons—toward those who are already licensed within that particular jurisdiction. So, for example, in Nevada, the only operators are the only people who operate casinos of a certain size, and the foreign suppliers and operators who want to come into Nevada are coming into it, while we stay in the supporting role. It’s in sort of a joint venture role with the operators to be able to provide a product to the customer. Now, I don’t want to say as a supporting role necessarily, because of the economics of that particular deal between the foreign suppliers and the domestic casinos. It could be anything. It could very much be in favor of the foreign operators. But if you think about it from a more global perspective, it’s really going to be determined primarily by the politics in the states and how they determine who needs to be licensed and who can be licensed going forward.

WA: I would just add that if there were to be federal legislation that was similar to the efforts that Sens. Reid and Kyl had worked on, that could also have an impact on partnerships and/or who plays what role. Again, if that were ever to come to fruition, simply because there were some elements that the quote-term penalty box, may depend on what company we’re talking about, what major online player we’re talking about and when they were doing what, which could also potentially play a role in what role they may or may not have moving forward.

SS: I think there are a couple distinctions here. One is that some of the publicly traded companies, like William Hill and a handful of others, have developed a footprint through acquisitions. And then you’ll see the type of thing that’s going on with PokerStars, which has had some legal issues in the U.S. with the Department of Justice, and is coming in through the back door and looking to acquire a terrestrial casino in New Jersey. Now, whether or not they will qualify partially depends on whether this recently passed law gets signed by the governor, so it’ll be really interesting to watch and see how all of that sorts out. But you definitely are seeing a number of the larger operators from across the pond, whether they’re land-based or Internet only, coming and putting a stake in the ground over here.

What should land-based casino operators look for in a supplier in this expanding Internet gaming market?

OE: They should look for a trusted supplier who can offer a comprehensive suite of online gaming products, both wagering and non-wagering, and associated managed services including online poker, play-for-fun and white-labeled social gaming products and a deep content portfolio that engages players, as well as technology that enables customer relationship management.

What advice would you offer to those in the gaming industry who are skeptical about making the move toward Internet gaming?

WA: On behalf of the commercial industry, I would imagine that the wise business leaders who run some of these companies would need to look at it on a case-by-case basis to see if it was the best possible business decision for their organization. I would imagine that if there are skeptics out there, that is something they would want to do and would act accordingly based on what they think is in the best interest of their business. As far as opportunities, we already talked about branding, knowing our customers better and things like that, and there certainly would be some big opportunities that could be and should be embraced.

OE: The Internet is not the Wild West. As we have seen in other parts of the world, you can apply a progressive and sophisticated regulatory infrastructure to ensure the integrity of online gaming for the benefit of players, and for authorities who may be applying a taxation scheme to those activities. There are precedents that provide proof of the reliability and stability of online gaming; the U.K. is just one example of a mature and competitive online market with the appropriate safeguards in place. Online gaming is coming, and operators should embrace the opportunity for revenue growth and get in front of the curve by building an online community of players using all of the marketing tools available in social, mobile casual gaming.

Switching to mobile topics now, how do you think land-based casinos can best utilize and implement mobile into their operation?

WA: Some already are, and I think others are taking a look at best ways to utilize and implement it into their operations. But again, at the end of the day it all goes back to providing a maximized customer experience as they enjoy their entertainment, while at the same time creating better opportunities to learn more about that customer to provide them with the best possible service so that hopefully they will be repeat customers. As technology evolves, whether it’s Internet, mobile or other ways, it’s all about serving the customer and helping to provide them with the experience that they’re actually looking for so as to maximize their enjoyment.

With respect to i-gaming, how do you see the mobile gaming market impacting technology?

OE: Mobile is a very necessary and critical component of any successful online offering because players want to play where and when they want to play. Mobile technology has advanced to the point where we can readily identify the player, his location and his preferences through various platforms. It is about having the whole view of a player, regardless of where he or she is playing.

How do you think this shift toward mobile and other new technologies will affect/is affecting casino patrons?

SS: I think if you ever talk to or listen to somebody like John Acres or folks who are studying what consumers are looking at, you get the impression very quickly that the gaming industry is going to have to make some radical changes to keep up with the change in demographics. The traditional reel machine is not going be of interest to a 20-year-old who grew up playing interactive games. So there’s going to have to be a variety of changes on the show floor through Internet and mobile, and we have to tie them all together and help them reinforce each other. That really needs to start happening sooner rather than later. I think it’s a situation where, as with client preferences, some players are literally aging out and they’re not going to be coming to that casino anymore; so what do you need to do to track and maintain the interest of a younger player?

WA: Being a relative newcomer to the industry in comparison to the rest of this panel, I’ll cite this as an example. G2E is fascinating to me personally, as I walk around the floor and see all of the cutting-edge, new technologies the manufacturers and the operators are looking at to bring to their operations. The same thing goes for the Internet. As modern society has evolved, we find ourselves in this highly technological age. I completely agree with you, Sue—this is something that needs to happen quickly. But I believe that it is happening quickly because these businesses understand, and need to continue to better understand their patrons in order to provide them with what they’re looking for. It’s something that’s happening but needs to continue to keep up with the times in this modern society that we find ourselves in.

If New Jersey wins its lawsuit over sports betting, which states will follow? Which will follow Nevada and allow bettors to place their sports bets using mobile devices?

SS: I am very fascinated with what’s going on there and pretty excited that they’re taking the initiative. I have, for about the 18 years I’ve been involved with the industry, always felt that we would never see sports betting legalized in my lifetime, beyond the existing key states that it’s in now. I’ve changed my attitude. I actually do think that whether it’s this challenge or maybe another one or two that might come along, we’ll see it happen. I think it’s time for that. There seems to be a will at this point, and if New Jersey is successful, we will see another couple of states come along fairly quickly. I was surprised that even here in Missouri, where I’m based, about two years ago there were two young state legislators who put in a sports betting bill then to study it. So you know there does seem to be—even in conservative states—an interest in getting something like this going, and it really goes back to what Whit was saying earlier about consumer protections and wanting to have a safe place to do what is a very common activity that is in the U.S.

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