During mid-February 2013, more than 500 delegates converged on Las Vegas at the Planet Hollywood Resort & Casino for the third annual iGaming North America conference. Participants hailed from all over the globe, and Native American gaming attendance was at an all-time high. The conference producers/organizers were all i-gaming professionals (BolaVerde Media Group, Lewis and Roca Law, eGaming Brokerage and The Innovation Group); their deep sector expertise was evident in the impressive line-up of presenters and sponsors and the relevancy of the discussions. There is no question that the online/Internet gaming sector is growing and maturing at a rapid rate.
Every day, press announcements are released regarding new technology, legislation, corporate mergers, acquisitions and launches. The current state of professional online gaming with its ancillary markets and players (social media, technology, gambling, entertainment, mobile applications, lotteries, sports, etc.), in my opinion, resembles the Silicon Valley Tech boom of the ‘80s. Yet it is still in flux and somewhat resembles the Wild, Wild West. I dislike that analogy since not many of our tribal communities came out ahead in the Wild, Wild West battleground, but as it pertains to online gaming, our tribal nations certainly seemed poised and ready to ensure their place at the table. Unlike the Indian wars of the 1800s, but similar to the challenges fought and won regarding our rights to land-based gaming, they appear prepared to understand the issues and follow the best path toward success and victory regarding Internet gaming.
I attended the entire conference and viewed all the presentations through the lens of tribal applications. One of the more interesting panel discussions was during the first day’s “boot camp” entitled “Collapsing Windows in Marketing – Convergence of iGaming and Brick and Mortar Events and Promotion.” Far beyond marketing pointers, Rob Rosette of Rosette LLP provided an intriguing perspective. Rosette believes that under current law, tribes can launch Class II online gaming and not be restricted to players being located on Indian lands. He represents a coalition of tribes that believe the tribal right exists via “proxy play” theory, as long as the servers are based on Indian lands (but via proxy play could involve players from their computers or devices anywhere in the world). Rosette, an attorney with an MBA, is well-versed in both business and law and he made a good case. I asked him what regulatory agency he felt would best oversee such gaming business, and if he believed the National Indian Gaming Commission (NIGC) was prepared to act as such body. He responded that the NIGC has not taken a clear position on Internet gaming, but the proposed gaming should be self-regulated with the regulatory authority remaining with tribal gaming commissions, according to the existing Indian Gaming Regulatory Act (IGRA) law pertaining to Class II gaming. As a journalist, I love this bold approach and would be supportive watching from the sidelines. However, I am not a tribal government representative whose tribe maintains a current gaming compact. After the panel presentation, I had a chance to speak with several tribal representatives, as well as Sheila Morago, director of the Oklahoma Indian Gaming Association (OIGA). Although the attendees appreciated Rosette’s and the tribal coalition’s theory, none of their tribal governments seemed willing to take the risk.
A panel discusses hot topics at iGaming North America.
A panel discusses hot topics at iGaming North America.
Morago pointed out that not every tribe is necessarily allowed to implement online gaming under their individual compacts, let alone such an aggressive approach. One tribal representative said their government is conservative, and although they want to launch online gaming, they plan to be conservative and thoughtful and not do anything to harm their existing compact. Some believe there are standing legal decisions that clearly state even proxy play-style gaming off reservation lands is prohibited. Rosette pointed out tribes had to push the envelope in the 1980s. It’s true that we didn’t wait for legislation allowing us to game; we had to launch and then defend litigation, and the result was a precedent-setting victory with IGRA being enacted. However, the tribal representatives I spoke with are concerned about the reverse possibility: What would be the impact of a negative result? Would a legal decision against certain tribes regarding online gaming set a precedent for all tribes? Again, as a journalist, I am not on any one side, and I love a proactive approach—but launching reservation online gaming with players located off reservations via proxy play seems controversial.
There was also discussion about why tribes haven’t launched under what is granted as their current legal carve-out under UIGEA: the ability to launch online gaming from reservation to reservation, viewed as one state. Similar to Nevada and New Jersey, the tribes can implement immediately via tribal-to-tribal connectivity. There is no legal question about this, and in fact an NIGC opinion exists confirming the tribal carve out, as long as all of the online gaming takes place on Indian lands. The legal experts agree reservation land to reservation land (similar to a large wide area progressive) online gaming would not be challenged, nor should it adversely affect existing compacts, as long as the games offered are those allowed under the individual compacts (and the respective compacts obviously would have to allow online server-based delivery of gaming).
When questioned as to why tribes have not taken advantage of this leg up in the law (this carve out provision has existed since 2006), the standard response is that the restriction to have the server and the devices—whether they be mobile phones, tablets, flat screen TVs or computer terminals—on the reservation does not afford enough liquidity, i.e., not enough players to make the effort worthwhile. Most tribes have indicated to me that if they could be assured to tap into a larger pool of players than what might be within their own customer base, and if online gaming didn’t cannibalize their brick-and-mortar gamers, they would jump on this opportunity.
I believe the solution to the liquidity dilemma was revealed within the panel “Interstate Compacts – Are They a Feasible Approach to Increasing Player Liquidity?” It is always wise to research and learn from those who came before you. The lotteries are a great example and have already connected to increase the size of their Powerball games. The expert panel, which included two attorneys and a lottery representative, addressed questions of legality and logistics. Panelist Tim Goldstein, partner at Goldstein & Russell, was well-versed on this topic. The lotteries have been connecting state to state to increase their bandwidth and liquidity, and Goldstein made it clear there appears to be no law that prohibits this, nor does there appear to be any intent or incentive for either federal or state authorities to interfere with legal regulated jurisdictions connecting. The discussion then turned from lotteries that are already connecting to the newly (or soon to be) legislated states such as Nevada, New Jersey and Delaware. Goldstein appeared to think the answer to the legal question is a simple one: yes they can.
From the audience, I asked him, “If Nevada, New Jersey and Delaware legally launch online gaming and several tribes launch a legal online connected network on Indian lands, it is your opinion that the tribal network and these four states could connect in terms of player liquidity?” He responded, “Legally, absolutely.” However, he feels the hurdle is not legal or regulatory issues, but business logistics. He was quick to add the potential business upside is large enough that the time and effort to define the logistical solutions should be well worth the exercise. I further inquired, “Did it then appear that these four legal domestic jurisdictions could also connect to other legal regulated jurisdictions globally?” His answer was yes, and from a pure poker business standpoint, connecting around the world is a strategy that makes absolute sense. How operators manage the process using potentially different platforms, regulations, monetary exchanges, etc., is the struggle. He also clarified that he has researched this concept as it relates to online poker, and he feels the added liquidity would be well worth the effort, but he has not researched other casino style games such as online slots, bingo, social games and simulated sports, etc.
Goldstein also added that perhaps a flaw to the theory presented in my question was the assumption that tribes would work together in an online connected network. I think the assumption that tribes cannot work together is not only incorrect, but a moot point here, since each tribe regulates their gaming via their own gaming commission, and tribes have historically participated in wide area progressives with other tribes without issues. I am a firm believer that this is not only possible, but very viable.
Multiple panels and experts throughout the conference addressed the cannibalization issue at length. The data was predominantly presented verbally, but a few offered PowerPoint presentations showing recent studies conducted by sampling gamers. The unanimous belief amongst the experts—and the research data seemed to support this—is that online gaming does not cannibalize, but augments existing brick-and-mortar play. Online gamers are definitely a younger, more tech-savvy demographic. Ipsos presented one study that indicated the majority of this emerging market demographic is between the ages of 18 and 24! Operators need to think of online gaming, even when offered on property, as an added revenue stream, and they cannot market to this demographic in the traditional brick-and-mortar style.
I had the pleasure of moderating the “Tribal Perspectives” panel with John Tahsuda, Leslie Lohse, Neil Cornelius and Paul Girvan, all of whom gave thoughtful presentations from various perspectives including legal, regulatory and boots on the ground. Tahsuda opined that federally, with new election results and administration changes, tribes will miss the loss of sponsors for internet gaming legislation. Lohse stressed that California tribes will fight to keep a level playing field in the online gaming space and keep out any bad actors. One of the more fascinating presentations was the premier unveiling of the “iGaming Land Based Operators Study” completed in February 2013 by The Innovation Group offered by Girvan. The Innovation Group interviewed more than 100 operators, the majority of which were Native American.
He reviewed several slides showing interesting data results, such as 67.9 percent of respondents were formally or informally investigating i-gaming; 63 percent believe they need to implement i-gaming to stay competitive; 84.5 percent are preparing for real money gaming (as opposed to social and play for fun); and 71.4 percent plan to add full-time staff to implement i-gaming. A heartfelt presentation came from Neil Cornelius, CEO of the Osage Gaming Enterprise. He walked through their process to launch online gaming and how it is not an easy decision to simply pull the trigger or flip the switch. He made it clear that every tribal operator works for a government as their ultimate boss, and there are many moving parts to an important decision such as this.
Throughout the three-day conference, perhaps the most revealing comments were made by gaming veteran John Acres who gave his own presentation, which felt like a serious wake-up call to action. He made the point that mere legalization of online gaming (in any jurisdiction) does not equate creation of demand. The delivery method may be changing, but players still need variety, interaction, competition, entertainment and emotion as part of the gaming experience. Gaming providers must still innovate!
I left the conference with five major conclusions for my tribal colleagues:
• Tribes need to move quickly.
• Depending on their individual compacts, tribes can launch tribal to tribal online gaming (on reservation lands) without a legal threat.
• Tribal-to-tribal online gaming operations can connect to other legal jurisdictions for increased bandwidth and player liquidity.
• Online gaming is a new demographic and an added amenity to the brick-and-mortar facility; it does not appear to cannibalize the existing gaming play.
• Whatever platform is selected, it must be exciting and interesting to play.
iGaming North America provided very good news for tribes; however, I am convinced tribal governments need to play their hand differently than in the ‘80s with land-based gaming and IGRA. They need to be quick and nimble, utilizing their first to-market advantage currently allowed under the UIGEA and seek to connect with other tribes and other legal jurisdictions. I agreed wholeheartedly with Goldstein when he opined that taking the time to understand the logistics of how to work together will be well worth the effort.