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Online Gaming News Weekly Review Sept. 28 2008
The week’s top stories

U.S. GAMBLING SLOWDOWN?
Economic conditions could add to the burden of UIGEA

Despite political and law enforcement attempts to derail the US online gambling market, it remains a major contributor to Internet gambling revenues and therefore a new report on US gambling will be read with interest by industry observers. The report, by New York-based Moody’s Investors Service claims that several factors are combining with the “economic slowdown and possibility of a long-term, consumer-based recession” to negatively impact the overall US gambling industry.

“Declining disposable income of potential customers and increasing travel costs are lowering overall visits and spending per visit in many gaming markets,” said the report’s author, Keith Foley, Moody’s vice president and senior credit officer.

On a more positive note, the report concludes that longer-term fundamentals of the land casino industry remain favourable: an increase in the industry’s key demographic base of 45- to 65-year-old customers, major challenges to competitors trying to enter the industry, and rapid advances in gaming technology.

The report’s release was made on Good Friday, a day when the New York Stock Exchange and other financial markets are closed for Easter weekend, but was the findings were acknowledged by gambling group spokesmen as a short-term challenge, although longer-term fundamentals remain favourable.

In February 2008, MGM Mirage, Harrah’s Entertainment and Station Casinos together with several smaller local gaming companies acknowledged that the current economic downturn has forced staff reductions and loss of hours at some properties. However, none of the companies has given hard numbers on the number of employees effected.

“As in other consumer-based leisure industries like lodging and cruises, a decline in disposable income … combined with an increase in the cost of travel results in lower overall visitation and spending per visit,” Foley wrote in the report.

The slowing economy comes while gaming companies throughout the country are dealing with various challenges, such as increasing competition and smoking bans.

Several states reported gaming revenue declines in January, including 4.7 percent in Nevada, 10 percent in New Jersey, 17 percent in Illinois, 8 percent in Indiana and less than 2 percent in Louisiana, Missouri and Iowa.

“The amount and type of competition, along with the amount of capital investment needed to compete effectively, have increased substantially since 2001,” Moody’s Foley wrote.

The various challenges may have a benefit for consumers as the economic slowdown leads “to further increases in promotional activity across most major markets as gaming operators compete more aggressively to maintain visitation and market share.”

IS A ANTIGUA VS. U.S. SETTLEMENT IN SIGHT ON WTO DISPUTE?
Islanders’ legal adviser says a response is due next week

The 5 year World Trade Organisation dispute over online gambling between the Caribbean island nation of Antigua and Barbuda and the United States may see a settlement offer from the Americans by Monday next week, says the islanders’ legal counsel Mark Mendel.

Speaking to the Antigua Sun newspaper this week, Mendel said the US is scheduled to put forward a proposal for the settlement of both aspects of the trade dispute by next Monday – and the islanders are taking a wait and see approach despite winning a possible exemption from trade marks and copyright restrictions as compensation from the WTO worth $21 million a year.

“I am assuming that if they [the US trade Representative] are going to be good to their word, that they will have a proposal. It will be either a proposal or no proposal by the end of the month,” Mendel said.

The lawyer revealed that despite the controversial US$21 million in sanctions against the US awarded by a WTO Dispute Settlement Body arbitrator last December, the pending proposal is expected to address aspects of the trade dispute which dealt with the United States’ failure to comply with the WTO’s ruling on access for Internet gaming operators.

It is also expected to address the second aspect of the trade conflict, which stems from Antigua and Barbuda’s claim for compensation as the US seeks to withdraw from its commitment to provide market access to the sector under the WTO General Agreement on Trade in Services (GATS).

“Any settlement that we would do would be comprehensive. It would take in everything,” said Mendel. “These are (two separate issues) if we have to litigate them, but if we can settle something then it should all be settled in one go.”

Earlier this year, Antigua and Barbuda filed a notice at the WTO requesting arbitration on the issue of the US declaration that it is withdrawing from its GATS commitment to allow trade access in respect of remote gaming.

ANOTHER COURT VICTORY FOR BETFAIR
Australian litigation successful as judge rules that territory bans are unconstitutional

Western Australian politicians and betting companies that tried to constrain the Australian operations of the betting exchange group Betfair received a setback this week when the company won a High Court challenge against Western Australian laws that prohibit residents placing bets using the online exchange.

The High Court ruled the legislation was unconstitutional because it imposed protectionist burdens on interstate trade and therefore contravened section 92 of the constitution, reports the Australian Daily Telegraph.

As a global operation, Betfair enables punters to choose their own odds and bet against each other, even after an event has started. The company processes 5 million transactions a day and more than 300 bets a second.

Betfair challenged a WA law that imposed punitive restrictions on any local resident betting through an exchange, with fines of up to A$ 10 000 and/or two years imprisonment threatened. It also challenged a law that made making a WA race field available without approval an offence.

The WA legislation was introduced in January 2007, and was widely seen as an attempt to stop Betfair’s Australian expansion in its tracks to protect vested interests in the horse racing industry. Betfair was granted its Tasmanian betting exchange licence in January 2006.

In a unanimous judgment the High Court Thursday ruled the laws were invalid and WA residents could place a bet with Betfair’s exchange in Hobart by telephone or on the Internet.The Court also ruled that Betfair could publish or make available WA race fields by telephone or on the internet between Tasmania and another state.

The High Court held that the WA legislation contravened section 92 of the constitution as it imposed “discriminatory and protectionist burdens” on interstate trade and was inconsistent with the guaranteed absolute freedom of interstate trade and commerce.”

Betfair is currently seeking a licence to set up an operation in the New South Wales territory but the racing industry claims that this could cripple the sport.Racing officials say lay bets could harm the sport’s integrity, but more importantly the industry is heavily reliant on revenue from its own TAB wagering outlets.

Queensland Racing chief operations manager Malcolm Tuttle said in October last year that “we must protect the significant revenue streams that flow into the industry as a result of wagering through Unitab”.

Justice John Heydon said on Thursday that West Australia had argued its legislation had a “non-protectionist end” – namely, ensuring that persons who utilised horse and greyhound races for a wagering business “make a contribution to the persons who conduct those races”.

“(But) instead of providing in terms for a neutral contribution to the persons conducting Western Australian races (the legislation) has a tendency to exclude persons in the position of (Betfair),” Justice Heydon said.

GIGAMEDIA SUPPORTS KAHNAWAKE
No concern about Canada regulatory position says Asian gambling giant

The Asian online casino and poker interests group GigaMedia Limited has reaffirmed its view that the regulatory and licensing situation in Canada and the territory of Kahnawake is reliable and stable and that it has no concern over related business interruptions.

On the basis of communications with Canadian counsel and government officials, the company says it believes no change in the current licensing system is contemplated. Moreover, in accordance with best practices, GigaMedia maintains disaster recovery and alternate hosting arrangements.

A financial and investment website yesterday suggested that GigaMedia faces the possibility of a near-term revenue hit from a change in Canadian regulations, a statement for which the company finds no basis.

Recent comments by Quebec and national Canadian politicians (see previous InfoPowa reports) have broached the subject of the independent right of the First Nation Mohawk enclave of Kahnawake to license and regulate online gambling, but there has been little public evidence of a follow-up on the comments.

The GigaMedia statement claims that the group’s poker and casino software products continue to deliver strong growth in 2008, driven by Everest Poker, one of the most popular poker sites and the sponsor of the 2008 World Series of Poker. GigaMedia acquired the Calgary-based gambling software developer Grand Virtual some years ago.

SPORTS LEAGUES LOBBYING TOPPED $2.6 MILLION IN 2007
Halting online gambling, steroids and cable sports programming the targets

The National Hockey League, the National Basketball Association, the National Football League and Major League Baseball spent at least $2.6 million lobbying Congress last year, according to the Center for Responsive Politics, devoted to influencing high-profile issues like the use of steroids, cable programming and maintaining the UIGEA ban which seeks to dislocate online gambling by hampering financial transactions.

Ironically, bearing in mind that it is probably the most gambled on sport in the USA, the NFL has taken the lead in lobbying against Barney Frank’s proposed legislation seeking to reverse the ban by regulating the $15 billion industry, reports the Washington DC news medium “Politico.”

The league worked with attorneys general, church groups and other sports leagues in 2006 to pass the prohibition, Joe Browne, executive vice president of public affairs for the NFL confirmed.

“We don’t want to be used as a betting vehicle. We don’t want our games to be used that way. And if we can control it, we’ll work hard to do it,” Browne said, steering clear of the controversial carve-outs in the legislation regarding fantasy sports, horse racing and lotteries that have landed the United States in trouble with the World Trade Organisation and the European Union.

And whilst on the subject of protectionist discrimination, the football league has also visited the Hill to protest the cable companies’ treatment of its NFL Network. The league has argued that cable companies are discriminating against the network because it competes with cable-owned sports channels.

The NFL clearly has a major influence on the thinking of hockey administrators, too. Hockey is ‘monitoring’ rather than actually lobbying so far in 2008, NHL lobbyist Philip Hochberg, told Politico. On Internet gambling, the sport is following the lead of the NFL because football has been “aggressively following that issue,” Hochberg said.

Hockey has had its share of controversy in the gambling milieu, with a prominent coach – Rick Tocchet – making the headlines last year when he was convicted as part of a nation-wide gambling ring that also involved a number of NHL players….and was then allowed to return to the bench as a coach!

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