Tribes need fair licensing, not government handouts
In a recent discussion before the Senate Indian Affairs Committee, experts told Congress that tribes could stand to lose the most as players move online. Peter Karroll argues that fair regulation, rather than government help, will prevent the tribes from falling behind.
In his recent article published in the Las Vegas Review-Journal, Steve Tetrault quotes Nelson Rose, distinguished senior professor at Whittier Law School, who told senators “with few exceptions tribes won’t have the money or the political clout to claim invaluable state licences to offer online poker.” In California, he predicted, a licence would go for “one hundred million dollars up front.”
If US$100m dollars is the price of a licence to do business in California and to extend land-based casino business to the internet, then state legislators there will be shooting themselves and everyone else in the foot. Just the mention of this type of high licensing fee is ridiculous and damaging to the online gaming industry. If implemented it would have the cascading effect of providing major casino and investment groups with sole and protected access to one of the world’s most lucrative sectors in one of the most well-known global gambling locations. This is exactly how you continue to build the welfare state and dampen entrepreneurial spirit with welfare handouts and equalisation payments for lost business.
Creating a further welfare state is not the solution. Forget government handouts or equalisation payments to the tribes. Welfare thinking runs contrary to the business acumen and savvy entrepreneurial characteristics that tribes have displayed over the previous decades.
Tribal groups should be at the front of the queue for online licences, and entry should be reasonable and well regulated. The internet is a cost effective and efficient method of creating new business, as well as growing existing land-based businesses with added revenue streams.
Following the countries that have been in the online gambling business for a number of years and that have successful gaming licensing models already in place, it is evident that state and federal legislatures are not required to re-invent the wheel.
There are already options being put forth from organisations. This gives individual groups a low cost way to participate in a product that is launched and operating in legal jurisdictions worldwide.
Tribal land-based casinos will need to connect the internet business with their casino customer base in order to have any chance of retaining those customers once online is legalised in America. If the State of California, for example, issued online licences to only a select few, those major Nevada and Atlantic City license holders will siphon off the land-based business from the regional tribal casinos.
The great theft of land-based business will happen because un-educated legislators will unknowingly allow the restricted licence holders the ability to attract customers through the online portal and acquire them for their land based operations. The smaller regional land based casinos will be handcuffed, watching while their revenues rapidly reduce and finally disappear.
Think of how much is pumped into the local economies and tax systems from the smaller casinos. The loss of local jobs and local taxes will further hit small town and regional America while benefiting the big players including Wall Street brokers and investors with strong financial interests in many of the major casino groups.
Ultimately any casino can tool up and license software, hire professionals and create the same programs while the cost and time before launch can be significant. Balanced off against the potential loss of revenue of $26.48bn from brick and mortar casinos and bingo halls earned in 2009, the minimal cost of setting up and launching a fully operational online casino business is a good protective investment.
One difficulty will be hiring credible executives to manage this business considering the ever decreasing employment pool of internet gambling experienced people it will be difficult for regional casinos to staff up, and it may not make financial sense considering that they may only gain licensing for the state that they operate in.
The decision must be made not to wait for the state and or federal governments to hand out a share of the leftovers, if that actually happens. The real definitive choice is to make the move to get into the online gaming business now, and in a real way, so that when the dust settles in the US regional land-based casino operators and tribal groups will both be able to profit from a multi-billion dollar industry.
Peter Karroll is the CEO of IAM Corp, a leading online gaming management and marketing firm that provides management and marketing services to GEObet.com. The GEObet Gambling Network (GEObet.com) operated by Olympian Trading Limited and North Star Entertainment Limited, provides sportsbook, casino, poker, bingo and back-end systems to tribal casinos and independent casino operators to compliment and extend their land-based casino operations. The group provides igaming products from EveryMatrix, Microgaming, CTXM and Merge.