SOFTWARE INTEGRITY KEY TO ONLINE GAMBLING

Thursday, 8 Feb 2001

By KEVIN FERGUSON
lasvegas.com/GAMING WIRE

    LAS VEGAS - Internet gamblers are quick to question the fairness 
of Web-based casino games when they encounter technical glitches that 
make the games stall or fail, industry observers say.
    In fact, the industry will have trouble appealing to  the 
mainstream public until such problems are resolved, observers agree.

  "The biggest question about these sites from a player's 
point-of-view is: Does the game offer the player a fighting chance to 
win?" said Tam Lee, an Internet gambling expert who reviews e-casinos 
for rgtonline.com.
   Lee said a player's suspicion of a rigged game arises when an 
online blackjack player is dealt a pair of cards totaling 11, and 
increases his or her bet, anticipating that the next card dealt will 
be a 10 or a face card.
   And then a technical glitch locks up the game.
   "It scares you when the game stalls at that point, and then you 
wind up with a two," Lee said. "It's not likely (the game's 
operators) are changing the cards, but it raises questions to the 
players."

    The Internet gambling industry is expected to grow from revenues 
of about $1.5 billion in 2000 to $6 billion by 2003, according to the 
New York investment banking firm Bear, Stearns & Co.
     More than 800 Internet gambling sites exist, most of which are 
developed by about a dozen software companies, according to 
gamemasterlist.com.

    Tony Cabot, an Internet gambling lawyer for the Las Vegas-based 
law firm of Lionel Sawyer & Collins, said four software makers have a 
strong hold on the market: Starnet of Vancouver, Canada; Microgaming 
of South Africa; CryptoLogic of Toronto; and Boss Media of Sweden.
    Games developed by the software industry leaders typically promise 
a smaller chance of winning than their smaller competitors, but are 
likely fairer than games provided by the smaller operators, Lee said.
    "CryptoLogic offers about a 98 percent return on video poker and 
blackjack, but of course, the rules are such that the casino's odds 
may be a bit higher due to player mistakes," Lee said.
    "If you want better odds than what the major software-makers 
offer, you have to venture a bit off the beaten path, but if you do 
that you risk security."

    Most software-makers charge an Internet casino between $10,000 and 
$250,000 to develop a Web-based casino, with software companies 
receiving as much as 30 percent of the gaming win generated by the 
site, Lee said.
    Canadian and U.S. laws prohibit most forms of Internet gambling 
from within their borders, so most Internet casinos are based on 
offshore islands, where regulations tend to be lax or non-existent.

     Some industry observers say if Internet gambling were allowed in 
extensively regulated environments, such as Nevada or New Jersey, the 
largest U.S. casino operators would have a major edge in seizing 
control of online gambling.
    "If Harrah's Entertainment or Trump or (Park Place Entertainment) 
go online, they will become the 800-pound gorilla," Lee said.
    Harrah's offers casino-style games for prizes on its harrahs.com 
site, developed by software-maker Chartwell Technology of Calgary, 
Canada. Harrah's also has a strategic alliance with iwin.com, aimed 
at channeling Web traffic to each other's site.
    Analysts say games-for-prizes Web sites are one step from being 
converted to games-for-cash sites, if and when U.S.  gaming 
regulators permit the practice.
   A federal proposal to ban the practice is expected to once again be 
introduced in the House and Senate, where prior proposals have 
languished.
   In Nevada, Assemblywoman Merle Berman, R-Las Vegas, plans to 
introduce a bill during the state's current legislative session that 
would legalize Internet gambling within Nevada's borders.

     New Jersey legislators are debating a similar proposal to allow 
companies with Atlantic City gaming licenses to operate Internet 
casinos.
     Berman did not return a Thursday phone message left at her 
legislative office. Nevada Gaming Commission chairman Brian Sandoval 
said he has viewed a draft of her bill.
    "It's a broad-based bill that leaves the policy decision of 
legalizing Internet gambling to the Legislature, and the security 
issues to the Gaming Commission and the (Gaming Control) Board," he 
said.
    Sandoval noted that Nevada regulators need to be convinced that 
lnternet casinos seeking to operate in the Silver State can prevent 
gambling by minors and people living in jurisdictions where e-gaming 
is not permitted.

    But some industry observers doubt a continued prohibition of 
Internet gamblers in the United States will slow growth of the 
industry.
    "Starnet has jurisdictional blocking software, which doesn't 
accept Internet gamblers in Canada, but the vast majority of the 
software makers don't care (about regional prohibitions)," Lee said. 
"I don't think that's going to change."
 

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