As Nevada regulators begin a long process of deciding whether to license online casinos, one of the state’s largest gaming companies has taken a bold step. MGM Mirage has applied for a license to operate an online casino from an offshore location.
The application was submitted last month to the Isle of Man, a 227-square-mile island in the middle of the Irish Sea. The country of 75,000 people recently legalized online gambling and will soon select three companies to award its first Internet casino Pengeluaran SGP licenses.
A British newspaper, the Financial Times, reported Friday that MGM Mirage is a favorite to win one of the licenses. The paper said the Isle of Man has received 11 applications, and will issue three licenses in September.
Alan Feldman, the spokesman for MGM Mirage, confirmed Friday evening that his company is one of the applicants. The Isle of Man has not disclosed the names of the applicants, but Feldman said, “We are under the impression that several major American companies have applied.”
Feldman said the Financial Times story was “aggressive in its sense of a timetable” in stating that MGM Mirage “is close to setting up an online casino in the Isle of Man.” After licenses are awarded, he said, the actual implementation of online gambling will be discussed with government officials.
“This is still a ways off,” Feldman told RGT Online, “I would think several months at the very very least.”
In a July 11 story, the Las Vegas Sun quoted Jim Murren, president of MGM Mirage, as saying that the company was examining jurisdictions around the world that allow Internet gambling, looking for a venue with tough regulatory standards.
Feldman said Friday, “We have taken a good look at the proposals in Macau, England, Monte Carlo and of course we stay very close to what’s going on in Australia.” But no other applications, besides the one in the Isle of Man, are pending, he said.
U.S. casino operators who establish online casinos, even in jurisdictions where they are clearly legal, run the risk of antagonizing regulators in the states where their bricks-and-mortar casinos are licensed. Regulators usually pay close attention to what their licensees do in other jurisdictions.
Several states have specifically banned online gaming. Federally, its legal status is ambiguous, which is one reason Nevada is proceeding slowly after passing a law in June that could lead to the licensing of online gaming for its hotel-casinos.
No major U.S. casino firm has ventured into Internet gaming, except on a play-for-fun basis.
MGM Mirage has casinos in Nevada, Mississippi and Michigan, and is building one in Atlantic City, New Jersey. It also has three in South Africa and one in Australia. Feldman said the company informed regulators in each of these jurisdictions about its application to the Isle of Man.
Informing the Regulators
“Across the board, we let every one of them know that we were submitting an application,” Feldman said. “We wanted them all to not be surprised by that.”
Feldman did not reveal how the regulators had reacted to his company’s disclosure. He said, “This isn’t a question of separating regulators from us. We are all being very watchful over our ability to successfully establish Internet gaming so that it provides the appropriate protections. . . .” MGM Mirage’s priorities in Internet gaming, he said, are to prevent underage people from gambling and to prevent access to a site by people who live in jurisdictions where Internet gaming is illegal.
Two Nevada companies have run afoul of state regulators for involvement with Internet gambling. One was American Wagering, operator of Leroy’s, a large chain of sports books in Nevada. In 1999 American Wagering set up a subsidiary called Megasports, which ran an online sports book based in Australia. Megasports was not supposed to accept bets from the U.S.
But an agent of the Nevada Gaming Control Board used a fake name and went through a Canadian Internet Service Provider to place bets with Megasports. The company smelled something fishy, froze the agent’s account and told him it was refunding his betting deposit.
Still, the Control Board filed a complaint against American Wagering. A year ago, the company settled by paying a small fine and promising to sell Megasports.
And early in January 2000, International Game Technology, the world’s largest manufacturer of slot machines, sold its stake in Access Gaming after getting pressure from Nevada regulators. Access, now based in Dublin, Ireland, was at the time based in Australia and is a developer of software for online gaming.
But attitudes have changed in Nevada. MGM Mirage made headlines in August 2000 when it announced that it would set up Web sites for six of its major casinos and run play-for-free casino games on the sites. They were launched in January. Harrah’s Entertainment quietly beat MGM Mirage to the punch, launching play-for-free casino games in October.
MGM Mirage, which has been the most eager of the major casino firms to get into online gaming, helped push the interactive gaming bill through the Nevada legislature this spring. The bill authorizes regulators to license Internet casinos, if they determine that such gaming is legal and can be regulated effectively.
Strong Player Protection Measures
Documents on the Web site of the Isle of Man government show that the country’s regulations for online gaming have strong player protection measures. Each licensee must keep £2 million ($2.85 million) on deposit that’s available to the government to cover outstanding debts to players in case the licensee goes out of business.
Licensees must also maintain a reserve for each game “which protects the site against a run of bad luck . . . .” Games will be subject to random audits by Gambling Control Commissioners, who will also specify a maximum house advantage for each game.
Players are required to register, and provide details of age, identity and residence. Credit betting is not permitted. Players are required to set maximum betting stakes for themselves, which cannot be increased without seven days’ notice. Operators are expected to cancel the registration of problem gamblers, although it’s not clear how such a determination would be made.
The regulations specify what information and links must be included on a gaming site’s home page. Even advertising for online gaming is regulated. One rule, for example, states that ads “shall not have any sexual content.”
Companies that apply for a license, and key officials of the companies, will be subject to a background investigation. The application fee is £1,000, with an annual license fee of £80,0000. Gambling revenue will be taxed at 2.5 percent.