GPWA Times Magazine - Issue 28 - April 2014

Massachusetts Internet gamblinghearing focuseson geolocation, payment processing issues ByAaronTodd BOSTON – A panel of gambling regula- tors, Internet gambling operators and ven- dors testified about their experience run- ning regulated online poker, casino and lottery games in an openmeetingwith the Massachusetts Gambling Commission at theBostonConventionCenter inMarch. The Commonwealth does not regulate Internet gambling, although there are cur- rently two bills in the state senate that would create a regulatory scheme for the industry. Thehearingwas open to thepub- lic andwas live-streamedon the Internet. "This cannot be about the Gaming Com- mission protecting its turf," said Stephen Crosby, chair of theMassachusettsGaming Commission, at the beginning of the nearly seven-hourhearing. "This can't beabout the lotteryprotecting its turf.Thiscan'tbeabout the casino operators protecting (their) turf. This has to be a processwherewe . . . look at thebroadest public interest." Early problems with geolocation and pay- ment processing were the main topics of conversation, while lower-than-expected revenue in states that are regulating online gaming was a topic that regulators from Nevada, Delaware andNew Jersey tried to dance around. In fact, the difficultymany sites had in af- firmatively verifying player location led to many players who should have been allowed toplaybeingblocked,whileothers whowouldhavebeenable to fundaccounts were blocked by payment processors that denied transactions, which likely played a part in lower-than-expected revenues. New Jersey in particular faced difficulties verifying players' locations in its first few weeks of operation, as a large percent- age of the population in the Garden State lives near the New York and Pennsylvania borders. According to LindsayKininmonth, operations manager for GeoComply USA, 15 percent of New Jersey's online casino andpoker play takes placewithin onemile of the state's borders. Other complications compelled someplayers togo through long processes to verify their location, as regu- lations require players to be connected via WiFi (depending on the device being used toplay) andplayers to turnoff anynumber of programs that could be used to disguise their true location, such asGoToMyPC. While most of those issues have been fixed through player education, 5 percent of attempted logins to New Jersey online casinos still fail. "Some of them are from people outside the state, and some of them are from false negatives," said EricWeiss, chief of techni- cal services for the New Jersey Division of Gaming Enforcement. "For technological reasons, they can't be geolocated to the sat- isfactionof the state." Crosby askedKininmonth if shewas aware ofanyone fromoutsideNew Jerseyslipping through the system. "We're not aware of any specific players in New Jersey that are accessing websites there from out of state," said Kininmonth. "Butwealsounderstand that no system can be foolproof. "Youput a lot of roadblocks in front ofplay- ers, and they really have to be an eager player to overcome those. . . . Minimizing that percentage of players with false nega- tives is a challenge that operatorswill have todealwithon a regular basis." Another major roadblock would-be online players face is depositingmoney into their accounts. In Delaware, which became the first state to regulate full-scaleonline casino gambling on Oct. 31, 2013, MasterCard is approving 70 percent of player deposits, while Visa is approving just 30 percent. New Jersey is seeing MasterCard deposits succeed78percentof the time,with the suc- cess rate for Visa deposits improving from a dismal 10 percent in the state's opening weeks in late 2013 to 44percent currently. "(There's a) longstanding belief from that 2006 Unlawful Internet Gambling Enforcement Act saying you will be sanc- tioned by the federal government if you transfer funds for these purposes," said Rebecca Goldsmith, deputy director of the DelawareLottery. "We've tried tomeetwith the banks and educate them as to what is legal andwhat'snot legal inour state." These obstacles, however, have resulted in lower than expected revenues for online casinos, and as a result, much smaller tax revenues for the states. In January, New Jersey collected $9.5 million in online gambling revenues from casinos.However, Governor Chris Christie had budgeted $1 billion in gambling revenues by the end of the fiscal year, whichworks out tomore than $83 million a month. Nevada’s three onlinepoker rooms contributed just $55,620 to state coffers. Delaware’s online gaming operations,withapopulationof just900,000, generated just $145,276 in online gambling revenue in January.Thestatehasn’treleased how much of that money will end up in state coffers. When asked about revenues, regulators from all three stateswere cagey about pro- vidingmanydetails. "(I'm) a little hesitant to relay that informa- tion in a public meeting," said Jim Barbee, chief of the technology division for the Nevada Gaming Control Board. "We may have projected slightly over what we're currently receiving. . . . I do know that the accounts-created information is consistent withwhat our projectionswere." "I thought it was kind of interesting that peoplewere notwanting to talkverymuch about revenue potential because the prog- nosticators have been out there for years talking about billions and billions of dol- lars you can make with online gaming on the Internet," said Kim Sinatra, senior vice president, general counsel and secretary of WynnResorts. "Well, the early returnshave not beengood." Steve Wynn, CEO of Wynn Resorts, has flip-flopped on his stance on online gam- bling several times, but he recently came out against it. "The idea that thereare truckloadsofmoney that aregoingby that youmight bemissing isprobablynot accurate," addedSinatra. WEBMASTERNEWS WebmasterNews