iGB NA Issue 7 by iGaming Business

INFORMATION, INSIGHT AND ANALYSIS FOR THE BUSINESS OF INTERACTIVE GAMING IN NORTH AMERICA

iGAMING GAMING BUSINESS

NORTH AMERICA ISSUE 07 JUNE/JULY 2013

iGAMING BUSINESS NORTH AMERICA | ISSUE 07 | JUNE/JULY 2013

ONLINE POKER IS BACK IN THE US ULTIMATE POKER CEO, TOBIN PRIOR, ON TAKING THE FIRST LEGAL US BET

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Ultimate Poker: Day One Maryland Live! SVP, Mario Maesano Payments Supplement Bitcoin Mania

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Contents Editor’s Letter America has taken its gaming industry into the modern age with the launch of Ultimate Poker. This issue, we look at the first few weeks of Ultimate Poker’s operation and bring you an exclusive interview with the company’s Chief Executive Officer, Tobin Prior. Besides that, you will want to make sure you catch up on the payments landscape with our highly-educational payments supplement, and if you didn’t believe that social gaming could bring success to your land-based businesses, have a look at our story on Maryland Live! - it will change your mind for sure. I look forward to seeing you in Amsterdam from June 11 to 14 at the world’s largest iGaming conference and expo: the iGaming Super Show. See you there, Michael Caselli, Editor in Chief

Events Calendar

News

Evaluating the Potential Criminal Liability of Gaming Software Developers

State of the Union

US Patents Law

PokerStars’ Atlantic Club Acquisition Aborted

Interview: Steve Beason, CTO, Scientific Games

The World is Changing Around us

Payments Supplement

Online Poker is Live in the US: Ultimate Poker CEO, Tobin Prior

Ultimate Poker: Day One, with CMO, Joe Versaci

Maryland Live! SVP of Marketing, Mario Maesano

Fantasy Sports in New Jersey Casinos

Case Study: Jackpotparty.be

Unlocking Real Money Mobile Gaming for US Players

Bitcoin Mania

Global iGaming Index

iGaming’s Impact on Tribal-State Compacts

Data Center

Top 100 Gaming Companies

Managing Editor: Michael Caselli, michaelc@igamingbusiness.com Editor: James McKeown, james@igamingbusiness.com Section Editor (Law and Legislation): Professor I Nelson Rose Section Editor (Management and Marketing): David Briggs Section Editor (Business and Finance): Melissa Blau

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iGamingBusiness North America | Issue 07 | June/July 2013 | 3

EDITOR PROFILES Editor in Chief: Michael Caselli

Management and Marketing: David Briggs David Briggs is an experienced figure in the iGaming

Michael Caselli is considered one of the world’s leading experts on online gaming. During his 16-year career in the iGaming industry, he has founded and served as the editor of seven iGaming publications, chaired dozens of international iGaming conferences and regularly appears on international news programs including CNBC, MSNBC and the BBC as an expert in the field.

Editor: James McKeown

industry, having joined Ladbrokes in 1999 to head its fledgling online division and going on to become Managing Director of Ladbrokes eGaming. In 2007, David formed his own consultancy company, OrchidSports, to assist established and start-up betting and gaming businesses leverage the opportunities that the Internet brings. David has over 13 years of board level experience in the regulated gaming sector and is also Chairman of Geopositioning solutions provider, GeoComply.

James McKeown is Editor of iGaming Business and its sister

Business and Finance: Melissa Blau

journal, iGB Affiliate. Since 2006, James has overseen the development of iGaming Business into an award winning publication and was

Melissa Blau has been in the online gaming sector for

formerly Editor of consumer title Gambling.com. Prior to entering the iGaming industry, James worked in Financial Services Corporate Communications.

Law and Legislation: Professor I Nelson Rose Professor Rose is recognized as one of the world’s leading

eight years as both an operator and advisor. In her current capacity, Melissa is an advisor focused on bridging US and European interests. Through her consulting company, iGaming Capital, she has been advising mainly land-based companies in developing their online gaming strategy as well as informally advising on M&A opportunities and capital raising. Melissablau@iGamingcapital.com.

experts on gambling law, and is a consultant and expert witness for governments and industry. His latest books, Internet Gaming Law (1st and 2nd editions), Blackjack and the Law and Gaming Law: Cases and Materials, are available through his website, www.GamblingAndTheLaw.com. Gambling and the Law® is a registered trademark of Professor I. Nelson Rose.

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News

Four States Join NJ Sportsbetting Battle

Nevada Goes Live with First Legal Online Bet

Tobin Prior added, “We feel our technology

The states of Georgia, Kansas, Virginia and West Virginia have joined New Jersey’s fight to overturn the Professional and Amateur Sports Protection Act of 1992 (PASPA), which bans sportsbetting in all US states bar Nevada, Delaware, Montana and Oregon.

Ultimate Gaming, a majority-owned subsidiary

and product development,” “The technology

Attorneys general in the four newly partnering states issued “friends of the court” briefs to the Third Circuit Court of Appeals to emphasize their position on the continuing application of the 21-year old federal sportsbetting ban.

go events and multi-table tournaments

The main objections of the states concern the principle of “equal sovereignty” that is not evident in the current monopoly enjoyed by the grandfathered states, while the remaining states of the union are shut out.

an account and pay in funds in advance of

Sportsbetting Bill Passes California Senate

of Station Casinos LLC, has gone live with its real money online poker site, UltimatePoker. com, becoming the first operator in the US to offer legalized online poker. The new domain is now live and offers limit and no-limit games of Texas Hold‘em online poker via single table cash games, sit-andfeaturing buy-ins starting from a few cents up to $100. Players at the site will be able to deposit money and at any of the 16 venues owned by Station Casinos in Nevada while non-US competitors can also register for visiting the western state.

is a major advantage. Ultimate Poker’s proprietary software is completely owned and operated by parent company Ultimate Gaming, allowing for continuous investment was acquired in 2011 and initially developed by a U.S. based company with a completely clean regulatory profile.” Las Vegas-based Station Casinos signed a deal in November that saw it acquire a majority stake in real-money online games, social gaming and digital entertainment developer, Fertitta Interactive LLC, which itself purchased the assets of iGaming solutions firm CyberArts Licensing in October of 2011. Ultimate Poker was awarded an online gambling license by the Nevada Gaming Commission earlier this month after Station Casinos was questioned at length regarding its proposed anti-money

“We are proud to be the first company to

laundering and underage betting procedures

deliver legal and secure real money online

and now the domain is the first since the

gaming to poker players,” said Ultimate

passage of the Unlawful Internet Gambling

Gaming Chairman Tom Breitling. “We have

Enforcement Act (UIGEA) prohibition in 2006

worked closely with state gaming regulators

to be legally permitted to offer its services to

to demonstrate our unique and compelling

US-based players.

poker platform that, above all, players know

You can read an exclusive interview

they can trust. Ultimate Poker is dedicated to being the players’ choice for online poker.”

with Ultimate Gaming’s Chief Executive Officer, Tobin Prior, on pages 50 to 53

Ultimate Gaming Chief Executive Officer,

of this issue.

video lottery games, and intends to launch

The bill is an amended version of

Delaware Selects Joint Offer for iGaming Contract

a similar bill introduced by Wright

Three months after issuing a request

in 2012, which addresses specific

for proposals for the provision of online

concerns raised by lawmakers upon

gambling services, the state of Delaware

its introduction.

has selected a joint offer from Scientific

Progress appears to be taking shape in California as the latest iteration of Senator Roderick Wright’s bill to legalize sportsbetting has been passed by the state Senate.

Despite the recent progress, Californian residents would have to

Games Corporation, 888 Holdings and Williams Interactive LLC.

its iGaming enterprise before the end of the year. The request for proposals also included t he provision to any new intra-state online gambling service of a back-end technology platform alongside operations manager services such as identity verification, hosting, geo-location and e-wallet packages. To have been considered, “primary vendor”

rely on the successful campaigning of

Delaware received 14 bids from groups

those states seeking to overturn the

interested in serving as the “primary

in business with at least one private or

prohibitive Professional and Amateur

vendor” to the Delaware State Lottery for

government client for a minimum of one

Sportsbetting Protection Act (PASPA)

the offer of online gaming systems and

year and operated a minimum of 30 real

before any bets can be placed in the

services including games such as keno,

money games in regulated European or

Golden State.

bingo and poker alongside other table and

North American markets.

8 | iGamingBusiness North America | Issue 07 | June/July 2013

applicants were required to have been

News

Scientific Games Cleared for WMS Deal WMS Industries Incorporated has announced that shareholders have overwhelmingly approved its proposed purchase by Scientific Games Corporation. The two parties entered into a definitive agreement worth up to $1.5 billion in January that will now see the pair hope to merge before the end of the year. WMS stated that 99 percent of those that attended a special meeting held at the Waldorf-Astoria Hotel in May approved the proposed deal, which works out to approximately 75 percent of its total outstanding common stock, while

commercializing new innovative game content and products for our casino operator customers. We are encouraged by the strong player acceptance of our unique new Blade and Game field ad gaming machines, solid performance of new games including Monopoly Legends, Spider-Man and Colossal Reels and the ongoing growth of our interactive products and services.” WMS stated that it is now due to become a wholly owned subsidiary of New York-based Scientific Games. Stockholders are to receive $26 in cash without interest for each share held at the time of the transaction’s closing. “The merger, expected to be completed by the end of 2013, is subject to the receipt of certain required gaming jurisdiction approvals

shareholders additionally endorsed the non-

along with the satisfaction of other customary

binding advisory request regarding merger-

closing conditions,” read a WMS statement.

related compensation by a vote of more than

“The parties timely filed applications for

85 percent.

gaming regulatory approvals or otherwise

“Today’s shareholder approval is an important

provided the required documentation or

milestone toward completing the pending

information in all jurisdictions in which the

acquisition of WMS Industries by Scientific

filing of such applications or the provision

Games,” said Brian Gamache, Chairman and

of such applications or the provision of

Chief Executive Officer for WMS Industries.“

such information was required under the

In the meantime, we remain focused on

merger agreement.”

Rational Group and Atlantic Club Lawsuit Escalates

Club claiming that the deal’s termination was

The Atlantic Club Casino has responded to the Rational Group’s filing of a lawsuit over the termination of its deal to acquire the stricken casino by suggesting that it had

in violation of the New Jersey Casino Control Act. A judge has granted a temporary restraining order preventing the Atlantic Club from pursuing other potential suitors to acquire its business assets. On terminating the deal, the club had reinforced its

William Hill Agrees Monmouth Park Deal William Hill has announced that its William Hill US Holdco Incorporated subsidiary has signed a long-term partnership deal with Monmouth Park Racetrack in New Jersey. The agreement will see William Hill become the American facility’s exclusive sportsbetting provider while additionally serving as the title sponsor for the one million dollar Haskell Invitational horse race, which is due to be run on July 28 as the William Hill Haskell Invitational. “One day sportsbetting will be legal in New Jersey [and] when it is William Hill will be there,” said Joe Asher, Chief Executive Officer for William Hill US. “In the meantime, we are really excited to sponsor the William Hill Haskell Invitational, one of America’s great races for three-year-olds at one of America’s great racetracks.” Dennis Drazin, an advisor to the New Jersey Thoroughbred Horsemen’s Association and Darby Development, added, “We have carefully evaluated what sportsbetting company would put us in the best position to succeed and we decided to partner with a world leader. We are thrilled to announce this partnership for sportsbetting at Monmouth Park and happy to have William Hill as the proud sponsor of the William Hill Haskell Invitational.”

commitment to the opportunities presented by online gaming.

associated with the Group’s hierarchy

The latest escalation emerged from court

were “more extensive and unresolved than

proceedings, where the Atlantic Club

Q1 Net Revenues Decline at Caesars

previously disclosed.”

claimed to be unaware of the severity and

Caesars Entertainment Corporation has

Rational Group had looked set to engineer

extent of the criminal charges levied against

released its financial results for the first

an Atlantic City footprint for its leading poker

former PokerStars hierarchy, and that certain

quarter of 2013 showing a 2.9 percent

business PokerStars through the acquisition

former executives were effectively “fugitives”

decline in net revenues to $2.143 billion.

of the Atlantic Club Casino before the

from the American judicial system.

Caesars declared that its corporate

casino terminated the deal on May 1, on the

The judge lifted the temporary restraining

adjusted earnings before interest, tax,

grounds that the deadline for concluding

order on May 17 after hearing oral

depreciation and amortization for the

the acquisition had passed. Rational Group

argumemts from both parties. You can read

first quarter of 2013 fell by 9.8 percent

responded by filing a lawsuit against Atlantic

more on the case on page 23 of this issue.

year-on-year to $469.7 million.

become aware the certain criminal activities

iGamingBusiness North America | Issue 07 | June/July 2013 | 9

Law and Legislation

THE SOFT SPOT

Evaluating the potential criminal liability of gaming software developers, by attorney Lawrence G Walters of the Walters Law Group. The rising popularity of social gaming for socalled “play” money,1 along with the federal ban on acceptance of illegal online gambling transactions,2 has resulted in a boon for gaming software developers. Typically, the developers create gaming software that is intended solely for legal purposes; in connection with play money, virtual currency, or social gaming. Sometimes, however, such gaming software can be used for illegal gambling purposes by third-party licensees or operators. The potential criminal liability attaching to software developers in such circumstances is unsettled and can create substantial legal headaches for coders. A prime example of this concern is the recent felony prosecution against Extension Software by New York state authorities, who claim that the company profited from the use of its software for illegal bookmaking activities.3 The company contends that it merely provides software to the marketplace and was not aware of anyone using it to take illegal bets in the US.4 The owner further stated that the software was not designed to take bets – only to display which sporting events can be offered for betting, and to store 1 The global social gaming market is expected to generate approximately $8.2bn in revenues in 2012, rising to $14.6 billion by 2015 — a compound annual growth rate of 21 percent. “GamblingData Social Gaming White Paper 2012.” GamblingData. com. October 2012. Gambling Data. Available at: http://www. gamblingdata.com/files/SocialgamingDataReportOct2012.pdf

See, Unlawful Internet Gambling Enforcement Act of 2006 (“UIGEA”), 31 U.S.C. § 5361. Kim Zetter, “Write Gambling Software, Go to Prison”, WIRED, Jan. 3, 2

related wagering information, all of which is presumptively legal.5 Numerous other companies provide gaming or sportsbetting software to end users, but do not control how the software is used once it is purchased or licensed. Some developers receive compensation on a “pay-per-head” basis,6 but that is only one of an infinite variety of compensation relationships that could span the horizon from flat fee purchases to revenue sharing. Moreover, the precise nature of the licensing relationship and the level of knowledge (or willful blindness), will likely play significant roles in determining any potential liability for gaming software developers, under existing law. Regardless of the compensation arrangement, software licensing has become a hotbed of potential legal liability for coders. The starting point in the legal analysis of software developer liability is with accomplice liability theories. Under US federal law and the laws of most states, those who assist others in committing crimes, or who form agreements to engage in criminal activity, are punished the same as those who actually perpetuate the crime. Typically, 2013, available at: http://www.wired.com/threatlevel/2013/01/codercharged-for-gambling-software/ 4 Id. 5 Id. 6 Sam Borden, “Neighborhood Bookies Putting Lines Online”, The New York Times, Mar. 29, 2012, available at: http://www.nytimes. com/2012/03/30/sports/bookies-using-new-technology-for-oldfashioned-betting.html?pagewanted=all&_r=0 7 Title 18 U.S.C. § 2.

10 | iGamingBusiness North America | Issue 07 | June/July 2013

the government relies on the concepts of “aiding and abetting” or “conspiracy” when mounting such prosecutions. One who substantially assists another individual in committing a criminal offense is guilty of “aiding and abetting.”7 “Conspiracy,” on the other hand, requires the government to prove knowledge of, and voluntary participation in, an agreement to violate the law.8 Conspiracy does not require a completed crime, while “aiding and abetting” does not expressly require proof of an agreement to violate the law.9 For example, even “teaching” or “instructing” another on how to make an illegal venture succeed can be sufficient for liability to be imposed under aiding and abetting statutes.10 At least one court has held that a defendant’s personal knowledge of the details of a bookmaking operation need not be demonstrated, in order to be guilty of aiding and abetting such an enterprise.11 Moreover, participants in illegal gambling operations can be held criminally responsible for offenses that are likely to occur in the course of such operations, even if not specifically intended.12 As is evident from the aforementioned, the standard for imposing accomplice liability on gambling enterprise participants is somewhat nebulous and, therefore, favorable to the Title 18 USC s. 371; United States v. Bright, 630 F.2d 804, 813 (5th Cir. 1980). 9 Perenira v. United States, 347 U.S. 1, 11 (1954). 10 Id. at 280. 11 U.S. v. Miller, 22 F.3d 1075 (11th Cir. 1994). 12 Miller at 1078-79 (“As an accessory in the gambling business, Miller can be held ‘liable for any criminal act which in the ordinary course of things was the natural or probable consequence’ of that criminal activity.’”) 8

Law and Legislation

prosecution. Even those with minimal participation in gambling operations can be caught up in conspiracy allegations. Federal gaming statutes have also been broadly applied against a wide variety of participants, from big bosses all the way down to janitors.13 The US Supreme Court has held that, for purposes of proving a violation of the Illegal Gambling Business Act,14 the government need not prove that the defendant actually performed any act of illegal gambling; only that the defendant “participated” in the gambling business.15 However, in construing a separate federal statute prohibiting inter-state gambling activity, the High Court found that some level of “active encouragement” of the illegal inter-state activity was required.16 Courts have created various tests in determining the level of involvement required to prove criminal culpability related to a gambling enterprise.17 With the particulars of each analysis varying, most tend to focus on how necessary the defendant’s activity was for the operation of the gambling enterprise. Thus, one court has held that imposing liability on those individuals whose activity was merely helpful to the gambling operation would push the reach of the law further than

Congress intended.18 Naturally, most of the cases considering these issues were decided before the digital age – many even before the widespread use of personal computers and mobile devices. Thus, the precise issue of software developer liability in the gambling context has not been settled by US courts. It therefore comes as no surprise that the developers at Extension Software were more than shocked upon finding federal agents at their door and a criminal prosecution for promoting gambling activities in their future.19 Coders across the United States, and the globe, are naturally concerned that any misuse of their software product, or close involvement with licensees, can land them in hot water as a conspirator, or aider and abettor. In 2003, many media outlets were similarly shocked to learn that the US Department of Justice considered the mere advertising of online gambling to constitute “aiding and abetting” under federal law.20 After announcing its position, the DoJ proceeded to extract millions of dollars in fines and civil penalties from numerous media outlets for their prior advertising of online gambling activity.21 Routine cash seizures of advertising proceeds occurred under this theory as well.22 Based on well-founded concerns regarding

such accomplice theories, most payment processors and intermediaries fled the US market shortly thereafter.23 Certainly, software developers are not automatically liable for any misuse of their gaming software, absent some sort of knowledge of the illegal activity, intricate involvement with the illegal gaming enterprise, or active encouragement of unlawful use of their product. But as in all criminal cases, issues such as “knowledge” or “intent” are decided by a jury, and often based on circumstantial evidence. Thus, all of the surrounding circumstances would likely be considered in determining criminal responsibility of gaming software developers. Some of the issues that might be considered are: 1) The nature and basis of any compensation paid to the developer by end users/licensees; 2) The terms of any contract between the developer and end users/licensees; 3) The existence of any communications between the developer and the end users/ licensees, relating to legal/illegal intended use of the software; 4) The extent to which the software is actually used in the market, for illicit purposes;

U.S. v. Merrell, 701 F.2d 53 (6th Cir. 1983).14 18 U.S.C. §1955 Sanabria v. U.S., 437 U.S. 54, 70 (1978). 16 Rewis v. U.S., 401 U.S. 808, 813 (1971). 17 Compare the “Boss Test;” U.S. v. Boss, 671 F.2d 396 (1982) with the “Sanabria Test”, Sanabria, supra. 18 See, Boss at 400 (holding that a waitress who merely served drinks could not be considered part of a gambling enterprise under 18 U.S.C. § 1955). 19 See, Footnote 3, supra.

The “warning letter” sent to the National Association of Broadcasters relating to online gambling is available, here: http:// www.igamingnews.com/articles/files/NAB_letter-030611.pdf 21 For example, see: Jason Ryan, “Microsoft, Google, Yahoo to Pay $31.5M Over Illegal Gambling Ads”, ABC News, Dec. 19, 2007, available at: http://abcnews.go.com/Technology/ FedCrimes/story?id=4029545&page=1#.TyWzBW8V3CI (last visited Jan. 29, 2012). 22 For example, see: Matt Richtel, “U.S. Steps Up Push Against

Online Casinos by Seizing Cash”, The New York Times, May 31, 2004, available at: http://www.nytimes.com/2004/05/31/ technology/31gambling.html?ex=1086580800&en=15eb47a66936 27cb&ei=5062&partner=GOOGLE 23 See, Matt Richtel, “Citibank Bans Credit Cards From Use in Web Gambling,” The New York Times, June 15, 2002, available at: http:// www.nytimes.com/2002/06/15/business/citibank-bans-creditcards-from-use-in-web-gambling.html; Philbert Shih, “Regulations Changing the Face of Online Billing,” Web Host Industry Review,

iGamingBusiness North America | Issue 07 | June/July 2013 | 11

Law and Legislation

Naturally, no single factor would be determinative of imposition of accomplice liability on the developer, or proof of criminal intent. But a combination of factors, showing, for example, that the developer was well aware of the intended illegal use by licensees, established through communications or otherwise, could be problematic for the developer, even in the absence of direct participation in the gaming enterprise. Notably, the final “willful blindness” factor can trigger the issuance of an “Ostrich Instruction” by the court to the jury in a criminal trial. This type of jury instruction allows the jurors to infer knowledge from a combination of suspicion and indifference to the truth. In other words, if a person had a strong suspicion that things were not what they seemed or that someone had withheld important facts, yet shut their eyes for fear of what they might learn, the jury can conclude

that knowledge of illegal activity exists.25 The instruction is designed for cases where there is evidence that the defendant, knowing or strongly suspecting that he is involved in shady dealings, takes steps to make sure that he does not acquire full or exact knowledge of the nature and extent of those dealings.26 While the law remains unsettled regarding the extent of software developer liability, those developers who create products that can be readily adapted for illegal gambling, receive higher-than-market rate proceeds for use of their products, and/or license to users who are known to be involved with illegal gambling, run a substantial legal risk. However, the current state of the law on this issue has the potential to ensnare innocent victims; i.e., those developers who create a legitimate product for legal purposes but whose customers misuse the product for illegal gambling. Circumstances may not always be what they appear, and some developers may find themselves caught in wide conspiracy nets cast by state and federal authorities responsible for enforcing gambling laws. Worse yet, the fear of potential criminal exposure may cause some developers to stop coding, out of fear of getting caught up in a test case, or unwarranted prosecution. This sort of “chilling effect” is constitutionally

problematic, since it is well-settled that software is entitled to full First Amendment protection.27 The mere threat of prosecution can result in significant self-censorship by developers. The political winds are shifting, however; particularly in the realm of online gambling. Nevada, Delaware and New Jersey have already legalized forms of online gambling, and numerous other states are considering similar legislation. State lotteries are exploring the online sale of lottery tickets, with Illinois already offering this product. Legalization of online casino gambling (and possibly sportsbetting) is all but inevitable. As with any form of progress, this evolution will take time. But until legalization becomes a reality, gaming software developers must undoubtedly proceed with caution to avoid becoming a soft target.

Sept. 26, 2003, available at: http://www.thewhir.com/features/onlinebilling.cfm; Pete Harrison, “More Firms Flee U.S. Online Gaming Ban,” Business Report, October 11, 2006, available at: http://www.busrep. co.za/index.php?fArticleId =3480982; Aaron Todd, “NETeller Exit Impacts U.S. Internet Gambling Market,” Casino City Times, January 18, 2007, available at: http://www.casinocitytimes.com/news/article. cfm?contentID=163628; Joshua McCarthy, “Online Poker Transfers

No Longer Available Through ePassporte”, Online Casino Advisory, April 15, 2008, available at: http://www.onlinecasinoadvisory. com/casino-news/online/epassporte-cancels-online-gamblingtransfers-1625.htm; see also “Epassporte Statement to PitbullPoker,” posted on CompatiblePoker.com, April 11, 2008, available at: http:// www.compatiblepoker.com/epassporte-closed.cms.htm. 24 Some states permit exemptions from their general gambling

prohibitions for ‘penny ante’ or small stakes games between acquaintances. 25 U.S. v. Giovannetti, 919 F.2d 1223, 1226 (7th Cir. 1990). 26 Id. 27 Brown v. Entertainment Merchants Ass’n, 131 S.Ct. 2729 (2011); Sorrell v. IMS Health Inc., 131 S.Ct. 3653 (2011); New.net, Inc. v. Lavasoft, 356 F.Supp.2d 1090, 1111 (C.D. Cal. 2004).

5) The manner in which the software is designed for easy modification by users for illegal gambling; 6) The existence of legitimate uses of the software (i.e., social gambling,24 free play, etc); and 7) Any efforts by the developer to avoid gaining knowledge of illegal use of the software (i.e., willful blindness).

12 | iGamingBusiness North America | Issue 07 | June/July 2013

Lawrence G Walters, Esq., heads up the Walters Law Group, and represents clients involved in all aspects of online gaming, including software developers, distributors and licensees. Nothing in this article is intended as legal advice, but is provided as general information. Mr Walters can be reached at 800.530.8137 or larry@gameattorneys.com.

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Law and Legislation

STATE OF THE UNION 2013 has already been a year of significant change for the online gaming industry in the US, with Delaware concluding its RFP process, Nevada adding inter-state legislation to bolster its pending online poker industry and New Jersey finally coming to the table with is own legalised intra-state online gaming regulations. Rachel Hirsch, an associate at Washington DC-based law firm, Ifrah PLLC, takes a look at the changing iGaming landscape in the US and how events in Nevada and New Jersey could affect activity in other states. If the first half of this year is any indication, 2013 is poised to be a watershed year for iGaming in the United States. With states like Nevada and New Jersey leading the charge, there has been a flurry of activity to introduce and pass iGaming legislation within individual states, with the expectation that cross-border play will soon follow. While some legislative measures have failed before even making it out of the gate, there is considerable justification for continued optimism for iGaming legislation, especially in the more populous states.

The leader board Although, for some time last year, New Jersey appeared to be on the verge of becoming the first state in the union to legalise and regulate online gaming, it actually turned out to be the third. New Jersey lost this honour to Nevada and Delaware. All three states, however, approved very different versions of iGaming legislation, with New Jersey offering a broader range of iGaming opportunities with the most appeal to foreign operators.

Delaware Unlike Nevada and New Jersey, Delaware offers a public-based model for its iGaming legislation. The law authorises the state lottery and the three racetrack casinos it regulates to offer full-scale Internet gambling, including web table games that include online poker, video lottery games,

and traditional lottery games to be offered online. The law also allows the state to explore compacts with other states to share player pools, which is important to Delaware given its small population. Six months after passing its iGaming legislation, Delaware issued a request for proposals for the implementation of an Internet gaming system and associated services. Released on behalf of the Delaware State Lottery, the request invites interested parties to submit bids for the provision as a primary vendor of a back-end technology platform alongside operations manager services. To be considered for these positions, the request states that potential vendors must have been in business with at least one private or government client for a minimum of one year and must have operated real money games in regulated European or North American markets. Primary vendor applicants are required to have been operating in a regulated market for two years, as well as having offered at least 30 games or game variants for at least one year. On May 3, the Delaware State Lottery announced that it had selected Scientific Games, teamed with 888 Holdings and Williams Interactive LLC, as the primary vendor to operate iGaming in the state. The Delaware State Lottery hopes to begin offering iGaming no later than September 30, 2013.

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Nevada Following the private-sector model, Nevada was the first state to legalise intra-state online poker, providing a potential platform for foreign operators to forge partnerships with existing land-based casinos in the state. Although the legislation passed in 2011, online poker in Nevada only went live on May 1, 2013, with the launch of Ultimate Poker. Not to be outdone by its competition in the east, Nevada lawmakers fast-tracked a new iGaming bill this year that would authorise Nevada to enter into inter-state gaming compacts. In February of this year, the Nevada Assembly Judiciary Committee unanimously voted to amend and pass Assembly Bill 114, which would allow Nevada to enter into partnerships with other states that legalise iGaming in order to share player pools. The bill was approved by both houses of the legislature in rapid succession, and Governor Brian Sandoval signed the bill as soon as it hit his desk. Under the new law, licensing fees have now been set at $500,000, with a renewal fee of $250,000. The law, however, also contains a clause that would prevent any online company that has offered online gambling to Americans since the 2006 passage of the Unlawful Internet Gambling Enforcement Act (UIGEA) from entering the market for at least five years. This means that those companies shut down by the US government during the Black Friday seizures cannot earn a seat at Nevadaâ&#x20AC;&#x2122;s table, at least initially.

New Jersey Although Nevada may have foreclosed opportunities to some of the giants in the industry, New Jersey has not. A week after Nevada passed its online gambling bill,

Law and Legislation

New Jersey followed suit. Both houses of the state legislature had previously passed the iGaming bill, by large margins. Governor Chris Christie gave the online gambling bill a conditional veto in February, sending it back to the legislature and requesting minor changes. Lawmakers agreed to his conditions on February 26, passing the bill through the General Assembly with a vote of 68-5-1 and through the State Senate with a margin of 35-1. Governor Christie signed the bill into law that afternoon. The changes requested by the Governor included an enhanced level of funding for compulsive gambling treatment programmes, a requirement that state employees and legislators disclose any representation past or present of entities seeking Internet gaming licences, and an extension of a prohibition on any casino-related employment for state employees and legislators to include companies involved in Internet gaming. Under the law, casinos or their affiliates would be allowed to offer the same games that are currently offered on Atlantic City casino gaming floors. All players must be physically located in New Jersey, but do not need to be residents of the state. The law also offers the possibility of generating much larger player pools for games through inter-state gaming compacts with states that have legalised online gaming within their borders, as long as this is consistent with federal law. On May 17, the New Jersey Division of Gaming Enforcement (“DGE”) released a draft of the proposed regulations for iGaming in the state. The public comment period on the regulations will end on August 2 and final adoption of the regulations will occur after a full review. The DGE will then announce a date when casinos will be permitted to accept online wagers at least 45 days in advance of the start date. There is not yet a definitive start date for iGaming in New Jersey, but it is quite possible that it could happen this year.

The runners-up

New York

The news of Nevada and New Jersey passing online gambling legislation caused a surge of activity in other states.

Hoping to follow in the footsteps of its neighbouring states, New York recently passed a non-binding version of a budget bill that included a statement in support of the regulation of online poker. The proposed regulation reflects the recent court ruling from US District Judge Jack Weinstein that determined that poker is “not predominantly a game of chance”. The development of online poker regulations, along with the remainder of the budget bill, is expected to be finalised this spring. In the meantime, the state is working on the authorisation of new bricks-and-mortar casinos and an online lottery system.

Pennsylvania Pennsylvania recently introduced a bill that would legalise online poker, having overtaken New Jersey as the second most lucrative gambling market in the country. With a population of 12.7 million people, Pennsylvania would have the largest intrastate player pool to work with between Nevada, New Jersey, and Delaware. Yet, operators may have to pay a steep price to take advantage of Pennsylvania’s player pool, with licence application fees expected to be in the millions.

Illinois As in Pennsylvania, total revenue generated by new gaming measures, including online gaming, would be a welcome addition to the state budget in Illinois. For the third time in as many years, an Illinois senate committee approved an expansion of casino gaming in the state, but this time including online gaming and poker. With a population of 13 million, Illinois has a larger player pool than the three other states that have legalised online gambling – New Jersey, Nevada, and Delaware – combined. The legislation, like that in implemented in Nevada, includes a “bad actor” provision, restricting the issuing of an iGaming licence to any operator and vendor that has “been convicted of accepting” wagers in violation of US law. The legislation also contemplates only intra-state iGaming play, even though Illinois would be an attractive partner for inter-state compacts. With previous gambling measures failing in the state, the path towards legalized iGaming in Illinois will likely be a difficult one.

California With the fifth largest economy in the world, California would have a major impact on iGaming if it were to approve it. The state legislature recently introduced a proposal to regulate online poker on an intra-state basis. The bill will allow the California Gambling Control Commission to establish a framework for online poker websites, which has the potential to generate billions of dollars. Although similar bills have failed to pass because of concerns from lawmakers and Native American tribes, there is still hope that this measure may succeed.

And the rest As the iGaming leaders begin to generate tax revenues and job opportunities within their borders, other states will be motivated to do the same. Buoyed by the success of the leader board, in a year’s time, the landscape for US iGaming will be very different than it is today. Rachel Hirsch is an associate at Ifrah PLLC, a Washington, DC-based law firm specialising in iGaming, and Internet advertising and marketing.

iGamingBusiness North America | Issue 07 | June/July 2013 | 15

Law and Legislation

STATE OF THE UNION Since the US Department of Justice publicly reversed its position on the scope of the 1961 Wire Act in December 2011, conceding that it only reserved jurisdiction over sportsbetting, we have been reporting on various state activity with regards to the broadening of intra-state lottery and iGaming models. This issue, we see the very first patch of white on our US map to signify Nevada taking the first legal US bet, courtesy of Ultimate Poker. Nevada: White Regulated Gaming Type: Poker-only Operator Type: Applicants with existing land-based license (open to foreign operators) Estimated Go Live Date: Live. April 30, 2013, will go down as the day when online poker legally returned to the US, as Station Casinos subsidiary Ultimate Gaming went live with its real money poker site in Nevada. UltimatePoker.com offers limit and no-limit games of Texas Hold’em via single table cash games, sit-and-go events and multi-table tournaments featuring buy-ins starting from a few cents up to $100. Ultimate Gaming’s Chairman, Tom Breitling, said, “We are proud to be the first company to deliver legal and secure real money online gaming to poker players.” On May 9, Ultimate Poker reportedly discontinued the use of all services from Iovation in light of previous links to the now defunct Ultimate Bet. Illinois: Green Regulated Gaming Type: Online lottery Operator Type: Illinois Lottery controlled Estimated Go Live Date: Online Georgia: Green Regulated Gaming Type: Online lottery

Operator Type: Georgia Lottery controlled Estimated Go Live Date: Online Delaware: Green Regulated Gaming Type: Full-service online gaming Operator Type: Centralized iGaming system via Delaware Lottery and operated by the three state casinos Estimated Go Live Date: End of summer, 2013. Delaware is going through an RFP process released on behalf of the State Lottery that invites applications for the provision of the back-end technology platform and operations manager services. The Lottery hopes to have iGaming up and running by no later than September 30 of this year. The law also provides for the state to explore compacts with other states, a function also evident in the Nevada and New Jersey laws. Maryland: Green Regulated Gaming Type: Online lottery Operator Type: Maryland Lottery controlled Estimated Go Live Date: 2013 Michigan: Green Regulated Gaming Type: Online lottery Operator Type: Michigan Lottery controlled Estimated Go Live Date: 2013

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White

Live (iGaming)

Green

Legislation Enabled/Lottery Online

Amber

Work in Progress/Under Consideration

Red

Undecided/Back to the Drawing Board

Blue

No Movement

Black

Prohibited/ Pending Prohibition

New Jersey: Green Regulated Gaming Type: Full-service online gaming Operator Type: Atlantic City casinos with existing land-based license Estimated Go Live Date: 2013. Finally, at the third attempt and after over two years of campaigning, New Jersey has passed its intra-state online gaming regulations into law. All parties are hopeful of a 2013 launch date after Governor Christie signed the bill at the end of February, having conditionally vetoed it earlier in the month. Intriguingly, the bill is absent of the “bad actor” provision evident in bills in Nevada and Delaware which has ruffled a few feathers, especially with PokerStars hovering over a deal to become a permanent fixture in Atlantic City. However, Atlantic Club terminated the deal on May 1, citing that the deadline to conclude the purchase agreement had passed. The Rational Group, PokerStars’ owner, and the Atlantic Club are currently in the throes of a lawsuit over the termination. California: Amber Present Status: There are three bills in the California Senate in 2013 that deal with some form of online gaming regulation. AB51 is the Internet Poker bill introduced by

esota

Law and Legislation

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Iowa: Red Massachusetts: Amber Senator Rod Wright that would limit North Carolina Present Status: Dead for the year Present Status: Senator Bruce Tarr online poker to the state and to those who has introduced S197 that would permit have obtained a license from the state. Tennessee District of Columbia: Red companies to offer online gaming in the Only holders of existing land-based Present Status: Back to the drawing board state under license of the Massachusetts licenses, including gaming tribes, can Gaming Commission. There is also an online apply. Senator Correa’s SB678 is less Florida: Red lottery bill in place although there is little detailed; in fact, the only details evident in Present Status: Back to the drawing board information as to the support of either bill. the bill’s 14 lines of text is that Internet poker South sites can be operated in California, the Carolina Connecticut: Red New York: Amber Gambling Control Commission is in charge, Arkansas Present Status: Undecided Present Status: Non-binding version and people can apply. Senator Wright has also introduced SB190, of budget bill supportive of online poker Mississippi Utah: Black has been passed. a sportsbetting bill that would permit current Georgia Present Status: Prohibited land-based licensees to take wagers on nonCalifornian sports events (or teams), however, Pennsylvania: Amber Texas: Black Present Status: Online poker bill whether this will extend to the Internet is Louisiana Alabama Present Status: Texas remains in the introduced, but costs may prove a unclear, but is not ruled out. California will ‘prohibited’ group as we are only dealing with barrier for operators. continue to be eagerly watched, being the state-level legislation, but the state has put fifth biggest economy in the world, but there forward plans that would allow it to opt-in to Mississippi: Red remain many variables that could swing the any federal law governing iGaming. Present Status: Back to the drawing board iGaming argument in either direction.

iGamingBusiness North America | Issue 07 | June/July 2013 | 17

Florida

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Law and Legislation

UNITED STATES PATENTS

YOU HAVE TO PLAY TO WIN US consumers spend billions of dollars gaming online every year. In five years, the projected spend is between $6 billion and $11 billion annually.1 With billions in potential additional revenue just a few years away, many companies are turning to US patents to slant the odds of higher profits their way, write DLA Piper’s Paul Taufer, Claire Bennett and Michael Burns. Slanting the odds comes from a US patent owner’s ability to prevent others in the US market from making, using, offering to sell, selling or importing any similar process, machine, manufacture, or composition of matter while a patent is in force. As applied to the online gaming industry, patent protection may generally extend to the overall functionality of a game, the technology underlying the game or any graphical user interfaces. As such, a strong patent portfolio may operate as a sword by yielding significant market share by giving the ability to either drive competitors out or prevent competitors from entering the US market. It may also provide an additional revenue stream for the patent owner through either licensing or transfer of patent rights to others. In addition, a patent may also provide more indirect benefits in operating as a shield by helping to counter a patent enforcement threat from a competitor and use as a point of negotiation for a suitable resolution. This has become especially important in recent years as the amount of patent litigation in 1

the US has increased and damages awarded have risen. As a result, for companies that want to successfully operate in the US market or plan to enter it, it has become more important than ever to implement a well thought out patent strategy.

Acquiring US patents US patents are most often acquired through either: (1) filing and prosecuting a US patent application to grant; (2) purchasing US patents; and (3) purchasing another entity who owns US patents. First, a US patent may be acquired by filing and prosecuting a US patent application on new technology that is organically developed within a company until a patent is granted. A US patent application generally includes a specification having a detailed description of the invention, drawings and claims. The specification must describe the invention with enough detail to allow a person with ordinary skill in the art to which the inventors pertains to use the invention. The patent claims are numbered sentences that describe the exact

scope of the claimed patent protection. The public policy behind the system is to grant a monopoly on the claimed subject matter in exchange for sharing your information on the technology with the public. In theory, this will spur innovation by saturating the industry with technical knowhow while providing incentive to gain new patent protection and develop new technology to design around existing patents. After filing a US patent application, it usually takes about three years or longer before a patent is granted. However, this process may be expedited to as little as one year by utilising special procedures offered by the US Patent Office. Second, a US patent may be acquired by purchasing US patents from a third-party. A patent’s owner may be either the listed inventor or an assignee. Information on a patent’s assignee is normally publicly available and the owner at the time of the granting of the patent may be listed on the patent itself. Accordingly, companies may contact inventors or assignees to enquire about purchasing a patent. There are also other options such as patent auction houses, which list patents for sale. If a patent is purchased, intellectual property rights come much sooner than they would through the normal patent

http://www.americangaming.org/sites/default/files/uploads/docs/futurewatch/futurewatch_vol_10_exec_summ.pdf

iGamingBusiness North America | Issue 07 | June/July 2013 | 19

Law and Legislation

application process. However, due diligence is required to ensure that the patent is in force and relevant to your industry. For example, title to the patent may be clouded such that ownership in the patent may have to be shared with others. In addition, the actual subject matter covered by a patent is often difficult to fully understand without a thorough review of the patent and the history of the patent application process. Third, a US patent may be acquired by purchasing another entity who owns US patents. If your company is considering a merger or acquisition, some targets may include those that own intellectual property that is relevant to your field. Even if the target company is not successful from a revenues perspective, its intellectual property may still be lucrative and enable you to more easily enter a new market with additional products. As with purchasing single patents, intellectual property rights obtained via a merger or acquisition come much sooner than through the normal patent application process, but more due diligence is usually required. Aside from analysing the intellectual property holdings of a target company, you will also have to evaluate other issues such as outstanding liabilities and potential exposure of the target company.

Advantages of the US patent system In the US, there are two basic types of patents that are available: utility patents and design patents. Generally, a utility patent protects how an article is used and works, while a design patent protects the way an article looks. Both of these subtypes of patents are applicable to the online gaming industry. Importantly, the US grants patents for software, Internet-related technologies and business methods more readily than many other countries. As these technologies and business aspects have been integrated in the gaming industry, many businesses have turned to US patents as a mechanism to gain additional intellectual property rights to protect their products. For example, US patents may be utilised to protect the functionality of a game, the technology behind how a game is implemented and the functionality and appearance of any graphical user interfaces. The US is also important because of a one-year â&#x20AC;&#x2DC;grace periodâ&#x20AC;&#x2122; for public disclosures in limited circumstances. In the US, a patent application may be filed for any subject matter up to one year following a public disclosure or sale/offer for sale. This grace period differs from most countries, which do not allow for any public disclosures prior to the filing of a patent application, or else the ability to obtain patent protection may

20 | iGamingBusiness North America | Issue 07 | June/July 2013

be lost. For this reason, many multi-national companies employ a patent strategy to file patent applications before any public disclosure is made, to preserve the ability to obtain patent protection on a global basis. However, the grace period means that even if a company fails to do so, it still may be possible to obtain patent protection in the US. Whilst the opportunities to obtain utility patents and design protection outside the US should not be neglected (particularly because not many companies realise that valuable protection can be obtained outside the US, so it provides an opportunity to get ahead of the market), due to the more limited ability to obtain patent protection outside the US in relation to software, Internet-related technologies and business methods, the US patent laws are important for gaming companies to understand and to learn how best to manoeuvre through the patent process to maximise its effectiveness.

Enforcing and monetising US patents As previously noted, a US patent owner has the power to exclude others from making, using, offering to sell, selling or importing anything similar to their patented inventions while the patent is in force. If an analysis shows that patent infringement is likely, a patent owner may bring an action in court to prevent the infringement from continuing

Law and Legislation

and to obtain monetary damages for past infringement. In addition, the patent owner may recover additional money in the form of an ongoing royalty for the life of the patent if the infringer is permitted to continue to use the patented technology. Importantly, there is no knowledge requirement for direct patent infringement. As such, a company can be liable for years of past patent infringement even if it became aware of a patent for the first time when a lawsuit against the company is filed. Many gaming companies are taking advantage of US laws to gain and preserve market share, because competitors who release similar products may be liable for patent infringement and subject to large out-of-pocket costs for court judgments and legal fees. Even though there is no knowledge requirement, monetary damages may increase as high a threefold when another knowingly proceeds with infringement despite being aware of a patent, which is

termed “wilful infringement”. The issue of wilfulness is routinely litigated in patent cases in the US due to the potential for the recovery of large damages. For example, in 2009, a jury awarded a patent owner (pharmaceutical company) $1.67 billion in damages for wilful infringement. Because of the extent of patent litigation that has occurred in the US, and such large judgments awarded and high legal costs to defend a patent action, the very existence of a patent, or even merely a patent application and the possible future threat of patent suit, is often enough to keep competitors at bay. There are also other benefits afforded by patents that have a more direct impact on a company’s revenues. For instance and as discussed earlier, the technology underlying the patents can be licensed or the patents sold outright to third-parties for a lump sum payment or an ongoing royalty. A patent portfolio can also help to increase a company’s overall valuation, and help to

attract investors and potential acquirers or joint venture partners. Exclusivity in the market afforded by patents is a very powerful factor in many business decisions.

Navigating third-party patent portfolios One thing that should never be overlooked is that all of the US patent advantages discussed are also available to your competitors. Accordingly, it is prudent that companies operating in or planning to enter the US market take precautions to determine its potential exposure to US patents when doing business in the US. In competitive industries such as the gaming industry, US companies have become more sophisticated by acquiring intellectual property, monitoring the industry and enforcing patents on competitors. In addition, patent holding companies have emerged whose sole business is acquiring, licensing and suing others for patent infringement. These holding companies are

iGamingBusiness North America | Issue 07 | June/July 2013 | 21

Law and Legislation

named non-practicing entitles (“NPEs”) or “patent trolls” because they do not develop or exploit the underlying technology. These NPEs have made huge amounts of money and routinely sue entire industries for patent infringement. For example, the median damage award for NPEs in the US was about $11 million in 2012.2 To gauge and control these risks, companies can take some pre-emptive actions before launching a product in the US market. For example, a ‘freedom to operate patent survey’ can be commissioned to attempt to uncover any third-party patents that may be pertinent to a new game. If no patents are found, a company can enter the US market confidently and aggressively knowing that the risks of violating another’s patent rights are low. However, even if pertinent patents are found, the information may provide an opportunity to modify a game before it is released to avoid a potential patent infringement scenario. Often, only a minor change is required to avoid patent infringement altogether. In addition, you could choose to evaluate the validity of any patent and challenge it for nullification, if it is determined to have been improperly issued as a patent based on the state of the technology that predated the patent and not considered by the patent office or some other technical defect with the patent. Alternatively,

you could attempt to licence or acquire the patent to gain permission to use the patented technology. Many options are available, but getting a clear picture of the patent landscape is key and preferably before a new game is released in the US market to provide the greatest amount of flexibility. Another helpful mechanism, regardless of a freedom to operate study, is having your own patent portfolio on hand to use as a bargaining chip if the need arises. For instance, if you have a strong patent portfolio and are sued or even just approached by a patent holder alleging infringement of a patent they own, you may be able to leverage your own patent portfolio to strike a favourable deal to resolve the dispute quickly and cost effectively, such as on a crosslicence basis. In this manner, just having the ability to use your own patent portfolio to either counter with your own infringement allegations against the other company or to entice the other company with a licence to what they perceive as valuable patented technology, can be a very effective strategy to avoid litigation.

Conclusion Many of the gaming companies doing business in the US have already implemented a patent strategy and are in the process of developing some substantial 2

22 | iGamingBusiness North America | Issue 07 | June/July 2013

patent portfolios. To effectively compete in the US market, companies should consider establishing or adapting their own patent strategies, if not done so already, to help level the playing field as the gaming industry continues to expand. Competing in the US market without a patent strategy is analogous to a bet against the house.

Paul Taufer and Claire Bennett are partners and Michael Burns an associate at DLA Piper, a leading international law firm with offices in 30 countries. Paul and Michael are based in DLA Piper’s Philadelphia office and Claire in DLA Piper’s London office. Together, they advise companies involved in the gaming industry on all forms of Intellectual Property prosecution, litigation, opinions and licensing, along with mergers and acquisitions, for clients ranging from established companies to start-ups. Paul is a registered patent attorney and lawyer licensed to practice in Pennsylvania and New Jersey and Claire a patent and technology-focused English lawyer. If you wish to know more about how DLA Piper can work with your business, please contact gambling@dlapiper.com.

http://www.pwc.com/en_US/us/forensic-services/publications/assets/2012-patent-litigation-study.pdf at 26.

Law and Legislation

POKERSTARS’ ACQUISITION OF

ATLANTIC CLUB ABORTED Judge refuses to maintain temporary restraining order on Atlantic Club Casino following lawsuit filed by Rational Group, writes David Schollenberger, Head of Gaming and Leisure Team at Healys LLP solicitors, London. PokerStars has run out of time for its acquisition of the Atlantic Club in Atlantic City, New Jersey. It appears that its ambitions for an online gaming presence in New Jersey have been foiled by a poorly thought-out purchase agreement. PokerStars, through its US subsidiary company, Rational Group US Holdings, Inc (“Rational”), entered into a purchase agreement (“Purchase Agreement”) in November of last year for the Atlantic City property with the Colony Capital subsidiary company, Resorts International Holding, LLC (“RIH”) for a purchase price of $15 million. Under the terms agreed in the Purchase Agreement, Rational was required to fund operation shortfalls in the property until the date of regulatory approval, which could be credited towards the purchase price upon completion of the sale. The Agreement was further subject to obtaining regulatory approval by April 26, 2013. After that date, RIH had the right to terminate the Agreement. According to Rational’s claims, it put in over $11 million into the Atlantic Club between November and May and further contributed another $220,000 to build a poker room. The Agreement also contained a termination fee of $4 million, payable by Rational should the Purchase Agreement be terminated.

After learning that a decision by the New Jersey gaming regulator would not likely be determined before August 2013,

held with oral arguments of both parties on Friday, May 17, 2013. Following the hearing, the Judge then lifted the temporary restraining order. The Judge sided with the arguments of RIH’s lawyers that Rational was attempting to rewrite the Agreement between the parties.

“Rational may well end up losing the $15 million it had earmarked for the purchase, a foothold in Atlantic City and its first opportunity to operate online poker legally in the US.” Rational attempted to obtain agreement to an extension to the April deadline from RIH, but was refused. On April 27, 2013, RIH sent Rational a letter terminating the Purchase Agreement and demanding the termination fee of $4 million provided for in the Purchase Agreement. Rational then quickly applied to the Superior Court of New Jersey Chancery Division for an emergency temporary restraining order to stop RIH from selling the Atlantic Club to anyone else, to declare the termination notice void, to reinstate the Purchase Agreement until regulatory approval had been obtained, and to impose a lien on the assets of the Atlantic Club in the amount Rational had expended to date funding operational shortfalls and the poker room. The Order was initially granted by Judge Raymond Batten on an emergency application of Rational. A further hearing on the temporary restraining order was

Rational took a risk that the approvals would be in place by an agreed date or forfeit its right to purchase when that time expired. His ruling will allow RIH to sell to other interested parties, of which there are purportedly numerous. In the meantime, Rational will continue to pursue RIH in the courts for monetary damages. Rational may well end up losing the $15 million it had earmarked for the purchase, a foothold in Atlantic City and its first opportunity to operate online poker legally in the US. David Schollenberger is Partner and Head of Gaming Team at Healys LLP Solicitors. David is a tri-qualified UK/US/ Australian lawyer with many years of experience in gaming, gambling and betting regulation and transactions for companies in the industry. He heads the Gaming Team at Healys and has acted for major online and land-based gaming companies. david.schollenberger@healys.com

iGamingBusiness North America | Issue 07 | June/July 2013 | 23

Compliance and Technology

GAMING TECHNOLOGY

THE SCIENTIFIC APPROACH The gaming industry was renowned as a breeding ground for technological innovation long before the Internet’s disruptive arrival changed the landscape, and naturally, today’s iGaming sector has continued to enhance this heritage ever forward. Scientific Games is one of the few companies to have straddled the online and terrestrial gaming sectors, bringing its technical land-based knowhow to the digital gaming arena. iGaming Business North America spoke to CTO, Steven Beason, about the wider sector’s evolving relationship with the application and creation of technology. You have been involved in the technology side of the gaming industry for some time, working with GTECH and the Hong Kong Jockey Club before you joined Scientific Games in 2005. In your experience, how far has the industry come in terms of its understanding and application of the technology at its disposal? Having been in a CTO-type role all of my career, I’m rather pro-gaming as far as what we’ve been able to do with technology. I think we’ve been at the forefront in a lot of situations; certainly, the technology has been there for quite a long time. Perhaps one of the things that came across most recently was when the Internet did come along, we took a bit of a back seat. Not because we didn’t have the technology; it was mostly due to gaming authorities grappling with the legalities of it. I know all my friends in the gaming industry were champing at the bit at what we could do with all this new technology. In many jurisdictions (but not all), I was fortunate enough to be in places where as soon as mobile phones became good for

mobile transactions, I was doing it. As soon as the Internet was capable of being used as a vehicle for making transactions, I was able to do it. Obviously, coming over to North America, we’re still battling through some of those legal issues today. I think technology has been the cornerstone of what we do in the gaming industry, and what we do with side games. In my opinion, there are a lot of gaming companies who, when creating a piece of technology, then have to use it in the next release. I see a lot of people really trying to shoehorn a piece of new technology into their specific line of business without really thinking about what the advantages are going to be for their customer. The industry is also renowned for creating new technologies and methodologies in order to evolve. Is the gaming industry still an innovator when it comes to progressive/ pioneering technology, and has the arrival of Internet gaming, and with it the required formulation of new

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technologies for new platforms, helped to enhance the sector’s innovative heritage? I think it has. There are some unique barriers that the industry wasn’t that well set up on. Suddenly, you’re potentially anonymous, you’re outside of my store, my bricks-andmortar facility, I don’t know whether you’re within the boundary of the facility in which I have my license. Now, we have things like geolocation and age identity verification – the ‘know your customer’ age. We now have a massive database that we can access to find out whether you are really who you say you are. Now, we want to know where you are, and we want to know that from a mobile device and browser perspective. We want to have back-ups in case certain areas don’t work and we need high levels of granularity. All of these different types of technologies have really been pioneered in the gaming and wagering business at a level that no other products really require; because we are talking about secure, legal and safe transactions for our customers and

Compliance and Technology

our licensed operators. Those three areas of technology were huge. We got it right. Now we see some of the things we’ve been working on breaking outside of the industry and going into content distribution for TV stations and things like that. We certainly see ourselves as being at the top in the gaming industry; of being able to take those types of technologies out into other sectors of the business. These are well established parameters over in Europe, but geolocation, security and verification is a conversation that’s only recently taken effect in the US. Do you think that regulators are now looking over at Europe and understanding that the technology is there for online gaming to be regulated effectively? Absolutely. I don’t know how many times in the past six months I’ve been in front of legislators. We worked tirelessly with Delaware over its bill, going through and talking about what we’d already been doing outside of the US and the tools available. Everyone knows how to do geolocation, but how well do they do geolocation in Europe? How well do you do geolocation in North Aemerica? How well do you do KYC verification in the state and or province that you’re in? What you find is that use of a similar technology requires different vendors, and those vendors have

access to databases that are relevant to the jurisdictions you’re operating in. They give you that added level of meta data that says, “I know you are here in this state and I know you’re talking to these cell towers, and I know where these cell towers are because of the meta data”, or “I know all of the records for this municipality from taxes to addresses, and now I can do my KYC verification in this state or province using the same things we’ve been using in other locations.” Those are the areas that we’ve been looking at. When we talk about pioneering technology, we also have to look at the cloud network, and that virtualization is something that’s very big today. How did the onset of Internet gaming affect land-based suppliers initially? Naturally, as a technologist, you will have a slightly different perspective on the industry, and the trends and events that affect it. You mentioned that people were champing at the bit to get to grips with the Internet as a new technology in the early days of iGaming, was it a time of frustration for those that could see the opportunity? It was very frustrating as a technologist, to have your friends come up to you and say, “Haven’t you thought about selling lottery tickets on the Internet?” As you can tell, this is obviously a North American conversation.

Eight years ago, I was doing the same thing; selling lottery tickets over a mobile phone while somebody was watching horseracing. It was “horses for courses,” as they say. You just had to wait it out. There were some frustrations at that point in time because we really did have all the technology ready to go and we were waiting on advances in the legal framework at the jurisdictional level. Regardless of that, Scientific Games has always seen that as an opportunity to deliver any kind of relevant data or content. For instance, we are currently capable of taking sporting bets throughout Germany over the Internet, but this business has been put on hold while a potential conflict between the German Gambling Law and EC law is being settled. Needless to say, in North America, we were putting in loyalty programs, reward programs and we created over 400 different websites for things like second chance draws, to award loyalty points and offer rewards stores. Those areas became extremely relevant in this context. Any time you take a great disruptor like the Internet, you’d better embrace it or you will become irrelevant yourself. Fast forward to today, and the major companies with land-based heritage are all well established in the digital gaming market, creating subdivisions or new business divisions to engage

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Compliance and Technology

“Any time you take a great disruptor like the Internet, you’d better embrace it or you will become irrelevant yourself.”

the space. How much of a change of mindset is it for a land-based supplier to properly focus on what is effectively a new digital marketplace? I think that’s a very good question. I believe that there are many times when, perhaps, it hasn’t been done in the most optimal fashion. It’s a disruptor to your current business model, almost always. It stretches across that model so eloquently that, in fact, what you really need to do is to get every one of your existing business models to adopt an Internet strategy for their product. Say I have a land-based supplier who already has venues, retail shops, and people that manage those P&L streams: we believe that the Internet is something that permeates across those channels, adding value to them. So rather than have an interactive group, we have some interactive product managers, and the business plan needs to come out of the individual groups; the same group that is going to sell a Powerball ticket from a retail terminal is the same group that’s going to sell a Powerball and Mega Millions ticket over the Internet. There are some big advantages. If I have a $5 million run of tickets, I’m going to

be able to offer four printed products and one interactive product, each for a million. It’s almost like liquidity in a way; if you tie in your Internet product with your land-based product then you’re able to offer five $1 million prizes and you’ve given a liquidity that means something to your interactive channel. Just as a CEO will be aware of the emerging market forces that could prove disruptive or beneficial to a company’s short and near-term operations, I would imagine the same responsibility will befall a CTO in terms of keeping abreast of the latest technologies emerging in other business sectors. What are you seeing in other industries that could have an impact on the gaming industry of the future? Apart from the data management, geolocation and biometrics, perhaps other areas are centrally managed service centers, cloud-based computing – virtually managed servers where you have a co-location that’s running a number of municipalities, all in a safe and secure area. They are scalable now.

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Maybe ten years ago, you’d say “I want all of my machines in one data center and the data center needs to be in my state.” There were costs to do that, on everyone’s side. There were benefits that, quite frankly, weren’t or aren’t even today being realized because suddenly, you run out of space and you’ve got to buy an entirely new system as they weren’t upgradable. Now, you buy the generic blade or disk and you put it into a storage area network as part of a white area of a CPU bank. You say you want to switch them on and off when you need them from a volume perspective – that’s how we deal with everything in our company today. We’re seeing now that the services that were available five years ago might not have been as safe, we might not have been able to lock down data between different customers in the same way, and we might not have been able to take advantage of adding new hardware on the fly without experiencing any downtime. Today, the ability to co-locate really gives you scalability. I think the advent of the cloud and the associated tools have allowed us to offer our services to jurisdictions and customers in a way than we were previously unable to do.

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Opinion

THE WORLD IS CHANGING AROUND US Online gaming and the impact of technology for regulators, by GSA President, Peter DeRaedt. The Internet is doubling in size every 5.32 years. The US Internet growth alone was 153 percent between 2000 and 2012, and 79 percent of the population have access to Internet. The Internet has revolutionized our lives and changed consumer behavior. Today, eBay is the world’s largest online garage sale, Expedia the world’s largest online travel agency, Amazon the world’s largest online department store and PokerStars the world’s largest online poker room. We have entered the exponential revolution age and we need to adjust and start thinking exponentially. Our linear thinking will no longer support the way we are living today and the environment that is being created around us. Some years ago, we thought the Internet belonged to the Personal Computer. Today, we have “explosive” growth of the Internet on Smartphones, tablets, cameras, radios and TVs. Information used to be stored on portable medium in limited capacities; today, information is accessed from the cloud, and it’s anybody’s guess where and how big it is. New technologies are impacting the way consumers gamble and their demand is changing the perception of gambling itself. We used to believe that people gambled to win money and have a good time, but social gambling – where players pay to play with no chance of winning money – shows us that there is a far greater leisure component than the industry imagined. This transformation impacts the industry, and mainly regulators. Over the years, regulators developed resources to control gambling. Today, technology is outpacing them far quicker than they can manage to

acquire the necessary competencies. In 2012, the Nevada Gaming Control Board decided to start relying on Independent Testing Labs (ITLs) for product compliance and certification. The regulator has started to collaborate with the industry to allow for innovation to move into the market quicker. The result of this partnership decreased time-to-market of new products, reduced costs for operators and brought broader control to the regulator. This is the new way forward for policy makers who need to invest more in developing collaborative platforms than trying to build monoliths that will never be able to expand at the growth of the market they control.

online gaming, the gaming device is owned by the player and is not a dedicated gaming appliance. The operator has to guess the type of gaming device, which is not certified and unlikely to have adequate security. The device is used in an uncontrolled environment and game content is delivered by the manufacturer to an unlimited amount of devices. Online gaming involves many more stakeholders, from service providers to operators to testing facilities. The complexity of creating solid gaming policies for the online gaming space is significantly more challenging and will continue to develop in terms of use and technology. Any time we are dealing with solutions to protect consumers and their money online, we are faced with a daunting task.

New perspective Barriers to progress Old methodologies and technologies will crush the ability to drive business forward. As the markets mature, casino operators that do not innovate will simply die. The market is shifting from location-centric to playercentric and regulation is shifting from gamecentric to system-centric. Additionally, there are significant differences between regulating land-based gaming and online gaming. In land-based gaming, the gaming device is essentially owned by the manufacturer and/or the operator. The process of design, manufacture and placement of a gaming device is strictly controlled and its function is dedicated to gaming. It is maintained by the operator and supported by the manufacturer. The device is certified and located in a controlled environment. The experience happens on site within a limited space. In contrast, in

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All of this brings change to the way we regulate gaming today. To have effective regulations we need a new perspective in order to grasp the exponential expansion and create a safe and responsible environment in which it can thrive. A key element in supporting these changes will be the development of technical standards for interoperability outside of the gaming floor that would assist regulators with their gaming policies, and open the pooling of players across borders, providing operators with more liquidity. The ease of integration between multiple suppliers would provide speed-tomarket and ease of integration, and for the operator, the flexibility and choice of multiple vendor applications. Regulators and the industry must not chase the Internet. Collaboration is critical to support this exponential change we are all facing.

Payments Supplement

SPONSORED BY

PAYMENTS SUPPLEMENT

THE LATEST PERSPECTIVES ON THE COMPOSITION OF THE ONLINE PAYMENTS LANDSCAPE FOR US OPERATORS

ALSO IN ASSOCIATION WITH

iGamingBusiness North America | Issue 07 | June/July 2013 | 29

Payments Supplement

WHY NON-CREDIT PAYMENT METHODS ARE GREAT FOR IGAMING By Joe Hall, VP Leisure and Entertainment at Skrill. The world of gambling is expanding in the US, as barriers on Internet betting start to be lifted. The states of Nevada, New Jersey and Delaware have all relaxed legislation that once outlawed casinos to partner with online wagering firms and it signals a significant milestone in the US market. It’s likely that legislation in other states will follow slowly, but for poker fans in Nevada, heading out to visit a casino is no longer the only option. The world of online poker has been opened up to residents of the states, who can now play poker legally in the US for the first time postUIGEA. Granted, players must be located within state borders, but it’s a move that still marks the opening up of big opportunities for gaming sites. Mobile gaming alone is forecast to reach $4.8 billion globally this year, but in this new world of digital gaming, it’s important that US gaming firms consider the role of digital payments in enabling them to take full advantage of this opportunity. Innovative ways to pay that are fast, intuitive and secure will be critical to capture consumer interest and market share.

The role of digital payments The fractured nature of the regulatory environment and the ability for each state to make its own rules presents a challenge for all iGaming market participants. The Nevada Gaming Commission is continuing to clarify its position on payment processors, but could

be well positioned to set a precedent in the way that payments are taken and processed. In the online and mobile gaming worlds, coins and checkbooks have little value. Traditional bank transfers are slow and cumbersome and not at all aligned with the fast-paced, instant action expected in an online gaming environment. Credit cards present a potential conflict; on the one hand, they open up the opportunity for gamers to inject more funds into their experience than they have at their immediate disposal, but it contradicts a move to encourage responsible gaming. Contemporary payment methods, including digital wallets and paying via mobile phones, are becoming increasingly popular, with digital wallet adoption doubling to over 30 million end-users in two years. In fact, e-wallets can be the most secure payment method for both the merchant and consumer, providing a noncredit payment that ensures fast processing. Places including Japan, Korea and Africa are readily accepting this method and banks there already expect their account holders to adopt the facilities of digital wallets on their mobile phones. In 2012, many games transactions were made with credit cards forming the dominant payment method in the US market. However, with new online gaming sites opening up, non-credit payments look set to be the future. Research has already shown that payment method usage is closely linked to game monetization, where free-to-play

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games see higher volumes of sales using these more innovative methods of payment.

Why go digital? The US now has an opportunity to look to non-credit payments to help regulate the gaming systems in each state. Regulated online through local financial regulators, online wallets can use any currency for any location, for a secure, flexible and easy payment experience. Digital wallets offer a faster way for gamblers to upload and deposit noncredit funds and place bets, and they are proving to be instrumental in the growth of micropayments. If a gamer wants to make a bank transfer of only £2 in order to continue their online game, a traditional payment method could mean this takes three days to process and would likely ruin the excitement of the “here and now” experience. Online e-wallets can integrate all types of money from a number of accounts and loyalty schemes, doing so in a single app that is accessible online or by phone or tablet. There are no more confusing cards to fumble with or multiple forms to complete and submit. Advocates of a cashless society stress the convenience of alternative methods of payment and it’s clear that as our lives become increasingly digitalized, the cashless society is being ushered in. Digital cash also has a distinct advantage over other payment methods: speed. With an instant balance payment through a digital wallet, the whole deposit and payment

Payments Supplement

process is much more convenient and more economical, benefiting both the consumer and gaming site. Making a simple deposit and a bet in real-time ensures gamblers can take their bet when the odds are at their best, and withdraw their winnings when they want to retire from the fun.

Easy deposits The digital payments market has evolved considerably over the last few years and the US is set to benefit from new ways to pay. Offering one-step payments can be a highly effective way of engaging users and increasing deposits on gaming sites and there are some innovative options now available. Betting sites, like the UKâ&#x20AC;&#x2122;s bet365, have made depositing cash and making bets simple with a mobile one-tap solution. Most online payment processes involve anything from two to five different steps, each including a number of different fields for the customer to enter. Streamlining the deposit process into one step makes it significantly easier for gamblers to add funds and continue with their experience on the site, rather than having to re-enter log-in details or credit card information on each occasion. Itâ&#x20AC;&#x2122;s no surprise that the easier a gaming site makes it for their customers to deposit, the more they can expect to improve conversions from new account sign-up to deposit. It will also mean more return visits from loyal gamers, growing retention levels and, ultimately, revenues. Digital payment processing has come a long way, and iGaming brands can now expect over eight times faster processing, benefiting both their business and the experience of their customer.

Going mobile Consumer research commissioned by Skrill in 2012 revealed that the most highly

regarded benefits of mobile payments are that they are quick and easy, emphasizing that this has become a very clear-cut consumer expectation. In the last few years, Smartphone adoption rates have soared and, by the end of 2012, it is predicted there were more mobile phones than people in the world. But the challenge for mobile payments has always been ease of use and the Skrill research showed this is a key benefit that users expect from a payment made via a mobile. For consumers, a digital wallet on their mobile provides the ability to make payments and send and receive money conveniently, cost-effectively and securely from any location, without revealing personal financial data. For gaming businesses, it can offer access to over 100 payment options in over 200 countries and territories, immediately turning international traffic into revenues. Ease of use, loyalty schemes, rewards and security are all the rage in the mobile wallet space, and the sophistication of these solutions continues to evolve. For gaming affiliates who do business with international players, the number of currencies available to digital wallet users removes several frustrating layers from the payment process and supports expansion into new markets. Mobile payment technology is also proving to be far more secure than cardbased systems, with many security features integrated into digital wallets, including GPS data, personal usage information, and even the biometric of a thumb.

The future As the online gambling market opens up in the US, and more gamers adopt a digital lifestyle, electronic payment systems will become the norm. The European market grew up online, but the US looks to be following

a different path. In this emerging, complex environment, it will be a combination of gaming online, via mobile and in physical locations that will drive the market. In many ways, this presents a fantastic opportunity for gaming operators to engage with their customers and digital wallets are set to play a big role in facilitating this. Digital wallets and payment services offer clear benefits for both gaming operators and gamers above credit methods, from ease of use and speed, to convenience and cost savings, and revenue generation and loyalty. The important step now is for all players in the US iGaming industry to work together to address any issues such as security, infrastructure and consumer confidence to make the most of this opportunity. One thing is certain: there is no need to worry about losing your wallet when it comes to digital, as more ways of non-credit payment methods come to the fore.

Joe Hall is VP Leisure and Entertainment at Skrill. Joe joined Skrill in January 2011. Prior to this, he was part of the founding senior management team at Initial Rewards, where he held both Chief Operations Officer and Chief Business Development Officer positions during a three-year period. Currently, Joe is Vice President of Leisure and Entertainment at Skrill, responsible for the Sales, Account Management and VIP business units that service the online gaming sector. Joe has been involved in online gambling for over seven years and has worked alongside some of the largest brands within the gambling industry.

iGamingBusiness North America | Issue 07 | June/July 2013 | 31

Payments Supplement

THE IGAMING TRANSACTION FLOW Lucy Nucciarone-McGarr, Vice President Marketing and Communications at Optimal Payments, maps out the online gaming transaction flow between player, online gaming site, payment gateway and banks and bankcard associations/networks.

Player Account

Player initiates funding request to their account on the gaming site. They choose credit card as a payment option and the amount to be funded.

Online Gaming Site

Online gaming operator receives funds and credits player account with chips.

Visa / MasterCard Associations Issuing Bank approves or declines the transaction and passes the transaction result back to the credit card Associations.

If transaction is authorized, the settlement instructions are sent to the online gaming operatorâ&#x20AC;&#x2122;s acquiring bank.

Issuing Bank

Transaction is then submitted to the Card Associations.

Request for authorization is sent to the credit card Issuing Bank.

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Gaming transactions are coded as 7995 which some Issuing Banks will not authorize, returning a decline code (declined authorizations are returned to the online gateway which returns to the gaming operator that then notifies player of decline).

Payments Supplement

Online Payment Gateway

Credit card “payment” request is submitted to the online payment gateway/processor for authorization.

Through Optimal Payments’ API, transaction response status is passed to the merchant operator.

Acquiring Bank

Transaction is then submitted to the Acquirer Bank.

Request for authorization in the form of credit card number or token information. Transaction is scrubbed for credit card fraud, including velocity checks, negative database, device fingerprint and Bin Lookup. Geo-IP address Verification is performed (Optional).

Optimal Payments will use a domestic Acquirer Bank to maximise the approval ratio of card transactions.

Player Account

Often, Issuers will accept the transactions only if coded as “cash advance” triggering fees to be paid by the player.

Issuing Bank will bill the player for the transaction and any fees they may levy for a gaming transaction or FX.

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Payments Supplement

CASHING OUT

Give plenty of cash out options… your customers will love you for it, write Vantiv’s MD of Gaming, Joseph Pappano, and Omer Sattar, Executive Vice President of Prepaid and Interactive Gaming at Sightline Payments. You have gone through the effort and spent the time and money to get an iGaming site up and running. That may have included the steps of partnering with a platform provider, content providers, one or more company that does geolocation, know your customer, ID verification, and payment processing. Maybe you have partnered with affiliates, local and national retailers, and database marketers. You have most certainly worked countless hours within your own organization with the C-Suite, strategy, marketing, finance, and operations, to name just a few. You may even have taken the time to partner with some of your traditional competitors, folks you may never have partnered with unless iGaming was a reality for you. Not to mention the time and effort you spent with your attorneys and your regulatory body understanding the nuances of what is permissible, what is prohibited, and what is seemingly still being worked out. You may even have worked with your relevant legislative body helping draft the governing regulations applicable to your jurisdiction, and what you spent on lobbyists, someday that count will happen, but let’s just leave it at being a “significant” number. So, now you are live (as in taking real money bets), your iGaming customer has funded her Interactive Wagering Account (“IWA”) with $400, played for a few hours, had a good day, and has $1,000 in her IWA. She is sitting at

home on a Saturday afternoon and decides she would like some of her money for the weekend. As it happens, that evening she is going out with her girlfriends for cocktails and on Sunday afternoon she plans on going to her neighborhood nursery to pick up some plants before spring foliage (she is an avid gardener). She also wants to buy her younger brother a gift for his birthday, probably some electronics and most likely on Amazon.com. In other words, she wants access to her money which is on deposit with you. Not all of it, because she would like to continue playing on your site, but about $600.

In order to accommodate your customer, what are the options you should provide her to get access to her own money? 1. Cash: more likely than not, she has to visit your bricks-and-mortar location and go to the cage to effectuate this. The cost for you is minimal, but her inconvenience level is most definitely high. 2. ACH: a regular ACH can take one day but it can also take three to four. Since she asked for her funds on a Saturday, they will probably not arrive in her checking account until Wednesday (they will get processed from your bank account on Monday). The cost for you is, once again, minimal, probably under $1, but what you have on your hands is a relatively dissatisfied customer.

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3. Wire: a wire transfer can sometimes show up the same day but is usually next day. In this case, she will receive her funds on Tuesday. The cost to you is quite high, maybe as low as $5 and as high as $25. The relative convenience for your customer is higher than an ACH but still quite low. 4. Check: you can mail her a paper check. Regular mail delivery could be a day but also could be a few days. So, let’s say she receives her check on Wednesday and takes it to her bank the same day to deposit. Depending on her bank, she could receive credit for the funds in real-time or it can take up to 11 banking days. Needless to say, this causes her a great deal of consternation and makes her quite dissatisfied with you. It is also not inexpensive for you. The cost of printing, mailing, and depositing a paper check, with nothing said of the employee hours involved, is high. 5. OCT: in the US, Visa has recently expanded the definition of an Original Credit Transaction (yet to be done by MasterCard). What this means is that if her card issuing bank is equipped, through your iGaming payment processor, in a single transaction, you can credit up to $2,500 back to her credit or debit card. She is quite happy about this since her funds are available to her in real-time and she has access to them anywhere Visa is accepted. Relative to the aforementioned, the cost to you is moderate (right now expected to be $0.44 per transaction paid to Visa, and

Payments Supplement

whatever you have to you pay your payment processor – so maybe a total of $0.60). However, in order for you to do this, not only does her bank have to be equipped but so does your processor. In addition, her card issuing bank to which you are sending the “credit” may have dollar and transaction velocity limits in place. This could lead to the transaction being rejected and her being a dissatisfied patron. 6. Closed loop prepaid or an e-wallet: you could have issued her some type of closed loop prepaid or have an e-wallet account. From her standpoint, you have not done what she needs. The closed loop prepaid or e-wallet is not accepted at her neighborhood nursery and certainly not on Amazon.com. So, while from your perspective she has her funds available to her in real-time, she actually does not. The cost to you is relatively low but it does not lead to a satisfied customer. 7. PayPal or other such mechanism: let’s assume she has a PayPal account. From her perspective, this is a pretty decent solution, at least to the extent that the funds are available to her in, or close to, real-time and she can spend them on Amazon.com. Now, we know that PayPal is in the process of extending its usage into bricks-and-mortar locations, but so far, this has only happened in a handful of national retailers (like Home Depot). So, she will not be able to spend her money that night for cocktails with her girlfriends. From your perspective, this is a relatively easy solution to implement but not necessarily

that cost effective. You could be paying PayPal dollars or even basis points per transaction. 8. Open/closed loop prepaid: let’s assume you have issued her an open/ closed loop prepaid card. In a closed loop environment, you transfer the funds to her. She has them available in real-time. Without performing any other steps, she can now go out for cocktails with her girlfriends, go to the nursery and purchase her blooms, and buy that gift on Amazon.com for her younger brother (all on the open loop side). You have a satisfied customer on your hands. The funds that you sent her reside in an FDIC-insured account (up to $250,000) and her card carries full Regulation E Protection (in case of a lost or stolen card). Apart from having a satisfied customer, you like this option for four primary reasons: i. Y ou have a new profit center: when she makes that purchase on Amazon.com or at her local nursery, you share in the interchange income. In other words, Amazon.com is now, in effect, paying you for her to purchase something at their site. ii. Y ou collect her spend data: within the constraints of federal and state laws, you know that she purchased goods on Amazon.com, how much she spent, and when this was done. You will also know the same data about her cocktails and her spend at the nursery. Needless to say, this is data your marketing team never had before.

iii. Y ou spend less: this is quite possibly the least expensive form of your patron receiving her funds (pennies per transaction). iv. You are on her mind: probably most importantly, you are on her mind. She is thinking about you not only when she is on your iGaming site and in your bricks-and-mortar location, but when she is having cocktails with her friends, shopping at her nursery, or on Amazon.com. You are now forging a relationship with her that should make your C-Suite and marketing team salivate.

So, what should you do then? Give options, lots of them, if not all of them. Make sure your platform provider and other service vendors are equipped. Educate yourself on, and ask your chosen partners about, each of these options. While at first it might seem a little counterintuitive to allow funds to leave your patron’s iGaming Wagering Account, it is not. Just the way you would want access to your own money, so do your customers. Make their life easier, allow them to cash out as and when they please, and they will reward you with their loyalty and their business.

Joseph Pappano is Senior Vice President and Managing Director of Gaming at Vantiv (NYSE: VNTV).

Omer Sattar is the Executive Vice President of Prepaid and Interactive Gaming at Sightline Payments.

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Payments Supplement

THE IMPACT OF PAYMENTS ON THE IGAMING CUSTOMER EXPERIENCE Education and understanding are imperative if payments processing is to become the heartbeat of the US iGaming industry, writes Joseph Pappano, Senior Vice President and Managing Director of Gaming at Vantiv, and Omer Sattar, Executive Vice President of Prepaid and Interactive Gaming at Sightline Payments. Done correctly, a patron should have multiple methods to fund their iGaming wagering account and to cash out their funds when desired. Doing so should be easy, convenient and at the lowest possible cost. As retail consumers, we are used to options and convenience. There is no reason that the patron experience in iGaming should be any different. Typical account funding and cash-out methods include: ● Credit ● Debit ● Prepaid ● ACH ● Wire

Transfers

● Checks ● Alternative

Payments

● Cash

Card acceptance as a means to fund an online wagering experience is either a fundamental benefit or a potential stumbling block. Done well, with careful planning, well-written regulations and a focus on the consumer, we enable the funding and cash-out of consumer accounts to become the heartbeat of a successful US iGaming industry. Done poorly, however, these same issues become the “Achilles Heel” of the entire industry.

It is imperative that key participants in the payments ecosystem, like state regulators, card associations (Visa®, MasterCard®, and Discover®) and card issuing banks take the time to understand the peculiarities of gaming. As payments professionals, this

“Unless we get better at educating these key players in the industry on the potential impact of rash or simply bad decisions, the iGaming industry will falter in the US.” is our imperative. How we correctly assign Merchant Category Codes (MCCs) to identify gaming transactions is only part of the equation. The core issue is something more fundamental; it is ongoing education and market understanding. In the past, card processors have underperformed when educating the card associations and issuing banks about the nuances of gaming payments processing. It has been assumed that payments will work in gaming just as they do in the broader economy.

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Unless we get better at educating these key players in the industry on the potential impact of rash or simply bad decisions, the iGaming industry will falter in the US. Additionally, we must remember that consumers are the final arbiters of how to spend their money. It is our imperative to provide them with the means to do so efficiently and conveniently.

Growing pains So, if the prognosis today is dire, what is the remedy? Does one even exist? Growing pains can be mitigated by partnering with large payment processors who truly understand the market. Payments expertise is the key to iGaming’s success because processors sit between the merchant, card associations and issuing banks. Gaming operators, gaming vendors, and representative trade groups should actively seek a better understanding from these payments experts to educate regulators, card associations and issuing banks on the sector. If payments processing is to become the heartbeat of this industry, as it is in other sectors of the US economy, we must start with education and understanding.

Joseph Pappano (joseph.pappano@vantiv.com) is Senior Vice President and Managing Director of Gaming at Vantiv (NYSE: VNTV). Omer Sattar (osattar@sightlinepayments.com) is the Executive Vice President of Prepaid and Interactive Gaming at Sightline Payments. For more information, visit us at www.vantiv. com/igaming.

Open new doors to online gaming with the GCA Digital Wallet GCA Digital Wallet creates a continuous connection to your players in all of your gaming environments. Land-based or online, real-money or play for fun, our innovative and multi-dimensional payments solution helps your patrons make the most of every play. Access to More The GCA digital payments suite accepts more forms of US centric payments for iGaming customers than any other online payment provider. GCA understands the challenges of accepting traditional payment types, and is dedicated to providing successful and effective alternative payment types to drive the most funds to your site. Total Internet Monetization With its sophisticated analytics engine and integrated offer management system, the GCA Digital Wallet gives you access to more marketing opportunities, more data, and more access points to your customers.

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09/05/2013 12:20

Payments Supplement

GROWING PAINS What early teething problems can American iGaming expect with regard to payments? Tim Richards, GCA’s SVP Product Development, and Neil Steinhardt, CEO of Skrill USA, offer their thoughts. Tim Richards, SVP Product Development, Global Cash Access US iGaming sites are going to struggle to have great success with card-based payments due to iGaming payments being blocked by the patron’s bank that issued the debit or credit card being used. Due to the top ten banks in the United States being responsible for 86 percent of all US card payments, for this to be meaningfully corrected, they must agree to be part of the solution. In the case of American Express and Discover, they are both responsible for the card network and the bank, thereby making it easier for them both to refuse iGaming transactions. In GCA’s land-based gaming business, approximately two-thirds of the transactions we process are completed with a Visa card. For any iGaming site to be successful, Visa must be more flexible in its coding of legitimate iGaming transactions. Today, Visa will only process iGaming transactions using the merchant category code (MCC) 7995. Visa provides merchants the opportunity to apply for this “high risk” code and have the possibility of higher approval rates. However, the issuance and acknowledgement of this code by a card network is only one piece of the online card payment puzzle. Many card issuing banks continue to block all “high risk” transactions from any “high risk” merchants. This will continue to happen until there are more favorable standards issued from the governing card associations. Overall, it is a bit ironic that iGaming is classified as “high risk” considering that it’s unlikely that any other “high risk” merchant

is participating in KYC, geolocation, and age verification as iGaming is mandated. MasterCard has shown some flexibility and has recently expanded the use of MCC 9754 to include non-sports related Internet gaming purchases. In order to use this code for iGaming, the merchant of record must be qualified by, and subsequently registered with, MasterCard. Without an approved registration, merchants must continue to process using MCC 7995. Visa has not yet followed suit with expansion or the addition of new merchant category codes. There are plenty of alternative payment methods available for iGaming. Dealing strictly with cash, many of these methods were designed for the unbanked. The current adoption rate for these alternative methods in the United States is low compared to other regions. However, we believe that they could be popular with the “banked” population as iGaming emerges, due to the card-related roadblocks. Until the card networks, card associations and issuing banks begin allowing successful iGaming transactions to be processed, US iGaming sites will be forced to promote alternative payment methods from companies such as PayNearMe and PaySafe.

Neil Steinhardt, CEO, Skrill USA Over the last seven years, the Unlawful Internet Gambling Enforcement Act (UIGEA) has prevented gambling businesses from knowingly accepting payments in connection with a bet or wager involving the Internet in the US. If you wanted to gamble in America, you went out to a casino. Today, the states

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of Nevada, New Jersey and Delaware live in a post-UIGEA world, having passed intra-state gaming legislation. Nevada is up and running, allowing online gaming for residents and has established a licensing regime to regulate it. There remain complexities in the US iGaming market. Horse betting, for example, remains legal in 35 states, while other states have blocked legal horse betting sites primarily to protect their tax revenues derived from state-run satellite betting. Every state has its own internal hurdles to overcome when opening up the iGaming market and it’s likely that it will take some time before other states follow Nevada, particularly as some have not passed lottery or horse betting legislation. The ideal solution to address this nationally could be to revoke or modify the UIGEA.

Paying across states The US is a unique market for iGaming; it’s more litigious and fractured compared to places like Europe, and the complexities of opening up the sector in the US will include the payments process. If horse racing is any guide, there will not be blanket participation by the banks, and I can see some issues with card associations. There will also be security issues as it’s critical to know if the person playing a game on your site is from a legal state. ID verification will be important when it comes to making payments and some states have said they will embrace geolocation. Going mobile will also have an impact, but the most important consideration for any iGaming brand will remain to ensure that gamers can pay with proven, safe payment methods.

IGaming_Optimal_Ad_Pokertable.pdf

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Payments Supplement

THE MISUNDERSTOOD UIGEA The federal legislation known as the Unlawful Internet Gambling Enforcement Act of 2006, or UIGEA, is proving to be a significantly limiting factor to generating potential iGaming revenues, at least for the short-term, writes Tim Richards, SVP of Product Development at Global Cash Access. UIGEA was very specifically written to target the payment processors and banks from knowingly allowing payments for unlawful Internet gaming in the US. However, it also very clearly allowed processors and banks to process payments for lawful forms of gaming. This is commonly accepted to include intrastate and intra-tribal gaming via the Internet. In 2010, regulations born from a UIGEA mandate specifically named five payment types covered by UIGEA. Those payment types included: automated clearing house (â&#x20AC;&#x153;ACHâ&#x20AC;?) systems, card systems, check collection systems, money transmitting businesses and wire transfer systems. The regulations require participants in the designated payment systems to establish and implement policies and procedures reasonably diligent to identify and block or otherwise prevent or prohibit any transaction that involves unlawful Internet gaming. In addition to the 2010 regulations, payment processors and banks are required to do proper diligence on transactions to ensure that they are properly coded. Due to the detailed nature of debit and credit card networks, this is most easily completed and strictly enforced with card transactions. Generally speaking, card systems use merchant category codes (MCC) to determine the merchant type responsible for the transaction. You commonly hear of the dreaded 7995 as the MCC code for gaming purchases through the Visa and MasterCard networks. Many banks have chosen to block any and all card transactions containing the MCC 7995. This is done with no filtering for

transactions that might be originated from a lawfully approved gaming site. American Express and Discover use their own networks and banks, but have also set policy to not accept any Internet gaming transactions. It is clear that the banking industry still has concerns regarding the appropriate interpretation of these regulations by their governing bodies. MasterCard and Visa are taking a few steps to help banks be certain that they are dealing with legitimate and credible iGaming merchants. In addition to the use of 7995, MasterCard has created a program to further vet iGaming sites by allowing them to submit for the use of MCC 9754. This code was recently expanded from just online OTB wagering to include all non-sports Internet gaming transactions. Additionally, MasterCard extended the use of MCC 9399 to include Internet lottery purchases, once a lottery has been approved for its use. Visa has chosen to maintain the MCC 7995 for iGaming transactions but has recently reinforced the option merchants have to apply as a high risk merchant. Once approved by Visa for this program, additional information will be sent with each transaction that denotes the iGaming merchant as having been vetted and a lawful site. However, each card issuing bank will have to allow this type of card transaction to process for there to be success with Visa transactions. For banks to become more comfortable knowing that they can be compliant with lawful intra-state gaming, they will also need to become more comfortable with the KYC, age verification and Geolocation technologies

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that operators have implemented. These providers ensure compliance with the strict state laws and regulations. The products are tested by independent gaming labs and also reviewed by state gaming agents. As operators go live and the banks see that it is possible to use these technologies to ensure compliance with UIGEA, they undoubtedly will become more comfortable with processing iGaming transactions. However, most banks will likely be followers into the market due to their risk adverse nature and the fact that UIGEA calls for both civil and criminal prosecution for those that step out of line. The challenges with payment processing to an online gaming site should not be underestimated. The US banking industry and the UIGEA have presented many obstacles that must be overcome to operate a prosperous iGaming site. To be successful, you must first understand those obstacles and the right, and legal, way to process in the US. As an operator, you need to understand the traditional payment processing cycles for credit, debit and ACH to better realize the importance of providing your real money iGaming players with alternative payment methods as they come available. Please take the time to seek competent professional and legal advice on how to best work within the payment rules while staying compliant with UIGEA and other regulations. Current and new online gaming site operators and state gaming boards need to work with regulators and the financial industry to ensure that iGaming is successful and profitable for all stakeholders by providing the banking industry with the comfort to open up the use of credit cards in regulated states, and to encourage and approve the use of alternate online wallet solutions.

More Education. Sure bet. Understanding issues before they become problems is often the key to more success. Luck won’t deliver winning merchant services solutions – it takes innovative, proven payments expertise and robust service offerings to drive real revenue growth. As payment processing experts, we work closely with industry regulators, card network providers and issuing banks to address your needs and improve your odds of success.

Ready to cash in? Contact us at vantiv.com/igaming

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ULTIMATE OPPORTUNITY TOBIN PRIOR, CEO, ULTIMATE POKER Legal online poker is live in the USA. April 30, 2013, will go down as the date when Ultimate Poker accepted the first legal online bet in the US, and when Nevada became the first state to go live with a regulated intra-state iGaming program. iGaming Business North America spoke exclusively to Ultimate Poker CEO, Tobin Prior, about the lead up to “day one,” and what happens now for America’s pioneering online poker room. Ultimate Poker is the first licensed online poker business to go live in the US, but your history in iGaming goes back to the turn of the century. Talk us through the early days. Back in 2000, with my partners at the time, Kerzner International, I entered into a 50/50 joint venture with Station Casinos to go into that space and Frank and Lorenzo (Fertitta), and Station Casinos are the major shareholder once again in Ultimate Poker, so, you can see that both Station Casinos and Kerzner at the time were very serious about getting into the online space. We spent years pioneering the technology that then became commonplace; in terms of geolocation and age verification. We went into that industry; we were the second to receive a license but were actually the first to go live on the Isle of Man. And now it’s come full circle and you’re in the US. In the meantime, you’ve been working on expanding international gaming… After 2002 – when, as you will recall, all the Americans pulled out of the market because online wagering was deemed illegal where the player was and where the server was – I went back into international development

with Kerzner International; I was still running our international division at the time. I went and bid on a casino in Singapore and developed a large and interesting scheme there, which was fantastic. Unfortunately, we didn’t win that. In fact, Butch Kerzner died in a helicopter accident while we were in that bidding process, which was really a big set-back for us. I then went on to build a very big property in Morocco – a 500-acre development with a casino called Mazagan Beach Resort. About two years ago, I joined Frank and Lorenzo to look for international opportunities for them as well as opportunities on the Internet. It became pretty clear after “Black Friday” what was going to happen. Clearly, after UIGEA, some guys had pulled out but others decided to stay. It was a crazy situation because these guys were clearly operating and the regulators weren’t doing anything to shut them down. They were very big businesses which was, I think, testimony to the fact that people really want to play online poker in the US. We were really keen to get into that space again. So, we started looking seriously for a platform. We had been dealing with Full Tilt Poker just before Black Friday and had penned a non-binding letter of intent,

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saying that if there was any scope for us doing something with them, we would do it together, subject to licensing and due diligence. It became clear within a week that it wasn’t going to happen. So, we started looking for our own platform and looked at everything that was out there. We then came across CyberArts. CyberArts was basically a technology solution provider to third-party gambling companies and only to legal entities in legitimate jurisdictions; they’ve never taken a wager in the US. We basically bought that company, set about adjusting and modifying the software to comply with Nevada regulations and turning it from a B2B business into a B2C business. We built our own customer service capability, our own marketing team… everything that was missing from the technology side, and then built up our business. We are fortunate to have Station Casinos as a major shareholder and also UFC as an exclusive marketing partner. We’ve positioned our brand as Ultimate Poker and our company as Ultimate Gaming. The platform can actually handle all forms of gaming and is a well structured, open API architecture and we’ve been used to integrating our platform into a third-party games, our own games into third-party backends, front-ends, etc. It’s what we have been doing for the past ten years. Is that going to be a major factor for your business in the future? Do you think that you’ll be licensed to offer additional games or do you think your

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growth is going to come from moving into additional territories either through international or inter-state treaties? If I knew what the law was going to be in each case, I could answer your question more definitively. In truth, the answer is probably both. To the extent that some states go with broader gaming than poker, then we will have a technology solution for that, and our platform does handle that. We have 14 other casino games in our suite and, historically, we’ve integrated lots of third-party slots content, and so on, into our games and into our platform. So it’s a pretty standard procedure for us. Obviously, it’s always a little trickier than people think; to get to market and actually comply with what regulators require. But we have a regulatory compliant and certified product solution, a really good brand solution, and we have an extendable platform into the other games. So, we believe that in states like New Jersey, for example, if they’re going to proceed with full gaming, then we’ve got a solution to provide for people there. Clearly, there will be other states that will go with poker-only, so, our growth will come from taking advantage of any of those opportunities; we’d like to position ourselves to play wherever we can play. We actually support a poker-only bill because we believe that on the federal basis, it’s actually a better piece of legislation and makes more sense. We do believe that there is substitution between casino games and physical casino investment. We don’t see the same substitution effect with poker. But poker accounts for less than one percent of land-based gaming revenues. So, you’re not going to displace or put jobs at risk or stop investment in the land-based industry

by having online poker, and I think that’s been proven over the past decade. Whereas, if you put a slot machine on every cell phone, that’s a different story, totally. Do you currently have any plans to operate in other licensed jurisdictions with or without the international treaties? For instance, are you looking at setting up an operation in the UK or, perhaps, Italy? We have been concentrating primarily on the US at the moment, but we could absolutely move into international territories. Our initial priority is to get a good market position in Nevada and then to grow in the United States. However, there’s nothing stopping us from setting up in other territories. How important is product in the poker space? You’ve mentioned CyberArts and that you’ve gone with your own solution... is product a key driver or was it more important for your business to be first-tomarket? I’d say both, but product is a key driver. One of the reasons we’ve bought our own technology solution is because we really do

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believe in product as a key driver. We have our own dedicated engineers and our own dedicated product development teams who are focused on building best-of-breed features; we want to have those for ourselves. So, if you look at the successful companies in this space, they have typically owned their own product, and they’ve been passionate about making sure that they’re building best-of-breed features. We have a decent development pipeline of features that we will be releasing on our product and we’re happy with the way our product is performing. There are many other features that we had to build into that product that were not necessarily consumerdriven in order to scale the hurdles put in front of us by regulators. They take a lot of engineering time as well. But, we’ve got a very solid release program of new features coming out on our product and it’s our desire to be competitive with the very best product out there. Do you plan to sub-license your platform in various jurisdictions or do you want to operate in all the jurisdictions that you move into? We would prefer to operate. We have a very strong brand; there’s Ultimate Poker and our exclusive marketing relationship with the UFC gives us a very cost-effective route to market and the ability to target a very core demographic for poker. The demographic for the UFC and the core demographic for online poker are largely the same – largely younger male, high income, tech-savvy people who have entertainment dollars to spend. And so, they’re very strongly into digital media

and they’re very strongly into social media. Therefore, it’s a very good partnership for us. We want to take our brand and our technology solution to other markets and, ideally, we’d like to do that in partnership with operators elsewhere. We could sub-license, but we’re not trying to form a network; we’re trying to build a strong brand. Tell me about “day one.” You go live, presumably all hell breaks loose and, from what we understand, you have beaten all expectations that you had for the product almost immediately... We dealt our first hand at a sit-and-go at about 9:02am on Tuesday April 30; the first hand of legal real-money online poker in America. We’ve been dealing hands since then and we’ve had a lot of interest and a lot of sign-ups from many countries around the world, and from a lot of states outside of Nevada. But, obviously, you can only play within Nevada in terms of the regulations. So, the interest has been good and sustained. We’ve beaten expectations but it’s still Nevada, and it’s still a relatively small market; therefore, one has to be realistic about this, but we’re doing well. Our games server has performed fantastically – we haven’t had a hitch in our software at all. There are challenges in terms of geo-verification and the hurdle for identification verification and confirming where people live is very high, and it will be high for everybody. So it takes time for some customers to get signed up but once they’re through, it’s very good. And I understand that you’ve just taken on credit cards as a payment

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mechanism? How popular is credit card proving as a payment method as opposed to ACH? We had ACH and we had wire transfers; we had quite a few folks doing wire transfers, and quite uniquely, because we are partnered with Station Casinos. Stations Casinos has 16 casinos in Las Vegas and we developed an interface with the cage at the casinos so people who were Station Casinos customers could conveniently go to the cage and make a deposit or withdrawal. This is a new thing where you’ve got the “bricks and clicks” really happening for the first time. We have now turned on MasterCard for debit and credit and we’ve had an 80 percent success rate, and we haven’t even promoted or marketed that yet. Are you finding that credit cards are your most popular payment method at the moment? Not yet, but we think it will grow. Obviously, we’d like the other credit card companies to come to the party. That’s also a first: the first legal real-money online gambling transaction on a credit or debit card in the US. What surprised you on “day one”? I was surprised that we ran as smoothly as we did because these technology things are always prone to bugs, but we ran really well. I was surprised with the rapid amount of interest from a core of poker players. There’s clearly a pent-up demand for people who want this product. Americans love playing poker – you can see how many customers Full Tilt and PokerStars used to have here over the years. They have been waiting for

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this new era of legitimate online poker, delivered by people they can trust. We’ve had people in the chat rooms saying “This is fantastic, I haven’t played since Black Friday,” and, “It’s great to have poker back.” It’s the reception that’s surprised me most; how excited people are to have online poker back. How did you get to market so quickly compared to the others in the space? You’ve got to get your head down and you’ve got to work on the things that are really tough to execute. And we don’t really talk about that stuff; we keep our heads down and get on with it. So it’s not easy. We bought the company in October 2011, and we have probably spent the better part of a year just dedicating our engineers to making sure we can get our software to perform all the things that the regulators require. We had it into the labs before the end of last year. We worked with the labs and the Nevada Control Board to make sure that everybody understands the performance of the product and that it’s working properly. When we came out of the labs towards the end of March this year, we were the first to be certified. Then you still have to get approval from the Gaming Board, and they have a good look and kick around what the labs have done and do their own additional testing. They actually work hand in glove with the labs anyway. That took about another month and we were the first to get permission to do that. Our focus has always been to make absolutely sure that we’ve got a product that’s going to work in the marketplace, that meets the regulatory standards (because they’re very high) and that performs well. So,

it’s just been a focus of ours. We’ve got our own dedicated engineering team as I say in Oakland, we’ve got dedicated engineers in Eastern Europe and we’ve got our own product teams here in Vegas. We’ve got 100 people working on this business. We wanted to get to market early because, obviously, we have a good market position in Nevada with Station Casinos and we wanted to offer our customers a product early on in the development of this market. We control our own destiny because we have our own software. We just focused on making sure that we could deliver. How has the response been so far? What are the accolades and what are the complaints regarding the new product? Everybody’s happy that we’re back. Our tournaments are over-subscribed – we’re having to open our tournament lobbies 45 minutes before they start. So, people are just really happy to have a product that’s good, solid, and that works. The challenges were that we didn’t think that we’d have to physically verify quite as many people as we are. It’s a source of frustration for some players, but once you’re through it, it’s done. So, that’s required us to make sure we’re resourced up to handle that. We do have some very sophisticated geolocation and some of that involves technology where we confirm that a player’s mobile phone is in Nevada. It involves a third-party call-to-locate using locationbased services to ping your cell phone and confirm which tower it’s talking to, and confirm that you’re in Nevada.

We’ve had a carrier who hadn’t enabled that service, which is frustrating some of their users because we haven’t been able to verify the location of their cell phones. But with all the other carriers, it’s been working really well. So, those are challenges which are outside of our control unfortunately, and we’re working expeditiously with the carrier to resolve that one issue. Otherwise it’s been remarkably plain sailing so far. What elements of Nevada’s gaming regulation would you like to see emulated, or not, in other states? I don’t have many gripes about the regulations. In the context of gaming in America, I think Nevada is one of the leading regulatory authorities and they’ve worked really hard on their regulations. It’s not an easy space to regulate to the level of detail that they have, and I think they’ve done a good job of it. Obviously, there are things that we could make easier and more efficient, but at the end of the day, the regulators are more concerned about protecting the player, protecting their identity, protecting their funds... all of which are good for the business because they’re going to build trust. Once you’ve cleared those hurdles, they make a lot of sense as to why they’re there. There are things that would be easier for us if certain elements weren’t there, but then it wouldn’t be the same level of regulation. So, we accept it for what it is and our software now complies with it. We’re happy that we’re able to deliver.

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ULTIMATE POKER: DAY ONE Ultimate Poker’s Chief Marketing Officer, Joe Versaci, reflects on “day one” of legal online poker in the US and how the company’s experience of going live in Nevada can help other businesses set-up for launch into new territories. On April 30, 2013 at 9:00am PT, Ultimate Poker dealt the first legal and regulated hand of online poker in America. To the rest of the gaming world, it was a moment in time, maybe a milestone. To our competitors, it was a shot across the bow and probably a bit of a shock. But to us, it was more than two years of hard work and relentless dedication that brought about Ultimate Poker’s participation in the first legal hand of online poker in the US. Looking back over the last two years, specifically the last few months leading up to our Nevada launch, it is clear that it wasn’t any single thing, but several important milestones that gave us the unique opportunity to sit at the forefront of American online gaming by being the first-to-market in Nevada. Here are some of the key decisions and points that may help others as they build their business or take an existing business into a new jurisdiction, specifically the US.

Avoid binary goals Our main goal was never to be first-tomarket. I think it’s important to make that distinction because it speaks to a very important principle and philosophy I hold about goal setting. Setting goals is critical to success. You need to know where you are going in order to plan how to get there. In my experience, it is important to avoid setting overly binary goals whenever possible. The purpose of a goal is to define your vision, not limit you or set some false terminal value to what you’re trying to accomplish. If our goal

would have been to be first-to-market and we weren’t, it would have had a devastating impact on the morale of our team and our business plan overall.

Winning Nevada, on the other hand, is something everyone can get behind. You can be second or third and still become a leader in the state. So when we set out to launch, that’s where we aimed; to win Nevada. Being first was a great victory, but not the goal. For us it was always about “doing” not “saying.” This is a mantra I practice in my

“Being first-to-market is black or white; you either are or you aren’t. It’s never wise to set your sights on something so rigid, especially when it’s not entirely within your control.” Our goal was to win Nevada. By “win” I mean capture a leader’s share of the online poker market in the state. In order to accomplish this goal, we’d be well served by being one of the first-to-market, but our plans did not hinge on it. I’d like to further emphasize the goal to win Nevada because it was the company’s singular focus and driving force. We knew that Nevada was not the biggest state but, for us, it was everything. Our majority owner, Station Casinos, operates 17 casinos in Las Vegas – most serving the coveted locals market – so our company had a pedigree of being a powerful force in the state. We were also a new company and felt that successfully launching in Nevada would give us a much greater chance to bring our product to other new markets and replicate our plan there. The reason I’m making the point is because something like being first-tomarket is black or white; you either are or you aren’t. It’s never wise to set your sights on something so rigid, especially when it’s not entirely within your control.

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personal life and one the company latched onto behind the leadership of our CEO, Tobin Prior. Tobin felt so strongly about the topic he wouldn’t even admit that we’d be first until the cards were in the air. This practice of doing, not talking, alleviates a lot of pressure. Oftentimes, a company or individual will make public statements about when they plan to launch a product or service, only to create an artificial wall that ends up obstructing the goal itself. It’s very hard to work optimally if you are plagued by random dates or promises that hold no real sway to whether or not the goal is achievable. There’s not enough time to walk through all the hurdles we faced around building our brand, designing a new website from scratch or the seemingly insurmountable task of meeting the extremely high standards of operation set forth by the Nevada online gaming regulations. Instead, I’ve decided to pull out three things I think we did well in the hope that they would be applicable across all facets of gaming in any jurisdiction.

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Own the technology Let’s start where I feel it all begins: the product. Ultimate Gaming had decided well before I joined the company to purchase its own gaming software technology. This was far from the norm. Most competitors were (and are still) looking to third-party operators to provide the software that powers their games. For us, this decision was a natural choice. We knew it would be a fight and when it came down to it, we wanted to control our own destiny and that meant owning our game software. I strongly believe in our product, but that’s not the real point here. Whether our games are world class or not does not take away from the essence of why the decision to purchase rather than partner was so critical. It comes down to flexibility and being able to be nimble. When you are the owner and provider, you control your product roadmap. You can prioritize based on your core business goals and the entire machine works together in harmony. I can’t tell you the number of times during the launch process we had to go back to the drawing board, shift gears or rejig our priorities. If it were not for our code and our engineers, I can easily see days or even weeks falling off the calendar just trying to get everyone reading from the same sheet of music. It may not always be the right decision but for us, in Nevada, it was. It takes a strong commitment and confidence to go down this route, but at the end of the day, we control our own destiny and that helped us on many levels.

Build a team with passion The next point may seem obvious, but you’d be surprised by how many people, including myself, get this wrong. When we wanted to venture into social gaming, we thought decades of online gaming experience would easily translate. This is not the case. Our

struggles there provided clarity that when it came time to build a team to manage Ultimate Poker, we needed online poker veterans, and better yet, we needed online poker players. I’ve been in the online gaming industry for more than 13 years and have run the gamut of positions. Luckily, a good portion of that time was spent working for the world’s largest poker company; a place where I learnt that poker players make the best poker team. Many of the guys we brought in were close personal friends.

by state. That said, the important aspect to remember is that if you can’t beat them, join them. We learnt early on that Nevada was running the show. Much like our mantra of putting our heads down and doing the work applied to getting our product market ready, it applied double to working to meet and exceed the regulatory standards mandated by the state. Our team made it a point to work precisely to the specifications of the regulators. We did not always agree with the regulations, but we always did our best to

“I’ve learnt that poker players make the best poker team. The guys we brought in believed in the company, but also had poker in their DNA. The experience of your team is critical, but the passion is even more important.” They believed in the company, but also had poker in their DNA. The experience of your team is critical, but the passion is even more important. When you look to start a company, look for people who would be doing the job even if they weren’t being paid. I understand it’s a cliché, but I would not feel right if I did not mention the invaluable contributions of the entire Ultimate Poker team, and how important hiring the right team has been to getting us live.

Embrace regulation The next point is rather important, and very specific to coming to market in the US. Everyone in gaming knows that Nevada has a long and storied history of regulation. It is the gold standard for creation and enforcement. Its entry into the world of online poker would be no different. Obviously, all jurisdictions will apply their own set of regulations and these will likely differ by country, or even

build the product to meet them. We simply got on with the task of making our games meet the requirements and took comfort in knowing that every other company would need to do the same. In the end, I think this saved us valuable time. We tried, whenever possible, to work with the regulator to ensure our interpretation aligned exactly with theirs. Others may try to argue or work around them; however, we decided that our plan was to run toward regulation and embrace it. Looking back, I’m extremely glad we took that approach. I’d be foolish to say that any one, two or three things got us to market first. It was a team of people, a ton of focus and, most certainly, some good fortune. But, in the end, we’d have been fine being second; not happy, but fine because our goal is much larger and broader than just being first. We are striving to be the best, and that mission continues well beyond just opening the doors.

iGamingBusiness North America | Issue 07 | June/July 2013 | 49

Feature

MARYLAND LIVE!

THE BLACK SWAN MOMENT iGaming Business North America’s Management and Marketing Editor, David Briggs, speaks exclusively to Mario Maesano, Senior Vice President of Marketing at Maryland Live!, about the success of the casino’s free play online offering. The concept of the Black Swan dates back to 16th Century London as a common expression for a statement of impossibility. In that context, a black swan was impossible or at least nonexistent – deriving from the presumption that all swans must be white because all swans encountered thus far were most certainly white. All well and good until Dutch explorer, Willem de Vlamingh, discovered black swans in Western Australia in 1697 and the term metamorphosed to illustrate a “perceived impossibility that might later be disproven.” Common knowledge, in short, was re-appraised. In the iGaming industry, one such piece of common knowledge is that free play casinos, while being legal in most states of the US, offer little attraction to either operator or player. In the early years of iGaming in Europe, most casino software suppliers offered free play sites as a way for real customers to “try before they buy.” However, conversion rates were so low that most operators swiftly turned their attention to deposit bonuses as a way of getting new players in. Real money gamblers were so keen to win real money, they would just get their credit cards out, take advantage of a bonus to increase their bankroll, and hit the tables. Free play casinos thus languished in an unloved section of the iGaming market.

Sure, there were some players who liked them, but the profile of these players seemed fundamentally different to that of “real”

ability to launch real money casino games via Facebook, Apple or Android where players pay to play but can never cash out their winnings. For casinos that are used to 30 percent margin on deposit, a product with 100 percent margin and no licensing requirement or gambling tax is a pretty strong proposition.

“The numbers have blown us away. Fully 12 percent of our online, free play database have come into the casino to play for real money.” gamblers and, thus, any attempt to entice them from free play to real play seemed doomed to fail. Thus, in the post-UIGEA and DoJ opinion world, when US casino operators consider putting a toe in the water to gain iGaming experience, there has been a reluctance to use free play casinos as a pilot. Any database of players gathered from this route, so the “common knowledge” goes, would not convert to real money if and when regulations allowed for it… so why bother? The cost of building and running a free play casino is not materially less than a real money casino, so vendors would still expect to be paid for their work – and with no money coming from the play, and no value in the database being built up, the obvious conclusion for most operators (and their CFOs) has been to just leave free play off the development path. This decision has been even easier with the advent of social gambling and the

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So, another nail in the coffin for free play casinos. At least so the “common knowledge” went until April 2012, when two months before opening the doors to its bricks-andmortar property, Maryland Live! launched its online casino at www.myliveonlinecasino.com. According to Mario Maesano, Senior Vice President of Marketing, the original hope was to use the online channel (from Aristocrat) as a way of building awareness and a database before the property opened. However, Mario is the first to admit, he was skeptical of its long-term benefit. “I admit to being a bit skeptical at first with launching a free play casino,” he said. “As we moved forward with it, however, I at least hoped we would learn something useful about working with an iGaming platform”. Results, however, quickly made people sit up and take notice. “As soon as we launched, we started getting online registrations quicker than

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anybody had anticipated. Obviously this was pretty positive, but we assumed it was due to pent-up demand and excitement about the coming opening of the property.” However, even after Maryland Live! opened in June 2012 and allowed its visitors access to its state-of-the-art facility, boasting over 5,000 slot machines, restaurants, bars and direct access to Arundel Mills (the East Coast’s largest shopping facility), the online channel continued to grow. “Month on month we have seen ten percent growth. We now have more than 165,000 registered online players that seem to like what they find. 85 percent of new online registrants make a return visit and 70 percent visit more than ten times a month, spending an average of eight minutes playing.” However, even these impressive numbers did not really get the pulses racing for Mario and his colleagues. They were certainly happy that they were learning valuable lessons on how to build and manage an online channel and they could see that they had a free play online casino that seemed popular with players. However, all this was just for show, with no real financial benefits to take to the bank. “We were sitting in a meeting and going through our first look at the data in regard to the online and ofﬂine databases and looking for any players that had actually crossed over from online to ofﬂine. The number just blew us away. Fully 12 percent of our online, free play database (after opening their online account with us) had then come into the casino to play for real money. Not only that, but these players were coming 40 percent more frequently, worth 20 percent more per visit to us and stayed ten percent longer than the average patron during a visit. “This was an “A-ha moment” for all of us.” Mario explains. “We hadn’t expected that, and it made us sit up and start paying a lot

more attention to these players. We started looking at their behavior online and their behavior offline. What we could see was that players would play their games of choice online for free, learn them and then come in and play exactly the same game on the floor for real money. “We saw two basic types of players: those with high propensity to game and previous gaming experience, and those we coined “virgin players.” These virgin players had no prior knowledge of traditional casinos and had been introduced to them by the free play casino which gave them the comfort and confidence to come in and try them for real.” So, with a new demographic and a new channel to market on their hands, Mario and the Maryland Live! team are rolling up their sleeves to expand their experiment. “The number one complaint from players is that they want to see the same games online that they see on the floor. Currently, we have Aristocrat’s product range available online, but we are looking to expand beyond that. Additionally, we want to move to

Facebook and the virtual credit world as well as onto mobile platforms.” With revenues from the bricks-andmortar properties setting records in Maryland and table games having just launched, the future is looking very bright for Maryland Live!. A significant part of that success is down to the extra players that the online, free play casino has helped deliver. Once again, Australian pioneers have uncovered a new truth to challenge longaccepted common knowledge. “Aristocrat and Game Account did a great job in not just selling us a vision for integrated ofﬂine and online, but they delivered on it,” Maesano concluded. “Working with them on this project has really delivered way beyond our expectations and made believers out of all of us.”

iGamingBusiness North America | Issue 07 | June/July 2013 | 51

Management & Marketing

THE FUTURE OF US ONLINE SPORTS GAMING IS A FANTASY A new industry in the US is gaining momentum. The daily fantasy sports industry, born out of exceptions in the 2006 Unlawful Internet Gambling Enforcement Act, and fueled by late 20-somethings looking for fun and competition after the April 2011 shutdown of online poker in the US, is taking off. Led by venture capital backed start-ups FanDuel, DraftDay and DraftKings, the market size has grown approximately tenfold in the last two years and is expecting at least 500 percent growth in 2013. FanDuel is predicting a turnover of $200 million in 2013 and that is after reporting $50 million in player payouts the prior year. New brands are emerging, like FanEx, which is the first to migrate its US online gaming experience to expand the vertical. Fantasy sports have been around since the early 1980s, created by a group of sports journalists who had a liking for statistics and competition. The concept is simple: you pick players from several teams, building your own fantasy team, and then your players score points based on their individual performances. It’s that simple. You pick the players, you make the moves, you are the owner and the general manager, you are the one in control; and sports enthusiasts love it. You pay to enter your team and the most successful teams take the cash. Fantasy sports were carried to the masses by the Internet boom of the 1990s, and their popularity never stopped growing. It’s estimated that 35 million people (source: Fantasy Sports Trade Association, FSTA.org) play fantasy sports in some format, making them into a multi-billion dollar industry. Most of this industry is focused around the season-long fantasy format which major online brands like ESPN, Yahoo! and CBS Sports dominate. In the season-long format,

you pick your players once, and then manage your team throughout the season. (National Football League and Major League Baseball are the most popular leagues.) In October 2006, the Unlawful Internet Gambling Enforcement Act was passed. A clear exception for fantasy sports was created and the real money daily fantasy industry was born several years later. Daily fantasy took the old model of season-long fantasy and broke it up into smaller events. Instead of picking one fantasy team at the start of the season, you can pick several teams every day and enter those line-ups into real money contests. There are some state exceptions to the legality of daily fantasy. Daily fantasy games are set up in similar fashion to the online poker model: everything from large scale tournaments with thousands of entrants to heads-up games, and the buy-ins range from $0 to $530. The 21-to-35-year-old male demographic in the US has started to embrace the industry in the wake of Black Friday. The appeal of using their knowledge of sports and analytics to win large cash prizes has created liquidity in the industry. Fueled by the amount of data online, the industry is changing sportsbetting as we have known it. Now, simply knowing the starting line-up at game time and how teams have fared in the past is not good enough. Knowing how a player performs under certain conditions against his specific opponents, and correctly predicting the probability of that outcome is

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what divides the winners from the losers in fantasy games. This younger demographic has expectations that can be demanding on operators. Real-time play-by-play data, a great user experience, and mobile access are among the norms, along with high standards of customer service and player fund safety. In terms of a similar experience, those in the UK may remember the growth of sports spread betting which focused on adding more excitement to individual performance. Where daily fantasy sports have an edge is that there is a fixed risk to your investment. After the passing of online gambling regulation in New Jersey in March of this year, the state cleared the way to allow fantasy sports in Atlantic City casinos. For many years, traditional sportsbetting was considered the Holy Grail for Atlantic City, but now they’ve found a way to bring that same thrill of sports to the Jersey shores. This is the first movement toward any type of regulation for the daily fantasy industry, but it will not be the last. There is a list of challenges going forward in this new industry. It has taken nearly two years after Black Friday to convince players that online daily fantasy games are legal in the United States. Much of the fallout from the online poker world has become a hurdle for the bootstrapped start-ups that are expanding the industry. FanEx is powered by BAM Software & Services, who developed the platform behind BetAmerica.com, a leading online US horse racing site. FanEx will lean on BetAmerica’s substantial experience in the US online gaming industry. Alongside that experience comes player trust. BetAmerica has paid

Management & Marketing

out over $100 million to customers since its inception and this is something which no other player in the daily fantasy market can bring to the table. It is surprising that, as of now, no European online gaming operator has attempted to break into the daily fantasy market in the US. Most seem to be looking towards Nevada and New Jersey, and the online poker and casino riches promised there. Nearly $23 million dollars of venture capital funds have entered the space since 2009. The money is turning out to be well spent as the industry grows. Fans engaging in fantasy sports have helped raise the popularity of the National Football League and Major League Baseball to new heights. Radio and television stations that are solely focused on individual player performances during the games have been launched to take advantage of this growth. (See NFL RedZone and SiriusXM Fantasy Sports Radio.) There is no doubt the daily fantasy product is exciting for players; in many respects, more so than traditional sportsbetting. The initial data shows player loyalty at higher levels than all other forms of traditional games; but for now, the amount of players still place the industry in the niche bracket. 2013 could well be the year when that tag is left behind. Guaranteed prize pools for daily fantasy baseball this season are going to top $2 million, which is sure to attract the US players looking to test their skills in return for the lure of high rewards. Joe Bunevith is the Director of Fantasy Games at BAM Software & Services. BAMSAS develops and supports a full-featured software platform for pari-mutuel wagering and real money online games. Joe is known as “Joe Tall” in the poker world and is a founder of the poker coaching website, DeucesCracked.com. He tweets about the iGaming industry, Twitter: @JoeTall. Peter Laverick is the Director of Marketing for BAMSAS also contributed to this article.

Fantasy Sports Trade Association Data

Fantasy 35 Million Sports Players (US and Canada)

8% 13% 16% 19% 20% 21%

Adults & Teens Adults earning $50k+

Canada Males aged 12+ US Males aged 18-34

41.4yrs

The overall mean age of fantasy sports players *

Which Fantasy Sports do they play? *

Football Baseball Auto Racing Basketball Golf College Football Hockey Soccer

30%

72% 37% 24% 20% 13% 13% 12% 7% Fantasy Sports Players surveyed in 2011 used a mobile device to participate in fantasy sports.

The average fantasy player has these characteristics: ****

8yrs

Time an average player has been playing

$467.60

Average age

Are educated, professionals living in suburban USA Play fantasy sports with people they know

US Males aged 12+

Male

Spend per year playing fantasy sports

33yrs

Females aged 12+

dults that graduated from college A are twice as likely to play fantasy sports as those that did not. *

87%

3hrs

3/4

Spend per week managing their teams

Married

88%

87%

White/caucasian

Household size; 3-4

Home owners

78%

46%

Have a Bachelor’s Degree or Higher

65% 70% 92%

Make $50,000+ annually

Have attended college

$92,750

Average household income

From Fantasy Sports Trade Association (FSTA.org, to which BAMSAS is a member): * 2009-2010 Fantasy Sports Research Group and IPSOS study, n=1604 **Dr. Kim Beason, FSTA Study, 2011 *** Summer 2012 Fantasy Sports Research Group and IPSOS study ****Dr. Kim Beason, FSTA Study, 2010

iGamingBusiness North America | Issue 07 | June/July 2013 | 53

Management & Marketing

CASE STUDY JACKPOTPARTY.BE The convergence of land-based and online gaming in Belgium and what it means for the US and other emerging markets, by Rory Shanahan, Head of Marketing at Williams Interactive. In jurisdictions where online casino wagering is not yet, is soon-to-be, or has just become legal, current land-based casino companies naturally have questions and a number of options through which to extend their landbased businesses online – including what iGaming should mean to their enterprise. There are (at least) two schools of thought. In one corner, you have those who look at online gaming as a separate business that can be used to grow revenue outside the casino’s immediate jurisdiction, state borders or internationally. In the other corner, the question becomes how I grow my business in my current competitive environment through this additional engagement channel – both as a driver of play with my properties and as a driver of additional trips into my landbased operation. The potential benefits from creating a complementary experience for your landbased operation are many – you can expand your customer reach, better engage your players and maximize your revenue. In a growing number of legalization cases, such as the recently legalized online gaming market in New Jersey, the new laws limit licenses to land-based casino license holders, offering

those casinos the chance to leverage a combination of online and offline experiences to drive round-trips between their bricksand-mortar and online properties.

and run its new online casino in the newly formed regulated online gaming market exclusively for residents of Belgium. The joint operations agreement represents the first business-to-business (B2B) deployment of Williams Interactive’s online gaming solution.

Driving round trips: the convergence of land-based and online gaming

Land Based casino

Online Players

Online Casino

Smart phone Users

In 2012, Belgium legalized iGaming with nine online licenses available to landbased casino license holders Shortly following this legalization, Groupe Partouche SA, the largest land-based casino operator in Belgium and France, partnered with WMS Alderney 1 Ltd, an entity in the Williams Interactive™ group, to build, launch

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Available exclusively to players in Belgium – in both French and Flemish languages – JackpotParty.be began accepting wagers in February 2013 as an option for players to enjoy their favorite slots and table games online between casino trips. A robust marketing campaign began in mid-April, with the official launch highlighted by television and digital campaigns airing in both French and Flemish to citizens throughout Belgium. The campaign focused on the synergistic benefits between land-based and online gaming experiences for players, and the excitement of the online casino, which features more than 25 exclusive WMS slot games, more than 20 table and card games and the proven Jackpot Party Progressive™ retention mechanic that can randomly trigger a progressive picking bonus on any wager of any game at any time – in slots, table games and even video poker.

Management & Marketing

Ohad Narkis, Vice President and Managing Director of Online Operations for Williams Interactive, said, “We have specifically designed our marketing strategy to benefit from cross-marketing opportunities that complement the land-based casino operations by providing players with the convenience of playing at home, in addition to playing at the casino. One of the key pillars of our newly launched online brand in Belgium was the link with the well-known and distinguished Partouche land-based casino. This brought much needed trust and recognition to our brand whilst increasing exposure to the land-based casino in high reach, high impact medium like TV.” With the continued evolution of gaming technology, the opportunities for convergence

marketing to drive round trips will continue to develop. Savvy casino operators and their online casino partners will find more efficient, quantifiable ways to drive their players between online and bricks-and-mortar properties – connectivity between online and offline loyalty programs offers plenty of these opportunities, such as the reward of loyalty points for online play that may only be redeemed offline, or vice-versa, to increase the total value of each player in both properties.

When do you begin? Sooner is better The online migration is already happening in pre-regulatory jurisdictions as operators evaluate non-wagering free-play alternatives. Free-play alternatives can ensure operators put their stake in the digital landscape before

they miss the early-entry window and are forced to spend significantly greater financial and personnel resources to enter the market that could develop ahead of them. Whatever your strategy is to expand your enterprise online, the most important choice you’ll make is your partner. The right partner will blend experience, products and capabilities to ensure your transition to an “anywhere, anytime” gaming enterprise that drives additional business to your land-based casino is as easy as possible. The right partner for you is there – and the benefits of convergence to your casino are real and closer than you think. Do you want to be one of the first to benefit from these opportunities, or one of those trying to break in after the dust settles?

iGamingBusiness North America | Issue 07 | June/July 2013 | 55

Management & Marketing

UNLOCKING REAL MONEY

MOBILE GAMING FOR US PLAYERS Skill gaming is the key, writes Skillz CEO and founder, Andrew Paradise. With Juniper Research expecting mobile wagers to hit $100 billion by 2017, it is no surprise that major gaming studios like Zynga and Digital Chocolate have been actively experimenting with both social casino and online gambling. However, while most of these efforts have focused on enabling a UK market whose legislative environment is favorable towards online gambling, there is currently a huge untapped market for real money skill gaming in the United States. Although real money gambling is still prohibited in most of the US, games of skill are legal in 75 percent of states. What this means is that, as of today, more than 180 million Americans are legally allowed to bet on many of their favorite games.

Defining a skill-based game With real money gaming accessible to so many Americans, it is important to understand the difference between a game

of chance and a game of skill. A game of chance is one in which the outcome is determined predominantly by luck. For example, slot machines and roulette are chance games, where the player has no control over the outcome. On the other hand, games of skill are those that rely on the players’ ability to decide the outcome. Games like bowling, chess, and the majority of video games are great examples of skillbased games. To understand the difference in practice, just watch an experienced player take on a beginner in Angry Birds. Games of skill require a player to utilize a mental or physical ability in order to excel and win. Although games of skill may include some chance – for example, who goes first in a game of chess – and games of chance may include some skill, the classification of a game relies upon the relative presence of skill and chance within the game.

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Interestingly, elements of chance can actually be more carefully controlled and even reduced in video games than they can be in the physical world. Imagine players competing in a golf tournament (a quintessential game of skill): in real life competitions when teeing off, weather may affect the game’s outcome if one golfer is thrown off by a random gust of wind. In a video game, elements like wind can be controlled so every golfer experiences the same weather and circumstances.

Betting inside skill-based games is legal in most US states Gambling has historically been far more contentious than skill gaming, and the trend to legalize online gambling in the US will likely lead to a substantial expansion of online skill gaming competitions. In fact, skill-based cash tournaments are already legal in the majority of states. With Nevada, Delaware and New Jersey recently legalizing Internet gambling, other states

Management & Marketing

are expected to jump on the bandwagon in the coming years, continuing to expand the potential gambling market in the US.

The evolution of skill gaming Games of skill have a long history in the US and have been a traditional part of American social life. Tournaments surrounding games of skill, many of which require an entry fee and award real-money prizes, include fishing tournaments, chess tournaments, rodeos, marathons and spelling bees. Recently, skill-based cash tournaments have emerged for PC and console games. Online game communities such as King.com and Worldwinner.com have run cash tournaments for the last fifteen years in the US, attracting roughly 80 million users between them. Additionally, Virgin Gaming promotes competitive gaming tournaments for cash prizes on console games, like Madden NFL 13 and FIFA 13. According to Casual Connect, there are approximately 67 million casual tournament gamers in the US. However, mobile gaming, which is far and away the most common form of video gaming, remains completely untapped, and continues to grow. Mobile applications generated $10 billion in revenue in 2012 with 80 percent coming from video games. More than 100 million Americans play mobile games and that number grew by 35 percent last year. Games account for half of all the time consumers spend using their Smartphones. That means that consumers spend as much time gaming as they do talking, texting and surfing the web combined. Finally, it is important to note that over 80 percent of mobile gamers are over

the age of 18 and are therefore eligible to play games of skill for cash legally. Mobile gaming has become the most popular form of gaming today. With the explosion of mobile, it’s a natural extension to bring cash tournaments to the fastest growing platform. With the introduction of Smartphone-enabled cash tournaments, analysts are expecting the skill gaming market to eclipse $10 billion in the next few years.

Conclusion There is a large and expanding audience for real-money skill games and tournaments, especially as cash competitions become increasingly available to the mobile market. Since competition is already a huge aspect of the video gaming industry, it makes sense to extend cash tournaments to skill-based mobile games. While estimates suggest that the skill gaming market could be as large as $10 billion, only time will tell how pervasive cash gaming will become in the mobile gaming space. As the first company offering real money mobile games of skill, we’ll have more to share on this exciting space in the coming months.

Andrew Paradise is CEO and founder of Skillz, the world’s first and only cash and virtual currency tournament platform for skill-based mobile games. Skillz believes in making mobile games more fun for players while making game creation more lucrative for developers. Founded in March 2012, the company has offices in San Francisco and Boston. To learn more, visit www.skillz.com.

Early results around skill gaming cash competitions for mobile gamers Earlier this year, Skillz Inc (www.skillz.com) commissioned a survey to assess interest in cash tournaments inside mobile games; the results were staggering. In an independent survey of 1,000 consumers, 41 percent of people with mobile phones in the US indicated a desire to play for money. That means that almost 60 million American adults want to bet in their favorite mobile games. Launched on April 30, 2013, Skillz is making it possible for players to compete for cash in their favorite mobile games. Skillz is the world’s first multiplayer tournament platform for skill-based mobile games, enabling game developers to host both cash and free multiplayer tournaments inside almost any mobile title. Game developers can now make any skill-based game – whether a puzzle, arcade, sports, or other genre – more social by tapping into players’ competitive nature. People intrinsically want to see if they are better than their peers and many of them are ready to put up money to prove it. Initial user data from Skillz demonstrates that tournaments keep mobile gamers engaged, playing longer and more frequently. In the skill-based mobile game 3D Cave Runner, Skillz increased seven-day user retention from below four percent to over 18 percent – a 330 percent increase just by integrating cash tournaments. Rocketmind, developers of the mobile game Big Sport Fishing (which has more than five million players), found that players who entered multiplayer competitions play almost three times longer than their peers. Data from the mobile game, GnarBike Trials, shows that players entering tournaments log almost three times as many sessions as non-tournament players. Cash-based tournaments can make skill-based games extremely sticky, boosting both player retention and engagement. Tournaments make scores more meaningful as players get rewarded for their skills, which translates into more downloads, higher DAU (daily active users), and longer sessions. Currently, Skillz enables mobile gamers to test their skills in tournaments with entry fees ranging from $0.25 to $5, competing to win real money. Thus far, the average wager has been $1.00, but Skillz continues to expand its breadth of cash offerings.

iGamingBusiness North America | Issue 07 | June/July 2013 | 57

Feature

“BITCOIN MANIA” The Internet’s new favorite reserve currency, by professional poker player, Jonathan Aguiar. Introduction Bitcoin (or BTC for short) has been in circulation since January 2009, but only gained significant public attention earlier this year as its price soared from around $10 in January to nearly $300 in April. The sudden rush of interest brought comparisons to the legendary Dutch “Tulip Mania” bubble of the 1600s; people were placing huge orders for BTC with seemingly no idea what they were or why they had value. BTC mania, however, would be short-lived. On April 10, the world’s largest exchange for the coins, MtGox.com, suffered an extreme denial of service attack flooding the website with false requests that prevented access for legitimate users. BTC’s price dropped from $270 to $75 in a matter of hours as speculators ran for the hills. The correction, incorrectly referred to as a crash, restored stability to the market and scared away many of the uneducated investors. At the time of the writing of this article, BTC has been trading in the $110 to $125 range, a tidy 1,000 percent ROI for anyone who got into the market only a few months ago. So you might be wondering, “What are Bitcoins, and where do they come from?” In 2008, a white paper by a figure (or group) known as Satoshi Nakamoto outlined the concept for a new peer-to-peer currency with no central issuing authority. Instead,

transactions would be verified by other users on the network via a permanent (and anonymous) ledger of transactions known as the “block chain.” Coins would be “mined” by running a program on your computer that would effectively attempt to solve an increasingly difficult math problem. The world’s first “crypto currency” had been born, but it would take a few years for it to become a truly attractive commodity to anyone beyond a group of Internet nerds.

Mining Mining BTCs and mining gold have a lot in common by design. Gold makes a great reserve currency because it has a limited supply that becomes increasingly difficult to access and is also effectively impossible to counterfeit or synthesize in a costefficient manner. BTC mining has evolved considerably since BTCs were introduced to the world in 2009. The rules that govern BTC mining place two constraints on their creation in order to avoid inflation and subsequent risk of devaluation; the issues plaguing fiat currency (like the US dollar). There can only ever be 21 million BTCs and the last one will be mined in 2040. Every two weeks, the math problem that mining computers must solve becomes more difficult; additionally, the number of coins

58 | iGamingBusiness North America | Issue 07 | June/July 2013

released for solving one of these problems is halved every four years. The result of these restrictions is that, when graphed over time, the release rate for BTC looks nearly identical to the rate at which the accessible gold on earth should be mined. For years, the coins were mined relatively easily, at first on simple desktop computer CPUs and eventually on their graphics processors, which were even better suited to efficient mining. As the price of BTCs has increased along with the difficulty of mining them, there has been a boom in specialized mining equipment. GPU rigs gave way to Field Programmable Gate Arrays (FPGAs), a type of computer chip that can be programmed to perform many different specialized functions. FPGAs have recently been replaced by the new darling of the mining community, the Application Specific Integrated Circuit (ASICs). ASICs cost more than most high-end computers, at upwards of $2,500, and for all that, you get what is effectively a single circuit board with a processor on it; a processor that can do only one thing and do it with maximum efficiency: mine. The emergence of ASICs has correlated with the boom in BTC prices over the first four months of 2013, as large mining groups combined dozens of them into massive, power-sucking mining rigs. Just as the US gold rush was largely sparked by the emergence of steam power and advanced mining equipment that helped men reach

Feature

deeper into the earth, the BTC miners plow through deeper and more difficult blocks with the advances in technology predicted by Moore’s law (the cost of computer power is halved every 18 months). However, all the advances do come at a price, and with Bitcoins, that cost is electricity. Some of the largest mining operations have power bills in excess of $100k per month to feed their ASIC farm. Still, as long as BTC continue to hold value on the market, advances in mining technology will continue with more and more powerful ASICs until, in 2040, a processor more powerful than we can currently comprehend will solve the last block, releasing the 21-millionth BTC into the economy and leaving only one way to get your hands on one: participating in the new BTC economy.

Buying BTC In the early days of BTC, there weren’t many buyers; the majority of holders mined their collection on their own personal computers when it was easy to do so. However, over the last year or so, there has been a growing demand for the ability to turn fiat currency into BTC, leading to a rapid growth in BTC exchanges and start-ups, currently led by the largest and most quoted exchange, MtGox.

Anyone interested in purchasing BTC can visit an exchange like MtGox and order coins to be added to the user’s virtual and anonymous account within their wallet. BTC accounts have addresses on the network that would look something like this:“175 tWpb8K1S7NmH4Zx6rewF9WQrcZv24 5W”. Users simply give this address when purchasing coins and the miners on the network will confirm the transaction in the block chain (ledger), making the user the new confirmed owner of those coins. It is this ease of purchase that enabled the flood of exchanges that led to the rapid rise and correction in the market earlier this year.

Spending Just as accumulating the new Internet currency has become increasingly simple, spending it becomes easier every day. As the value of BTC continues to rise with the currency’s continued growth in popularity and social appeal, more and more companies have begun to accept BTC

as payment for goods or services. Although online vendors lead the charge, today, BTCfriendly bricks-and-mortar businesses are popping up in technologically progressive cities like San Francisco and Berlin. Even as legitimate vendors continue to join the BTC market, the reality remains that BTC has many obvious uses as an anonymous currency. Two of the most popular are unsurprising: purchasing illegal drugs and gambling (it remains to be seen how long it will be until the world’s oldest profession catches up to the technological advances of other vices). One of the most commonly referenced BTC sites is Silk Road, accessible only via the Tor network which allows anonymous browsing. Users on the Silk Road purchase drugs or other illicit items; the network holds the transaction until both sides confirm that it has been completed to mutual satisfaction. Not every transaction on the network is illicit or even anonymous as, over time, the transactions have become more mainstream with the exposure of BTC to the masses. Only time will tell whether you’ll be able to pay for dinner at your local restaurant or the registration fee to your next gaming conference in BTC. Until then, those companies that choose to accept BTC have seen the cost of implementation far outweighed by the free advertising they receive from an excited network of BTC “power users.”

iGamingBusiness North America | Issue 07 | June/July 2013 | 59

Feature

BTC and iGaming The most popular gaming destination by volume on the BTC network by is a site called Satoshi Dice. Over 50 percent of the volume on the BTC network can be traced to this site where users can bet from 1/100th of a BTC to 500 BTC on odds from 64,000:1 all the way to 1:64,000 with a maximum payout of approximately 5,000 BTC. Satoshi Dice has a 1.9 percent edge on all its bets, making it likely the most profitable BTC site on the Internet. Another relatively well-known iGaming site is Seals with Clubs, a poker site run by professional poker player, Bryan Micon. Seals with Clubs currently offers a variety of cash game and tournament action with stakes as high as $250 tournaments and $5 to $10 NL cash games. Especially in the United States, where the UIGEA has made funding a poker account nearly impossible and getting paid out even more difficult, we are seeing users willing to jump through the hoops necessary to carry out their gaming in what they perceive to be a relatively safe currency environment, even after the correction that saw those who bought at the peak of the bubble losing over half their investment.

Safety and security In 2010, the only incidence of vulnerability in the verification process was found, which allowed coins to be created at will. Within hours, the bug was fixed and ever since, the peer-to-peer verification of transactions on the network has been unbreakable. Over the

years, there have been booms and crashes, some of these caused by hackers attempting to take down the exchanges and incite panic selling, buying up BTC at a discount and then ending their attack, profiting as the prices rebound. This was the likely cause of the April crash that saw BTC lose over twothirds of its peak valuation. However, as the exchanges continue to grow and the currency market becomes deeper, the impact of such attacks is diminished. Due to the nature of the block chain, it is possible to see what has happened to coins after they have been mined. As a result, it is a known fact that approximately 1.5 million BTC created in the earliest days of the network have never been spent, the assumption being that these are in the wallets of Satoshi, whether that be an individual or group. There is some concern that given the growing immense value of these coins, that they could be dumped into the market and cause another crash. Beyond the concerns about the BTC network itself, users face some risk that the threats crypto currency pose to fiat currency will force governments to act to make them illegal. Recent regulations by the US Treasury require BTC to be regulated and subject to reporting requirements that apply to other currencies. It remains to be seen what the result of this government attention will be.

The future It will be 27 more years until the last BTC is mined; that is, if BTC still exists.

60 | iGamingBusiness North America | Issue 07 | June/July 2013

While miners and merchants have little risk beyond the coins theyâ&#x20AC;&#x2122;ve acquired but not yet sold, there are scores of individuals and funds now taking positions in BTC. There is no way to know what the future holds, but as long as the demand exists for a safe and anonymous way to hold and spend wealth that cannot be affected by the whims of governments, and as long as the security of the network remains without question, the BTC era is here to stay. On May 14, the US Department of Homeland Security forced payment processor, Dwolla, to suspend transactions between US customers and MtGox.com, marking the first direct intervention in the market by a government agency. Will BTC continue to rise as it develops into a useful currency or wither away and evaporate worthless just like those Dutch tulips almost 400 years ago? Only time will tell.

Jonathan Aguiar has been playing poker full time since 2003 and is a WSOP bracelet winner. His current passion is consulting iGaming start-ups in the fantasy sports and poker spaces. His current project is Boston based Daily Fantasy Sports company DraftKings.com

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Business and Finance

THE IGAMING GLOBAL INDEX iGaming Business monitors the leading companies with exposure to the iGaming sector. Each company is weighted for the percentage of their respective business derived from iGaming. The Index To date, 2013 has been very kind to the iGaming industry comparative to the broader market. In the two-month period ending April 2013, the iGaming Global Index finished the period up 7.8% compared to 1.5% for the broader market (FTSE 100). In Europe,

instil the type of investor confidence which has been lacking in recent years. The only area of confusion that remains is that of the investors’ dichotomy-like approach to regulatory exposure. Analysts and investors praise companies such as bwin.party for decreasing their exposure to unregulated markets, which negatively affects their share prices, whilst companies such as Gaming VC, which has institutionalised its increasing exposure to unregulated markets,

consolidation continues to be the greatest driver of value creation. Notable companies include Betfair’s offer from CVC, which drove the share price 20%, as well as the completion of GVC’s and William Hill’s joint acquisition of Sportingbet. Consistent solid earnings performance across the board continues to

The original iGaming Index was launched on the 1st June 2004 with a base value of 1000. The Index aims to be the most comprehensive indicator and benchmark for the performance of the iGaming sector. Mkt Cap Exchange

Share Price (Local Currency) 2-Month Period

52-Week

(in m)

Local

25/04/13

Currency

25/04/13

Change

Low

52 wk Hi

% of

% Wtd of Index

Company

Ticker

Paddy Power PLC

PLS

£2,661.0

EUR

63.91

0.61

1.0%

70.65

46.40

90.5%

14.4%

Playtech Limited

PTEC

£1,791.4

GBP

613.00

41.50

7.3%

646.50

324.75

94.8%

13.1%

William Hill PLC

WMH

£3,645.6

GBP

422.50

17.80

4.4%

443.30

262.80

95.3%

10.1%

Perform Group PLC

PER

£1,220.7

GBP

613.00

197.50

47.5%

613.00

300.00

100.0%

8.9%

Bwin.Party Digital Entertainment PLC

BPTY

£1,073.6

GBP

132.00

-16.10

-10.9%

158.40

91.90

83.3%

7.8%

Betfair Group PLC

BET

£872.8

GBP

842.50

145.50

20.9%

854.50

650.00

98.6%

6.4%

Betsson AB

BETS'B

£763.5

SEK

202.00

-11.00

-5.2%

223.50

160.00

90.4%

5.6%

Unibet Group PLC

UNIB'SDB

£627.0

SEK

223.00

-11.50

-4.9%

243.00

164.00

91.8%

4.6%

888 Holdings PLC

888

£595.5

GBP

170.20

17.45

11.4%

171.20

63.00

99.4%

4.3%

Ladbrokes PLC

LAD

£1,775.7

GBP

193.50

-36.10

-15.7%

243.10

152.70

79.6%

4.1%

International Game Technology

IGT

NYSE

£2,939.8

USD

17.30

1.36

8.5%

17.31

11.10

99.9%

2.7%

Sportingbet PLC

SBT

£363.5

GBP

54.49

-0.26

-0.5%

55.50

26.25

98.2%

2.7%

Net Entertainment NE AB

NET'B

£328.2

SEK

97.25

7.50

8.4%

98.00

64.00

99.2%

2.4%

Caesars Entertainment Corp.

CZR

NASDAQ

£1,365.7

USD

16.95

4.45

35.6%

17.64

4.54

96.1%

1.9%

Zynga Inc

ZNGA

NASDAQ

£1,203.1

USD

3.13

-0.25

-7.4%

9.42

2.10

33.2%

1.8%

Churchill Downs Inc.

CHDN

NASDAQ

£844.5

USD

73.15

7.17

10.9%

73.15

54.85

100.0%

1.7%

Optimal Payments PLC

OPAY

£224.7

GBP

156.23

-5.77

-3.6%

185.75

65.73

84.1%

1.6%

GVC Holdings PLC

GVC

£172.7

GBP

285.00

47.50

20.0%

303.50

142.50

93.9%

1.3%

Amaya Gaming Group Inc.

AYA

£287.9

CAD

5.22

0.03

0.6%

5.73

3.49

91.1%

1.2%

Lottomatica S.p.A.

LTO

£2,851.0

EUR

19.50

1.82

10.3%

19.50

13.33

100.0%

0.6% 100.0%

Note: iGaming Business is not licensed to give investment advice. The iGaming Index should not be relied upon as an indicator of the future performance of any company within the index or an indicator of the future performance of the sector. All Share Price data and Market Capitalization reflected in local currency. *Index weighting (1) adjusted to reflect exposure to online operations only and (2) all market capitalizations adjusted into US$ at end of the period.

64 | iGamingBusiness North America | Issue 07 | June/July 2013

Business and Finance

seem to go unaffected. My only conclusion to the situation is that investors seem to like clarity: in or out. Gaming VC has clearly chosen the unregulated route, while Betfair has made a clean break to pull out. However, bwin.party falls somewhere in the middle – half in and half out. The US has finally started to heat up. At the time of writing, Ultimate Poker, the Fertitta’s online poker division, has taken its first bet in Nevada. Delaware announced the selection of its primary vendor and also PokerStars seems to have been turned down in New Jersey. There is a lot of jockeying for position going on in the US market as deals continue to come and go. Prospects in Illinois and Pennsylvania are also keeping investors on their toes.

Index components (decreasing order of contribution) Paddy Power’s (+7.2%) share price started the period on its usual tearing, all-time highs at €70.65 per share after the company reported Q2 and, subsequently, fiscal year results that were modestly ahead of analyst expectations. Revenue was up 25% for the last quarter of 2012 with EBIT only up 6%. The moderate 6% EBIT increase was due mainly to a large investment in technology. While there remains universal enthusiasm and respect for the company, a majority of analysts still remain cautious on Paddy’s prospects and retain their ‘Hold’ on the share price. The continual outperformance of the

share price against analyst expectations has also created something of an odd situation. When the company announced its most recent earnings report, many retained their Hold, yet increased both forecasts and target price. That is not typical on Wall Street or in the City. The caution is mainly attributable to the ‘punchy’ multiple of 15x EBIT at which the share price is trading, which is a substantial premium to its peers, according to analysts at Daniel Stewart. The analysts also cited the headwinds of increased tax in both the UK and Ireland as reason to be cautious on the company. However, it was a Davy Stockbroker’s report on PAP which came out later in the month that actually caught the attention of investors, bold enough to cut Paddy’s rating to ‘Underperform’ from an ‘Overperform’. According to the report, the Davy analyst pointed to a lower than anticipated growth rate in Italy, declining online customer base and a potential decline in UK retail returns as reasons to avoid going ‘long’ on Paddy Power, sending the share price down 10% for the remainder of the period. As much as I don’t believe that trees can grow to the sky, Paddy’s performance and resulting share price continue to defy all expectations. Going bearish on Paddy is a bold move. Even a broken clock is right twice a day. Shares in Playtech (+7.3%) once again hit an all-time high, reaching 646.5 pence per share. Early in the period, Playtech’s share price spiked on consecutive announcements,

including the final terms of the company’s 29% stake in William Hill Online for a stunning £494 million. Days later, Playtech took advantage of its newfound freedom to form a similar strategic relationship with William Hill’s (+4.4%) arch enemy, Ladbrokes (-15.7%). During the period, Playtech also announced solid year-end results which were ahead of expectations and which sent the share price up 12.5%. Shares did sell off slightly towards the end of the period, possibly due to investors realising that there isn’t a great deal of market share left in the UK left to grab. Where does Playtech go from here? At the end of the period, Playtech announced results for Q1 2013 which were solid and included a 16% increase in revenue, yet was 4% below Deutsche Bank Analyst Richard Carter’s forecast. While Carter cited a solid beginning to 2013, he also pointed out that such growth is predicated on Playtech’s ability to continue to execute on a non-organic M&A and joint venture strategy, yet without any insight, there may be some near-term pressure on the share price. As part of the agreement, Ladbrokes announced the creation of an Israeli marketing division that will be staffed with Playtech’s recently acquired marketing arm, PTTS (formally Traffic Nation). With the exception of the ownership component (and associated veto rights that come along with it), the Ladbrokes deal looks remarkably similar to the William Hill deal. For those

iGamingBusiness North America | Issue 07 | June/July 2013 | 65

Business and Finance

2 Month Period: March-April 2013 1,100

iGaming Index

S&P 500

1,080

1,060

1,020

1,000

980

960

940 3//1/13

3/6/13

3/11/13

3/16/13

who remember five years back, Playtech had two marketing partners with whom it worked closely: Traffic Nation and Ad-gency. William Hill acquired the Ad-gency group as part of the transaction and Ladbrokes now gets the former Traffic Nation group (now PTTS). If rumours hold true, Playtech may be successful in leveraging its marketing prowess to eventually convince a core group of players to move from William Hill to Ladbrokes. The question is what impact that will have on the respective share prices of both William Hill and Ladbrokes. Will William Hill be able to continue its massive premium over Ladbrokes? Analyst expectations certainly seem to be bullish on both companies. According to Investec, William Hill remains a strong ‘Buy’. The 47% Q1 increase from online sportsbetting was the cornerstone of the company’s growth this period. With more than 35% of revenue coming from mobile, Investec named William Hill its ‘key pick’ for 2013 in the gaming sector.

3/21/13

3/26/13

3/31/13

4/5/13

For Numis Analyst, Ivor Jones, May 1 couldn’t happen fast enough. In a note he published on Ladbrokes entitled “Mayday! May Day!”, Jones professed his approval: “Ladbrokes clambers aboard the Playtech life raft”. While he states that trading for Ladbrokes will get worse before it gets better, he believes that “within six months, there will be signs that some of the holes have been plugged”. According to the report, William Hill is also well positioned, with its entrée into the FTSE100 slotted for the same date, which will have a positive result for technical reasons, as many index funds are forced to mimic (i.e. own) the indexes they track. Betfair’s (+20.9%) share price spiked 15% in a matter of days after giant Private Equity fund, CVC, announced it was considering privatising the sportsbetting exchange. CVC offered Betfair shareholders 880 pence per share, which represented a 26% premium over the current (at the time) share price. While investors took this as a buying opportunity, Numis Analyst, Ivor Jones, was

66 | iGamingBusiness North America | Issue 07 | June/July 2013

4/9/13

4/15/13

4/20/13

4/25/13

less convinced. He noted that Betfair recently reduced its marketing activities in a number of unregulated markets in an effort to limit its unregulated exposure and, as such, believed that, perhaps, Betfair was potentially a better fit for a bookmaker who could extract synergies rather than a financial investor with the same reservations as the financial markets – a buyout from a private equity investor would only add debt and interest which may only further thwart potential growth. Betfair ultimately rejected the CVC bid, believing there is more value to the company than the 880 pence per share offer. Bwin.party’s (–10.9%) share price gave back some profit after the company spiked 43.7% last period as a result of an overreaction of news that New Jersey had passed online gaming legislation. During the period, bwin.party announced that it was ceasing marketing activity in unregulated markets (i.e. not taking new players, yet retaining the existing players in these jurisdictions) while focusing marketing

Business and Finance

iGaming Global Index Performance: July 2004 to Present 2,000.0 1,800.0 1,600.0 1,400.0 1,200.0 1,000.0 800.0 600.0 400.0 200.0 0.0 6-04

12-04

6-05

12-05

6-06

efforts on regulated markets. This strategy received mixed results from the analyst community. Those on the optimistic side commended bwin.party for initiating a more focused strategy, believing the company had spread itself too thinly previous to the announcement. Those less optimistic, such as Gavin Kelleher of Goodbody, remained cautious. According to Kelleher, bwin.party’s “net revenue performance in the year to date is disappointing: -10% year over year. This has been partly driven by the group ceasing marketing activity in certain jurisdictions with uncertain regulatory situations.” While Kelleher welcomes the move toward regulated markets, the nearterm opportunity remains unclear. In my own opinion, I never understood the half-in/ half-out approach to unregulated markets. The strategy of prohibiting new players from a specific (and likely more profitable) jurisdiction, yet allowing existing players from the same jurisdiction to remain active, is like being half pregnant. You are either ‘in’

12-06

12-07

6-08

12-08

6-09

12-09

5-10

or you are not. Microgaming pursued that strategy in the US just after UIGEA. Shares in 888 (+11.4%) hit another fiveyear high of 171.20 pence per share. At the beginning of the period, the shares took a brief stumble despite a positive Q4 and fiscal year-end earnings report. Despite unanimous analyst praise, the share price took a one-day dip, which may be attributable to the caution of some analysts over the limited short-term upside opportunities in the US. 888 has certainly been laying the groundwork in the US. Just before the earnings announcement, the company officially announced its joint venture with Avenue Capital, which bolstered its B2C strategy. In addition, the company received its interactive suppliers licence in Nevada. Shares in Perform Group (+47.5%) spiked at the end of the period as the company announced, via its Q1 report, that it was on track to deliver another year of solid growth for 2013. The company announced the creation of its new Perform Sporting News

11-10

5-11

11-11

5-12

11-12

site, which combines its North American online sports video offering with one of the US’ flagship sports media brands to a create a top five US digital media player. During the period, the company also announced an expansion with MP & Silva, a leading media rights agency. Under the new agreement, Perform’s offering will once again offer the coveted Italian Serie A and French Ligue 1 football rights, two properties that were not renewed last July. Sportingbet’s (-0.5%) share price ceased trading on March 19 as William Hill and Gaming GV (+20.0%) completed the joint acquisition of the former leading sportsbook. Sportingbet will be removed from the Index next period. Gaming VC’s share price ended the period at a five-year high after the company announced another excellent year of operations. Taking advantage of Sportingbet’s adjustment to regulated markets, Gaming VC has been able to extract and create tremendous value by initially acquiring Sportingbet’s Turkish business

iGamingBusiness North America | Issue 07 | June/July 2013 | 67

Business and Finance

(+248% in revenue this period) as well as acquiring the remainder of the unregulated business, working in conjunction with William Hill, which acquired Sportingbet’s regulated business. While the company’s core Casino Club struggled with poker, Gaming VC’s Latin American business continues to perform well, increasing 17% in revenue. Going forward, the company is well positioned to take advantage of regulatory shifts in the business. Despite the refusal of many analysts to place value on excessive exposure to unregulated markets, investors in this case seem to embrace the institutionalised acquisitive nature of the Gaming VC strategy toward unregulated markets. Shares in Rank (+3.7%) were unable to garner investor interest despite selling off its loss-making online sportsbook to Betfair, as well as receiving the green light from the UK Gambling Commission to complete the acquisition of a select number of Gala casinos after much scrutiny from the government over the potential monopolistic effect the combined entity would yield. Shares in Probability (-7.7%) were also unable to garner investor interest despite the company’s announcement of its first profit this period. Despite slower than expected revenue this quarter, prospects on the company’s fast growing B2B business gives investors reason to remain bullish on the company. Shares in Mybet (-24.3%) tumbled this period as the company struggles to make a profit in Spain. The poor performance

forced a write-down in Q4 of Digidis, Mybet’s Spanish subsidiary. The slow start in Spain dragged the company’s overall EBIT into slight negative territory, which didn’t bode well for investors. According to the Q4 report, Mybet’s future prospects appear more positive, with sportsbetting stake up 35% for the quarter as well as a 36% increase in active customers. Shares in Boyd (+74.9%) jumped on solid Q1 2013 earnings with better than expected EBITDA across the board, including Borgata EBITDA ($3 million above forecast) largely on better than expected revenue, as well as stronger than forecast Peninsula revenue and EBITDA ($4 million above forecast). According to Union Gaming, “While exact timing is unknown we are confident that Borgata will be a key player in the New Jersey online market given that its brand resonates strongly in the Garden State. While the stock has had a great run of late, we think there is still significant runway ahead and we continue to like the Boyd story.” Shares in Caesars (+35.6%) popped this period despite numerous challenges in the land-based operating environment. The company announced Q1 2013 numbers which, according to Union Gaming, saw weak top-line macro growth throughout most regional markets. According the report, “The Atlantic City market faces a number of competitive challenges and Caesars’ outsized exposure to the market (four of the 12 properties) continues to weigh on overall results.” This was overshadowed by

68 | iGamingBusiness North America | Issue 07 | June/July 2013

the upcoming roll-out of online gaming in the Garden State as the company’s relative exposure and branding should translate into solid market share in the online space. In Las Vegas, near-term results will be weigheddown by construction disruption, but this should improve longer-term with the opening of several new properties. While Caesars faces a challenging operating environment, the stock trades on the optionality of online gaming, which is making some headway with New Jersey and Nevada set to commence operations and a slew of other states contemplating the issue. Union Gaming’s enthusiasm for online gaming is tempered by Caesars’ over-leveraged balance sheet and exposure to highly-competitive markets.

Looking forward With the early days of summer upon us, we look forward to the exciting period of racing which always greatly influences bookmakers’ year-end results. With Ascot on the horizon, we wait with great eagerness to see the results. Melissa Blau has been in the online gaming sector for eight years as both an operator and advisor. In her current capacity, Melissa is an advisor focused on bridging US and European interests. Through her consulting company, iGaming Capital, she has been advising mainly land-based companies in developing their online gaming strategy as well as informally advising on M&A opportunities and capital raising. Melissablau@iGamingcapital.com.

Digital Casinos A Market Assessment and Outlook

Online casinos were among the first gaming sites to appear on the internet when they launched in the mid-1990s thanks to the pioneering efforts of software companies. During the course of the past decade, the digital casino market (encompassing websites for computers, mobiles and other connected devices) has grown out of all recognition, maintaining its position as the leading gaming genre in terms of numbers of sites. Digital Casinos: A Market Assessment and Outlook examines the main issues surrounding the growing digital casino industry. Key Features: • Game genre overviews • Strategies into areas of opportunity: how you can expand and grow • Important factors affecting growth in the industry and how to avoid the pitfalls • Discover the marketing strategies of online and mobile operators • Regulatory issues and the growing role of smartphones and how it’s affecting digital casino offerings • Social media and live dealer gaming

To ask for your free executive summary quote 13EDigitalCasinos1 and call +44 (0) 20 7954 3489 or email reports @iGamingBusiness.com to order Digital Casinos today.

The report provides case studies of the major casino operators and software companies and determines who the winners and losers will be. It also features commentary from leading executives in the digital gaming industry who provide their own expert views on what is next for digital casinos.

www.iGamingBusiness.com

The leading provider of information for the online gaming industry.

Tribal Gaming

IGAMING’S IMPACT ON TRIBAL-STATE COMPACTS Whether to be pre-emptive or resistant to iGaming, tribes remain divided which, in turn, has created some interesting developments in Indian Country that may be a sign of things to come, writes Ehren Richardson. The anti-iGaming tribal faction predicts a catastrophic impact to existing bricks-andmortar gaming and believes tribes should pursue real money iGaming without waiting for the state or federal governments to pass legislation. Somewhere in the middle are the vast majority of tribes who are evaluating how to position themselves given the likely prospect of iGaming in their future. In the past few months, there have been significant developments in iGaming. New Jersey passed iGaming legislation into law making it the third state in the union to do so, Nevada is now authorized to pursue inter-state arrangements, Oklahoma signed a settlement agreement that allows the Cheyenne and Arapaho to provide real money iGaming services to players beyond US borders, the Winnemucca and Shoshone of Nevada announced they will do the same, there are iGaming deals between tribes and suppliers being announced every month and state lawmakers around the US continue their pursuit of iGaming legislation. In fact, the stock market is already pricingin the prospect of iGaming. In mid-march, Morgan Stanley predicted iGaming in the three states that have already legalized the activity would realize $640 million in its first full year of operation (2014) and the spread of iGaming throughout the US would

produce $9.3 billion by 2020, which is more than present day Las Vegas and Atlantic City revenues combined. Those that believe states are moving away from iGaming by proposing bans on the activity must consider the threat of neighboring states legalizing iGaming. Government officials and lawmakers in states considering a ban are also ensuring they have a way to reverse their position. In New Mexico, tribal-state compacts for five tribes including the Acoma Pueblo, Jicarilla Apache, Mescalero Apache, Pojoaque Pueblo and Navajo Nation expire in 2015, just around the corner in terms of compact negotiations. Yet, the proposed new compact for the Navajo has not seen movement, partly because of the impact that iGaming might have on the tribe and the state. In the proposed Navajo compact, if New Mexico decided to legalize any form of iGaming it would jeopardize the revenue received by the tribe from slots, but the Navajo have land that spans New Mexico, Arizona and Utah and the tribe is about to open their first casino in Arizona (their fourth casino in total). Given the restriction of iGaming in the proposed Navajo compact, should Arizona decide to allow iGaming, it could place the Navajo Nation in a precarious situation. The

70 | iGamingBusiness North America | Issue 07 | June/July 2013

repercussions of a neighboring state in this scenario directly impacts the tribe’s ability to compete online and the state’s ability to maintain its relationship with the tribe; a lose/lose proposition. Even if we discount the Navajo’s unique land situation, New Mexico borders four states with casino gaming. Should web gambling become legal in any of those neighboring states, it could change New Mexico’s outlook on iGaming. A change in the state’s position would trigger a renegotiation and potential arbitration of the Navajo compact terms. If one considers the possibility of this occurring sometime between now and 2037 when the compact expires, odds are the Navajo Nation would again be in a precarious situation. This dilemma is not unlike those in other tribal regions where state borders are shared with other states competing in casino gaming and considering iGaming.

Inter-state movement On top of intra-state concerns, there is the inter-state iGaming movement that has already begun in Nevada. Cross-border revenue sharing (for most forms of iGaming) is already occurring between Canadian provinces, so there is already a precedent in North America. Some industry pundits have predicted that Nevada and New Jersey are likely to be the first US jurisdictions to enter into an inter-state iGaming agreement due in some part to the common stakeholders in each state.

Tribal Gaming

Following the passage of Nevada Assembly Bill 114 in February allowing Nevada to enter into inter-state iGaming agreements with other states, the Nevada Gaming Control Board (NVGCB) reached out to gaming stakeholders to gain input on how interactive revenue sharing agreements with other states might be crafted. What stands out amongst the suggestions is the concept of taxing the player’s bets based on the player’s state residence and putting the responsibility on the operator to pay the appropriate state the appropriate tax revenue related to the transaction. So, let’s break that down. If a state with Indian gaming entered into an interstate compact with Nevada in this scenario, any bet placed by that state’s resident on a Nevada gaming website would be taxed and that tax would be sent from the Nevada gaming operator directly to the state in which the player resides. The tribe, in this case, loses its online gaming opportunity to a big Nevada operator brand and the state in which the tribe is located receives a tax on the bet. Among the other feedback to the NVGCB’s request is the concept that Nevada brings additional value to the inter-state agreement by providing its regulatory oversight in iGaming. In other words, a partnering state could outsource the oversight of its online operators to the NVGCB and the cost of this could be offset in the revenue sharing agreement.

Tribal gaming alliances Tribes must realize that these types of interstate proposals could entice some state governments looking for ways to augment state revenues with little-to-no cost basis. It doesn’t take much to recognize these types of proposals as an economic threat to Indian gaming. Some tribes have anticipated this type of development, and

have taken their own path. Enter tribal gaming alliances. There are certain tribes and their lawyers who are attempting to put together alliances as a means of working together specifically on the subject of iGaming. These groups have different agendas, but the one goal they share is to build strength in numbers. Lac du Flambeau, Red Cliff and St Croix bands of Lake Superior Chippewa Indians of Wisconsin have joined forces to form the Tribal Internet Gaming Alliance (TIGA) with the idea of developing competitive strategy for iGaming. Then there is the Intertribal Online Gaming Alliance (ITOGA), which believes tribes can participate now in Class II iGaming by providing the service from tribal lands and conducting transactions via payday loan facilities. Tribes are exempted under UIGEA and can operate Class II without violating existing tribal-state compacts. ITOGA’s Rob Rosette believes that through this strategy, the transaction then occurs on tribal lands and, therefore, complies with the IGRA as “Proxy Play.” As ambitious as this may sound, these alliances have not garnered the kind of commitment from tribes that they would like. This is not so much a sign that tribes are unwilling to work with each other, but more importantly an indication that tribes are scrutinizing their options very carefully and trying not to make a commitment that they could live to regret. Tribal leaders across the country are actively evaluating their potential iGaming markets and determining how their people can make a go of iGaming. Many tribal leaders I speak with are not against forming alliances but want to ensure that the alliance has the leadership, and a strategy, that aligns with the integrity and goals of their tribe.

Expect that tribal iGaming alliances will become a larger issue going forward.

Long-term success Indian Country’s true strength, as it applies to iGaming, is its geographical span across large population bases and state borders. Unity among tribes on iGaming could create a formidable competitive force not only in the US but also across the world. Some tribal leaders believe there is much to lose with iGaming now that Indian gaming is a $27.4 billion dollar industry. Perhaps, but it is dangerous to deny that iGaming is the future of the gaming industry and dangerous to allow commercial gaming to determine the standards of inter-state iGaming commerce. Economic pressures can effect market change, as seen in places like New Jersey. History has shown that innovation is the only way to maintain long-term business success and market leadership. Tribes need to understand that commercial gaming is setting its iGaming course and will proceed with or without tribes, particularly among states with little or no tribal gaming influence. As the iGaming business model is proven and states receive their revenue share in the coming years, no doubt other states will seek to follow. One needs to look no further than the lottery industry by way of precedent. As a result, tribal-state compact negotiations will now need to factor for the prospect of iGaming both in and outside state borders, and by this development, one can say that iGaming has already arrived in Indian Country.

Ehren Richardson is Director of Business Development at Wyley Interactive.

iGamingBusiness North America | Issue 07 | June/July 2013 | 71

Data Center

NATIONAL AND STATE ONLINE GAMBLING TRAFFIC Competitive Intelligence Services company, Experian Hitwise, provides data on the top visited gambling sites ranked by US Internet traffic for the entire US and by state based upon a sample of ten million US Internet users. The data does not include mobile traffic. Most Popular Gambling Websites Nationwide Ranked by Visits Share Month of April 2013 Websites

Total Visits

Visits Share Rank Rank March 13 Feb 13

Rank Jan 13

PCHLotto

22,492,699

6.16%

DNR

Lottery Post

16,987,020

4.65%

Florida Lottery

13,890,737

3.80%

PCHSlots

12,756,108

3.49%

NY Lottery

12,586,187

3.45%

PCH Instant Bingo

11,949,723

3.27%

DNR

FreeSlots

11,585,700

3.17%

Texas Lottery Commission

10,644,651

2.91%

Pennsylvania Lottery

10,171,436

2.78%

WorldWinner

9,816,253

2.69%

Source: Experian Hitwise US

Most Popular Gambling Websites Ranked by Visits from Illinois – 4 Rolling Weeks Ending May 4, 2013 Websites

Segmented Visits

Segmented

Most Popular Gambling Websites Ranked by Visits from Massachusetts – 4 Rolling Weeks Ending May 4, 2013 Websites

Rate

Illinois Lottery

27.92%

84.12%

Lottery Post

7.96%

6.11%

PCHLotto

6.45%

3.55%

FreeSlots

3.73%

4.35%

PCH Instant Bingo

3.69%

4.05%

PCHSlots

3.64%

3.90%

King.com

2.39%

4.89%

Bovada.lv

1.68%

11.85%

FreeLotto

1.49%

4.49%

Powerball

1.33%

2.46%

Source: Experian Hitwise US

Segmented

Visits

Rate

91.59%

Massachusetts State Lottery Commission

57.04%

PCHLotto

3.37%

1.79%

FoxWoods Resort Casino

2.66%

38.81%

Lottery Post

2.44%

1.81%

FreeSlots

1.83%

2.07%

PCHSlots

1.61%

1.68%

WorldWinner

1.51%

1.98%

PCH Instant Bingo

1.50%

1.60%

Twinspires.com

1.42%

3.86%

TVG

1.36%

7.49%

Source: Experian Hitwise US

72 | iGamingBusiness North America | Issue 07 | June/July 2013

Most Popular Gambling Websites Ranked by Visits from California – 4 Rolling Weeks Ending May 4, 2013 Websites

Segmented Visits

California Lottery

19.87%

94.42%

PCHLotto

6.61%

8.73%

WorldWinner

3.51%

11.34%

PCH Instant Bingo

3.33%

8.78%

PCHSlots

3.32%

8.54%

Sport Bookie Online

2.86%

22.45%

FreeSlots

2.66%

7.43%

TVG

2.61%

35.50%

Daily Racing Form

2.55%

18.06%

King.com

2.29%

11.25%

Segmented Rate

Source: Experian Hitwise US

Data Center

DATA PROVIDED BY

Most Popular Gambling Websites Ranked by Visits from New Jersey – 4 Rolling Weeks Ending May 4, 2013 Websites

Segmented Visits

Segmented Rate

Lottery Post

14.30%

8.50%

New Jersey Lottery

11.58%

89.52%

PCHLotto

5.67%

2.42%

Covers

3.23%

10.26%

NY Lottery

3.17%

2.51%

PCHSlots

2.96%

2.47%

Harrah's Casino Hotels

2.96%

6.87%

Lottery USA

2.88%

7.05%

PCH Instant Bingo

2.81%

2.39%

King.com

2.54%

4.03%

Source: Experian Hitwise US

Most Popular Gambling Websites Ranked by Visits from Iowa – 4 Rolling Weeks Ending May 4, 2013 Websites

Segmented Visits

Segmented

Most Popular Gambling Websites Ranked by Visits from Nevada – 4 Rolling Weeks Ending May 4, 2013 Websites

Segmented Visits

Rate

Segmented

Most Popular Gambling Websites Ranked by Visits from Florida – 4 Rolling Weeks Ending May 4, 2013 Websites

Segmented Visits

Rate

Segmented Rate

PCHLotto

16.10%

1.37%

Sport Bookie Online

31.21%

47.07%

Florida Lottery

44.98%

91.75%

FreeSlots

9.02%

1.63%

PCHLotto

6.04%

1.54%

PCHLotto

5.71%

6.98%

Florida Lottery - Second Chance Drawing

4.23%

96.38%

Lottery Post

3.98%

6.79%

PCHSlots

2.85%

6.80%

PCH Instant Bingo

2.79%

6.81%

WorldWinner

2.24%

6.70%

FreeSlots

2.06%

5.34%

www.us-lotteries.com

1.44%

14.01%

Daily Racing Form

1.38%

9.09%

PCH Instant Bingo

7.86%

1.33%

PCH Instant Bingo

3.75%

1.90%

PCHSlots

7.62%

1.27%

PCHSlots

3.71%

1.84%

Powerball

6.16%

1.76%

Covers

3.21%

6.07%

WorldWinner Brisnet.com King.com

4.24% 3.51% 2.73%

0.88% 4.58% 0.87%

California Lottery Ketqua.net VegasInsider.com

3.18% 3.12%

2.07%

2.91% 39.44% 9.76%

Harrah's Casino Hotels

1.97%

0.92%

Harrah's Casino Hotels

1.90%

2.63%

Game Colony.com

1.97%

5.22%

FreeSlots

1.84%

0.99%

Source: Experian Hitwise US

iGamingBusiness North America | Issue 07 | June/July 2013 | 73

Data Center

TOP 100 GAMING SITES WORLDWIDE Rk

Name

URL

Games

Name

bet365

www.bet365.com

Bingo, Casino, Live/In-Play Betting, Lottery, Mobile

FanDuel

www.fanduel.com

URL

Fantasy Sports

Games

The National Lottery UK

www.national-lottery.co.uk

Lottery, Mobile Lottery

MyBet

www.mybet.com

Betting Exchange, Casino Games, Live/In-Play Betting, Poker, Sportsbook

King.com

www.king.com

Backgammon, Mahjong , Skill Games

Oanda - FXTrade

www.fxtrade.oanda.com

Forex, Mobile Forex

BetFair

www.betfair.com

Betting Exchange, Casino, Live/In-Play Betting, Mobile, Poker, Skill Games, Sportsbook

JetBingo

www.jetbingo.com

Bingo, Casino Games

William Hill

www.williamhill.com

Backgammon, Bingo, Casino, Poker, Live/In-Play Betting, Lottery, Mobile, etc

Plus500

www.plus500.com

Forex, Mobile Forex

888 Casino

www.888.com

Bingo, Casino, In-Play Betting, Lottery, Mobile, Poker, Racebook, Sportsbook, etc

Bingo Australia

www.bingoaustralia.com

Bingo

TAB Racing and Sports

www.tab.co.nz

Live/In-Play Betting, Racebook, Sportsbook

Illinois Lottery

www.illinoislottery.com

Lottery

My Lotto.co.nz

www.mylotto.co.nz

Lottery, Mobile Lottery

Centrebet

www.centrebet.com

Mobile Racebooks, Mobile Sportsbooks, Racebook, Sportsbook, Spread Betting

WorldWinner

www.worldwinner.com

Backgammon, Skill Games

Royal Vegas Online Casino

www.royalvegascasino.com

Casino Games, Poker

SkyBet

www.skybet.com

Mobile Racebooks, Mobile Sportsbooks, Racebook, Sportsbook, Spread Betting

LEONbets.com

www.leonbets.com

Casino Games, Mobile Sportsbooks, Poker, Sportsbook

Paddy Power

www.paddypower.com

Bingo, Casino, In-Play Betting, Lottery, Mobile Poker, Racebook, Skill Games, Sportsbook

PlayMillion Casino

www.playmillion.com

Casino Games

eToro

www.etoro.com

Forex, Mobile Forex

The Health Lottery

www.healthlottery.co.uk

Lottery

TAB Sportsbet

www.tab.com.au

Racebook, Sportsbook

Markets.com

www.markets.com

Forex

IG Markets

www.igmarkets.co.uk

Forex, Mobile Spread Betting, Spread Betting

TVG Interactive Horseracing

www.tvg.com

Mobile Racebooks, Mobile Sportsbooks, Racebook, Sportsbook

Casino.com

www.casino.com

Casino Games, Mobile Casinos

Sports Interaction

www.sportsinteraction.com

Casino, In-Play Betting, Lottery, Mobile, Poker, Racebook, Sportsbook, etc

888 Poker

www.888poker.com

Poker

TwinSpires

www.twinspires.com

Mobile Racebooks, Racebook, Sportsbook

Ladbrokes

www.ladbrokes.com

Backgammon, Bingo, Casino, In-Play Betting, Lottery, Mobile, Poker, Sportsbook, etc

PKR

www.pkr.com

Casino Games, Mahjong , Mobile Poker, Poker, Racebook, Sportsbook

StarGames

www.stargames.com

Bingo, Casino Games, Poker, Skill Games

Gala Bingo

www.galabingo.com

Bingo, Casino Games, Mobile Bingo, Mobile Casinos

InstaForex

www.instaforex.com

Forex, Mobile Forex

Forex.com

www.forex.com

Forex, Mobile Forex

Game Duell

www.gameduell.com

Mobile Casinos, Skill Games

Mecca

www.meccabingo.com

Bingo, Casino Games, Lottery, Mobile Bingo, Mobile Casinos

Sportsbet

www.sportsbet.com.au

Live/In-Play Betting, Mobile Racebooks, Mobile Sportsbooks, Racebook, Sportsbook

TheLotter.com

www.thelotter.com

Lottery

Sportingbet

www.sportingbet.com

Casino Games, Live/In-Play Betting, Mobile Sportsbooks, Racebook, Sportsbook

24option

www.24option.com

Binary Options, Mobile Binary Options

PokerStars.eu

www.pokerstars.eu

Mobile Poker, Poker

Ladbrokes

www.ladbrokescasino.com

Casino Games

Betfred

www.betfred.com

Bingo, Casino, In-Play Betting, Lottery, Mobile, Lottery, Poker, Racebook, Sportsbook

Sun Bingo

www.sunbingo.co.uk

Bingo, Casino Games

bet-at-home

www.bet-at-home.com

Casino Games, Lottery, Poker, Racebook, Sportsbook

Tipico Online Gaming

www.tipico.com

Casino Games, Live/In-Play Betting, Sportsbook

Unibet

www.unibet.com

Backgammon, Bingo, Casino, In-Play Betting, Lottery, Mobile, Poker, Sportsbook, etc

PurePlay

www.pureplay.com

Poker

Coral

www.coral.co.uk

Bingo, Casino Games, Live/In-Play Betting, Lottery, Mobile, Poker, Sportsbook

GameColony.com

www.gamecolony.com

Backgammon, Mahjong , Rummy Games, Skill Games

Tombola

www.tombola.co.uk

Bingo, Lottery

Sky Poker

www.skypoker.com

Poker

Tatts

www.tatts.com

Lottery

Betsson

www.betsson.com

Betting Exchange, Bingo, Casino, In-Play Betting, Lottery, Mobile, Poker, Sportsbook, etc

Party Poker

www.partypoker.com

Poker

IASbet

www.iasbet.com

Mobile Racebooks, Mobile Sportsbooks, Racebook, Sportsbook

Oz Lotteries

www.ozlotteries.com

Lottery

TradeRush

www.traderush.com

Binary Options

Horse Player Interactive

www.horseplayerinteractive.com

Mobile Racebooks, Mobile Sportsbooks, Racebook, Sportsbook

TotelFootball

www.totelfootball.com

Fantasy Sports

IBCbet

www.ibcbet.com

Sportsbook

Fonbet

www.fonbet.com

Binary Options, Poker, Sportsbook

IG Index

www.igindex.co.uk

Mobile Spread Betting, Spread Betting

Sky Vegas

www.skyvegas.com

Casino Games, Mobile Casinos

Jackpotjoy

www.jackpotjoy.com

Bingo, Casino Games

Stan James

www.stanjames.com

Casino, In-Play Betting, Mobile, Casino, Poker, Sportsbook, etc

Pinnacle Sports

www.pinnaclesports.com

Casino Games, Mobile Sportsbooks, Sportsbook

Easy Forex

www.easy-forex.com

Forex, Mobile Forex

Rummy Circle

www.rummycircle.com

Rummy Games, Skill Games

Foxy Bingo

www.foxybingo.com

Bingo, Casino Games

TABOzBet

www.ozbet.com.au

Racebook, Sportsbook

All Slots Casino

www.allslotscasino.com

Casino Games, Lottery, Mobile Casinos, Mobile Racebooks, Mobile Sportsbooks

Atlantic Lottery

www.alc.ca

Bingo, Fantasy Sports, Lottery

bwin France

www.bwin.fr

Live/In-Play Betting, Mobile Poker, Mobile Sportsbooks, Poker, Sportsbook

bwin Spain

www.bwin.es

Bingo, Casino Games, Mobile Sportsbooks, Poker, Sportsbook

Party Casino

www.partycasino.com

Backgammon, Casino Games, Poker

Full Tilt Poker

www.fulltiltpoker.com

Mobile Poker, Poker

Sky Bingo

www.skybingo.com

Bingo, Casino Games, Lottery, Mobile Bingo, Skill Games

XForex

www.xforex.com

Forex

BetClic

www.betclic.com

Casino Games, Live/In-Play Betting, Lottery, Mobile Sportsbooks, Poker, Sportsbook

SBOBET

www.sbobet.com

Casino Games, Live/In-Play Betting, Mobile Sportsbooks, Racebook, Sportsbook

betboo

www.betboo.com

Casino Games, Live/In-Play Betting, Mobile Sportsbooks, Poker, Sportsbook

BetVictor

www.betvictor.com

Casino, In-Play Betting, Lottery, Mobile, Poker, Racebook, Sportsbook, Spread Betting

Ava FX

www.avafx.com

Forex, Mobile Forex

188 Bet

www.188bet.com

Betting Exchange, Casino, In-Play Betting, Mobile, Poker, Sportsbook, etc

UFX Markets

www.ufxmarkets.com

Forex

Play Now

www.playnow.com

Bingo, Casino Games, Live/In-Play Betting, Lottery, Poker, Sportsbook

LuxBet

www.luxbet.com

Live/In-Play Betting, Mobile Racebooks, Mobile Sportsbooks, Racebook, Sportsbook

Sportsbook.com

www.sportsbook.ag

Casino, In-Play Betting, Mobile, Poker, Racebook, Sportsbook

PlayHugeLottos.com

www.playhugelottos.com

Lottery

Bovada

www.bovada.lv

Casino Games, In-Play Betting, Lottery, Mobile, Poker, Racebook, Sportsbook

NetoTrade

www.netotrade.com

Forex, Mobile Forex

Ace 2 Three

www.ace2three.com

Rummy Games

Expekt

www.expekt.com

Bingo, Casino Games, Live/In-Play Betting, Mobile Sportsbooks, Poker, Sportsbook

bwin

www.bwin.com

Backgammon, Bingo, Casino, In-Play Betting, Lottery, Mobile, Skill Games, Sportsbook

100

Expekt

www.expekt.com

Bingo, Casino Games, Live/In-Play Betting, Mobile Sportsbooks, Poker, Sportsbook

Data provided by Casino City press • Traffic rankings indicate relative popularity of the 100 most popular iGaming sites offering real-money wagering and are based on historical web usage of a panel of nearly 20 million users over a 3-month period prior to publication. • The rankings are estimates based on panel usage and should not be considered absolute ranking values. • Only the top 5% of all iGaming sites are listed. For detailed, current, accurate information on 2,500 iGaming sites and 2,000 iGaming portal sites, along with rankings of the top 1,000 iGaming sites and the top 1,000 iGaming portals, directories of software providers, other suppliers, regulatory jurisdictions, and more, the latest edition of Casino City’s iGaming Business Directory is indispensable. View sample pages at www.casinocitypress.com

74 | iGamingBusiness North America | Issue 07 | June/July 2013

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