Notice for online regulation campaign

It looks like the mainstream media is picking up a story reported on the Internet last week about BetOnSports’ David Carruthers’s campaign to bring online gaming regulation before the public. From the LVRJ:

But unless Congress abandons efforts to prohibit Internet gambling. Carruthers said, the United States stands to lose billions of dollars in potential tax revenue to the United Kingdom and other countries that allow online wagering but regulate it.

BetonSports.com is headquartered in San Jose, Costa Rica. Carruthers came to the company after working 24 years for Ladbrokes Racing in the United Kingdom.

“We want to be the standard-bearer of Internet gambling regulation in the United States because a majority of our customers come from the U.S.,” Carruthers said.

Internet gambling is projected to reach $7 billion in revenue this year after producing $5.7 billion last year on more than 1,800 offshore wagering Web sites. By 2010, the Internet gambling market is expected to produce $18.4 billion.

As part of his company’s campaign for regulation, Carruthers is conducting summit meetings in New York, Washington, Chicago and Los Angeles.

The summits include discussions among Internet gambling officials, attorneys and educators about how to develop federal regulations for online wagering.

Findings will be published in a white paper that will be released shortly after the Nov. 2 election.

Exec pushing Internet gaming

This is certainly a developing story. I will be attending the Los Angeles event, so expect a full report about the meeting here, maybe in real time if I can get net access. Isn’t technology great?

Police poker popped

Like many other Americans, police in Virginia Beach like playing poker. For almost a year, they’ve been holding a monthly Texas Hold’em tournament in the Fraternal Order of Police lodge. But now, because the tournaments are apparently illegal, they will cease. From HamptonRoads.com:

The game became an issue with the FOP after the state Department of Charitable Gaming determined that the tournament was illegal and reported the matter to city prosecutors.

The gaming commission said the tournament must be shut down, or the FOP would risk losing its license to hold charity bingo and raffle events, said Paul A. Farrell, the police officer who organized the event.

Farrell said the FOP allowed him to use its lodge for the event and provided a lunch buffet for participants.

He said the ruling was a shock to him because he had been assured that the game was legal as long as he did not take a �cut� of the proceeds.

Farrell said all proceeds � generated by a $75 fee charged to each participant � were turned over to the winners of the tournament.

�I thought I was doing everything on the up and up,� he said. �I definitely paid out everything that I took in.�

Cristman said state statutes outlaw all gambling in Virginia, with four exemptions: bingo and raffles held by charitable organizations; the state lottery; off-track parimutuel betting; and games held in private homes.

The FOP game, Cristman said, does not qualify under any of the exemptions.

Poker itself is not outlawed by state statute, he said, but playing it for money anywhere but at a private residence is illegal.

Poker tournament at police lodge declared illegal, canceled

So you can play poker all you want in a private home, but if you do so in a fraternal hall, you’re breaking the law. This makes perfect sense, and is another example of the fractured approach to gaming prohibition that I discuss in Uneasy Convictions.

The thing that struck me was that the whole set-up seemed like something from the movie Rounders. A police-sponsored tournament drawing people from all over (about 150 showed up to the final two games), everyone thinking they’re experts after watching televised poker. Probably the perfect set-up for a skilled professional to make a killing.

When even the police aren’t sure if their gambling is legal, you know that there needs to be some clarification.

New debate on online betting

The parent company of BetonSports.com, a big Internet wagering site, has announced that it will launch an initiative called “Proposition 1: To Regulate or Prohibit Online Gambling?” which will bring the question of the legality of online gambling before the United States public. From yahoo, who just ran the press release:


The initiative will be anchored by a national summit tour during September in New York, Washington, D.C., Chicago and Los Angeles. Summit meetings will bring together experts in law, academia, industry and government to stimulate the discussion and debate needed to address issues critical to the development of federal regulation that will both recognize the growth and popularity of online gambling and provide key consumer protections. This begins with a focus on the merits of existing proposed legislation in Congress, but also looks at efforts by the Department of Justice to prohibit advertising by online gambling companies. Moreover, the initiative will address what the online and traditional “land-based” segments of the gambling industry should be doing together to demonstrate leadership in providing Congress valuable input and in protecting consumers.

To assist lawmakers with the process of developing the right legislation for consumers, BETonSPORTS will capture the key findings from the initiative in a white paper which it will publish just after the November 2 election.

“As an emerging form of entertainment, online gambling is growing exponentially and is here to stay in the U.S. Efforts in Congress to develop legislation have stalled and are otherwise polarizing people. The Department of Justice’s approach is also counterproductive. There’s a public policy vacuum on the issues and it’s in the best interests of consumers for industry to step in and help focus on what’s most important to consider and accomplish in creating legislation,” said David Carruthers, CEO of BETonSPORTS.

Also part of the initiative is a series of college campus debates and an advertising campaign.

‘Proposition 1: To Regulate or Prohibit Online Gambling?’, a National Public Policy Initiative

I’m chairing a session at the Global Gaming Expo on this very topic. So far, the panelists are Bob Blumenfeld, an attorney who assisted Antigua’s WTO challenge of United States gaming prohibitions, and Jay Cohen, the only man who has spent time in an American prison for violating the Wire Act by running an online operation. I’d love to have a representative of this initiative be part of it.

If you want to get involved in the debates (or suggest the inclusion of a certain academic expert who has just finished a book on the Wire Act and gaming prohibition), you can contact Kajal Jhaveri, Ruder Finn, at 212-593-5864 or jhaverik@ruderfinn.com.

New thing at Newport

I think that was the name of an Archie Shepp album in the 1960s. Anyway, today I’m talking about Newport, Kentucky. Once a major stop on the national “flourishing illegal casinos and vice” circuit, the city has cleaned up its image.

The city became a vice center in the 19th century, and remained so until an anti-corruption campaign in 1961. I think I touched on this in Uneasy Convictions, because Newport was one of the top targets of Bobby Kennedy’s Justice Department. You can read all about it in Ronald Goldfarb’s Perfect Villains, Imperfect Heroes, if you are curious.

Anyway, the Cincinatti Post has a few stories about Newport today. They are:

Girls, guns and gambling

Before there was Vegas, there was Newport

Casinos didn’t go quietly into the night

Newport: Envy of the region


This is part of a series to publicize a symposium entitled “Girls, Guns and Gambling: How Ordinary Citizens Drove Vice out of Newport,” to be held at Northern Kentucky University Thursday.

This should be a fascinating evening. If I was in the Cincinatti area, I’d be there in a heartbeat.

Inside an illegal gambling operation

If you were from the Maple Park, IL area, DJ’s Tavern West was the place to get some gambling done…until a May 28th bust, that is.  From the Daily Herald:

Court documents that detail the search of the tavern at 221 Main St. in Maple Park and the Yorkville home of its owner, David Weeks, paint a picture of a little Las Vegas in the cornfields.

Illinois State Police officers went undercover for a 15-month investigation of the tavern, which came to a head May 28 with the arrest of 12 people including Weeks, the bar manager, and the Maple Park village president. The Maple Park police chief was arrested about a week later.

The investigation found a complex gambling system mixed with a small-town openness, the records show.

According to court documents and officials, here is a look at how authorities say the operation worked:
Nearly three-quarters of the front room of the tavern was taken up by nine video slot machines all hooked up to pay out illegally, Melvin said. Just like in Las Vegas, patrons put cash into the machines and played until they ran out of money or decided to cash in credits.

Undercover officers said in the report winning players would tell whatever bartender was on duty how many credits they had earned and the bartender verified it by pushing a button next to the cash register, officials said.

Then money changed hands, something undercover officers said they witnessed more than 30 times.

The knob next to the cash register was wired to the video slot machines to allow resetting of the machines’ credits, the report said. Illinois State Police officer Joseph Stavola wrote in a court affidavit that the wiring was for “no purpose other than illegal gambling.”
According to court documents, police found much more to whet gamblers’ appetites.
Bartenders offered two rolls of five dice for $1. Winning rolls were based on poker categories such as a full house or four of a kind. Winners could earn free drink tokens, a six-pack of beer or for five of a kind, the cash pot, which could get as high as $500.
On Wednesdays, a vertical spinning wheel came out of the back office to offer $2 for one of the 120 lines on the wheel, according to court records. Patrons not present for the spin forfeited half of their winnings to help prime the pot for the following week’s spin.
The wheel, which was also used for local raffles, was so large that when officers raided the bar they had to disassemble it to make it fit through the front door.
Other gambling options changed by the season. In the fall, a football square pool offered a one in 100 chance for between $2 to $10 a square, court documents said. During the summer, a weekly race car pool offered a randomly selected NASCAR starting position and a percentage of the pot for those whose car finished first, second or third place.
Despite the plethora of games, there was one key reason officials focused on the Maple Park bar.
“Book making,” Melvin said. “That’s why we paid more attention.”

The Illinois Attorney General’s office estimates the video slot machines generated $700,000 a year in profits.

Officials won’t disclose how much the book making generated, but in a weekend raid on one of the duller professional sports betting times, officers seized $8,300 from the bar and $40,522 from the Yorkville home of the bar’s owner, according to court documents. Stavola wrote in court filings that a frequent patron at the bar told him Weeks netted $65,000 from the Super Bowl betting alone.

Court documents describe a complex system set up to take and pay out bets on professional sporting events. Patrons could cash checks at the bar, provided the money was going toward gambling. Bets and payouts for sporting events were kept separate from cash flow generated by other games. A cash register at the south and north end of the bar made the division possible.

Bets were primarily taken at the tavern by bar manager Michael Faber and sometimes through his cell phone, according to the documents. When he wasn’t around, bartenders would collect envelopes of money for him or pass out envelopes left by him to winning patrons. Undercover officers allege they repeatedly saw such envelope transactions and contacted Faber on his cell more than 18 times to place bets that totaled more than $2,000.

The gambling in DJ’s, as told by investigators

As a historian, stuff like this is invaluable in reconstructing the history of illegal gambling, which I think is just as important as legal gambling in understanding how Americans approach gambling. 

They didn’t, unfortunately, take action on the mystery mammal.

Breathe easy, Anaheim

Particularly if you own a pinball machine. From the LA Times:

Anaheim officials are doing a little housekeeping and whittling down the city’s bulky municipal code. Tonight, the City Council is scheduled to consider repealing or modifying several ordinances that officials call outdated, redundant or just plain silly.

The unlucky task of poring through decades of laws and thousands of ordinances fell to City Atty. Jack White, who said he had collected arcane gems that may come in handy only at cocktail parties or if he became a “Jeopardy!” contestant.

He knows, for example, that in the 1940s and ’50s, pinball was considered gambling.

The change in the law is welcome news for Terry McIntire, an owner of Orange County Game Distributors Inc., who said that if authorities cited him for all his pinball machines, “we would be old and gray by the time we got out” of jail.

In most cases, authorities realized the absurdities of these ordinances and stopped enforcing them years ago.

Pinball Desperados in Anaheim Will Be Allowed to Play at Full Tilt

During my research for Uneasy Convictions, I learned that many slot manufacturers evaded the Johnson Act, the 1950 law that halted the interstate shipment of slots, by switching to “amusement” devices whose “free games” could be redeemed for cash. In 1961, when RFK pushed for new anti-gambling laws (including the Wire Act), he also spoke out against pinball machines. So this was actually a pretty common theme of anti-gamblers in the 1950s and 1960s.

Even now, the line between “amusement” and gambling is thinner than we think. Is there that much difference between a slot machine and redemption games? Some would argue no.

VLT easter eggs

Everyone likes easter eggs, hidden features in video games, DVDs, etc. Usually they are not that impressive–you can unlock hidden commentary or an alternate costume in fighting games. But an article in Canada’s National Post says that video lottery terminals also have easter eggs that can be exploited:

As the middle-aged mother from Illinois plunked away at buttons on the electronic poker machine, something unusual happened. The machine, usually so adept at parting gamblers from their money, fell under the spell of the player.

The woman had manipulated the video lottery terminal at an Edmonton casino into letting her win on command, recalls Zues Yaghi, a computer programmer and gaming machine expert who watched the scene.

“She had been doing it for four years and had put her kids through university, was driving a Mercedes 500. She was all decked out,” Mr. Yaghi recalled.

“She thought she was the queen of the underground…. It’s so easy, so easy to run 10 grand from these machines.”

Mr. Yaghi says the woman was tapping into what he and some other experts call an “easter egg”: a line of digital code allegedly embedded on to the machine’s computer chip by rogue programmers, allowing informed players to cheat the games out of their booty.

Mr. Yaghi reported the problem to gaming authorities after discovering it himself. But four years later, rather than being hailed a hero, he is living a legal nightmare over the issue, facing a $10-million libel suit filed by the American maker of the machine on which he first found an easter egg.

Meanwhile, he and other experts allege that some compromised machines are still out there today, raising questions about the fairness of a diversion on which Canadians spend billions of dollars a year.

‘Easter egg’ cheats cracking casinos?

In the old days of mechanical slots, owners had to worry about mechanics or locksmiths making a duplicate key; today, they have to consider the possibility that programmers have inserted easter eggs.
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Yesterday, the Pittsburgh Post-Gazette published an opinion piece I wrote about Pennsylvania’s recent slot machine bill’s approval:

Forum: Greetings from Slotsylvania

Obviously, this bill marks a historic milestone, and I think that we’re going to be seeing much more gaming expansion in the next few years.