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June-06-2007,
Legalizing Online Gambling May Hit Players Where It Hurts The Most: Their Wallets...By Jay Graziani

For years offshore gambling remained safely out of public view, quietly going about its business in the Caribbean, poking its head out only occasionally to place a nearly inconspicuous ad in the back of a newspaper or sports-related magazine. As the 21st century rolled around, bringing with it a massive expansion of the internet, online gambling began to explode into a multi-billion dollar industry. This, of course, brought a concerned eye from "Big Brother", purporting to watch out for the safety of those wishing to patronize such establishments.

Government is never content with allowing its citizen to pursue their activities freely, and the gambling issue is no exception. For years, legislators attempted to pry their way into the doors of offshore casinos, to little avail until passage of the Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA) last October. However, the obvious problems in enforcing UIGEA, along with pressure from the World Trade Organization to open up the U.S. market to foreign competition, has given some so-called public servants second thoughts, most notably Representative Barney Frank (D - MA). While some legislators have been pushing for the regulation of online gambling for years without support, recent developments seem to have started to turn the momentum, as more legislators finally start to consider the issue seriously.

However, legalization will undoubtedly carry with it the price of licensing fees, taxes, and increased competitive pressure leading to more financial obligations of online casinos. Competition will cause an increase in not just advertising expenses, but costs related to all aspects of the operation in order to provide a level of service that is in line with the American-based gaming firms who would enter the market. This financial pressure will come at a huge price to the customer.

Let's peer into our crystal ball and see what might await the online gambling industry in the not-too-distant future if Congress decides to legitimize online gambling.

Betting Lines. Reduced-juice shops have been a staple of the offshore sports gambling world. Even post-UIGEA, most bettors have access to dime-line books for baseball and betting exchanges for discount pricing. With new financial pressures from licensing fees and taxes, sports books will have no choice but to raise their margins to maintain profits. Will 30-cent lines become the norm for football and baseball? Proposition bets will quite possibly be jacked-up to 40-cent lines or worse. Expect teaser prices to be lowered as well, continuing a trend that has already started offshore. The vigorish will also be increased on parlays and futures to squeeze every possible dime out of the customer.

Incentives. The increased financial pressure will also manifest itself in the perks offshore players have become accustomed to. Deposit bonuses as they exist today would disappear completely. That is likely a good thing for the industry, but a bad outcome for the majority of players for whom the deposit bonus might be all that is keeping their handicapping head above water. While competitive marketing will undoubtedly lead to some creative incentives, these will likely be of the nickel-and-dime variety. A $20 matchplay on the Superbowl (betting into 30-cent lines) is downright laughable in comparison to the 20% or better bonuses (up to $1000 or more) that were easily found just a year ago offshore.

Limits. Those that frequent the sports books of Las Vegas can often be heard complaining that the casinos don't seem to want to take a bet, that posted limits are too low, and that winning players are "backed-off" or subject to arbitrary line moves against them. While this has been an occasional problem offshore, mostly with less-reputable sports books, expect this to become an everyday occurrence if online gambling is legalized. The overly-cautious and stingy corporate mentality which has plagued Las Vegas will manifest itself in the online sector. The "nine.com" policy of limiting a player first and asking questions later may very well become the norm, and posted limits may be reduced to the level where getting down a significant amount of money may become near-impossible. Handicappers with any inkling of how to beat the posted lines may soon find themselves very limited in betting options.

Privacy. Any legislative policy will undoubtedly require all casinos to keep strict records of player activities. This will be justified to limit "problem gamblers"; and while gambling addiction is indeed a serious problem, it is not up to the government to intervene, or even to decide who exactly has a "problem". However, laws may be imposed limiting the amount of wagers a person may make in any given day, month, or year. Furthermore, these records will likely be subject to review by the IRS for tax collection purposes. While that may seem only fair on the surface, what of players who may win online only to lose it at a local casino, or to a "local" bookmaker or poker game---losses which may be impossible to prove?

These issues are not just for sports bettors. Poker players will be hit with increased rake and less profitable promotional tournaments and giveaways. Casino players will see rule changes to increase house hold (a la the 6-5 blackjack games now ubiquitous throughout the Vegas strip and Atlantic City), as well as a reduction in the usually-generous online casino bonuses. No matter what your game of choice, all online players can expect a significant hit to their bottom line.

While many gambling advocates are backing a House of Representatives-led investigation into online gambling, Barney Frank rhetoric, and pro-gambling legislation, ultimately all involved must realize that big tradeoffs will have to be made for legalization. Government will not get involved unless it gets a slice of the pie, and that slice will come out of the pocket of those who choose to place a wager. Those that are grinding out a living now will find that much harder to do in a regulated environment, while those who pursue gambling recreationally will suddenly find their hobby quite a bit more expensive.

When considering governmental regulation of online gambling, be careful what you wish for.

06-06-07
Jay Graziani
MajorWager.com
graziani@majorwager.com



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