Paul's Wall May 28, 2012

Paul's Wall May 28, 2012

I received some interesting feedback regarding the international "People's Postcode Lottery" recently licensed by the Alderney Gambling Control Commission. One commentary was incredulous that the Alderney Gambling Control Commission somehow manages to hold onto even a shred of international credibility after the gross negligence in their oversight of Full-Tilt Poker. In fact, I think the international community should extend a big "Thank you" to the Alderney Gambling Control Commission for making it so crystal clear why state and member state governments should have the unencumbered right to regulate this industry, and why the EU Commission and the U.S. federal government should refrain from imposition of any pan-European or federal framework, or any form of "mutual recognition" of licenses granted by other states like Alderney which have proven themselves to be either corrupt or inept at the job of regulating their licensees.

Another commentary pointed out the importance for governments all around the world to reinforce their laws that protect the interests of their own legal lotteries. The prospect of an international "People's Postcode Lottery" based in Alderney invading international markets is troubling indeed; with a potential impact that would far exceed the threat of i-poker and other games. Perhaps others can do what Switzerland just did. They took the whole question to a vote of the people. It is now enshrined in the Swiss Federal Constitution that "profits from lottery games and betting will continue to be disbursed to charitable, sporting, and cultural bodies and projects." It's time to roll back the unfortunate and misguided notion that the interests of the people should be compromised at the altar of "free-market capitalism" and other rationales used by operators in Malta, Gibralter, Alderney, and the UK to force other states to sacrifice their sovereignty when it comes to the regulation and taxation of gambling. Congrat's to Loterie Romande, the Swiss government, and the Swiss people for asserting your rights and providing an example for how others might do the same.

More evidence that the tide is turning in favor of governments stepping up to take control of their gambling industry destiny: The Spanish government is in the process of licensing i-gaming operators. As a condition for being approved, applicants for a license are being required to pay taxes on revenues earned (albeit illegally) since 1970! And it is actually being enforced - Bwin.Party is paying €33m. It is especially gratifying that "The back-dated tax demand sparked anger among UK gaming companies." Let's hope that jurisdictions everywhere can lay claim to those taxes that should have been collected on revenues accrued over years of illegal operations. Pokerstars and others would owe a huge amount in the U.S. Maybe France, Italy, and others can go back to licensees like Bwin and demand that recompense be made for revenues earned illegally prior to their being licensed?

There has been a debate as to whether the lottery player migrates to other forms of gaming and gambling. It was almost certainly true, 20 years ago, that the profile of the consumer who was willing and able to travel to Las Vegas or other casino gambling destinations would be different than the consumer who bought a $1 lottery ticket at the convenience store. But does it necessarily continue to be true now that casino gambling is within short driving distance for almost everyone? Not according to the recent report by Pennsylvania Legislative Budget and Finance Committee. "Rapid growth in Pennsylvania’s casino revenue has suppressed lottery sales in the state as more options become available for residents eager to gamble." Since being introduced in 2006, casino gaming revenue in Pennsylvania has grown from zero to over $3 billion in 2011, almost equal to lottery sales. While it is true that lotteries are in the "entertainment" business, it is even more true that we are in the gaming business with a focus on games of chance. Legislators need to give their state lotteries more flexibility to implement new games through new channels, like internet and mobile, to effectively compete in this space.

Dr. Alan Kay (a founding principal of Xerox PARC research facility in 1970, a fellow at Apple and Disney, a technological visionary and evangelist who was at the center of much of the business computing and digital communications revolution of the last 40 years) puts a contemporary spin on Abraham Lincoln's quote that is our conference theme: "The best way to predict the future is to invent it. This is the century in which you can be proactive about the future; you don't have to be reactive." I would respectfully update even Dr. Kay's version to point out that if others (i.e. our competitors) are being proactive and inventing, or creating, the future, then we in fact have no choice but to do the same in order to protect the interests of our stakeholders. The only viable option in a world being shaped by change-agents is to be the ones who proactively set the ground rules for our industry by taking the lead and creating the future that serves the interests of our stakeholders and the consumer.

We need to remain vigilant and keep reminding our legislators to block any attempt by people like Sen. Harry Reid and others to impose a federal regulatory and taxation framework onto the i-gaming industry. Reshaping our laws that way helps Big Casino interests and hurts states and by extension hurts the consumer and the general public. Thankfully, though, according to Frank Fahrenkopf, chief executive of the American Gaming Association, the U.S. Congress is not likely to pass anything soon. “In a presidential year, in a Congress that is so partisan, we are going to have to get lucky to get it passed.” And the Executive branch of the federal government affirmed its agreement with and support of the U.S. Dept. of Justice clarification that states should have the authority to regulate all gaming and gambling except sports-betting.

Our effort to give a voice to the consumer, www.LotteryPlayersAlliance.com, is building momentum. Thank you for your support and guidance. I welcome whatever input you might have in our effort to promote the interests of lottery's biggest stakeholder, the lottery player. This e-mail address is being protected from spambots. You need JavaScript enabled to view it .

Mark your Calendars (Oct. 22-25) for Lottery Expo 2012 in Miami. Click on www.PublicGaming.org for more info.