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Tech industry sets its sights on gambling

silicon valley billion-dollar business facebook zynga justice department betable

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#1 Hum


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Posted 19 February 2013 - 02:04

SAN FRANCISCO — Look out Las Vegas, here comes FarmVille.

Silicon Valley is betting that online gambling is its next billion-dollar business, with developers across the industry turning casual games into occasions for adults to wager.

At the moment these games are aimed overseas, where attitudes toward gambling are more relaxed and online betting is generally legal, and extremely lucrative. But game companies, from small teams to Facebook and Zynga, have their eye on the ultimate prize: the rich American market, where most types of real-money online wagers have been cleared by the Justice Department.

Two states, Nevada and Delaware, are already laying the groundwork for virtual gambling. Within months they will most likely be joined by New Jersey.

Bills have also been introduced in Mississippi, Iowa, California and other states, driven by the realization that online gambling could bring in streams of tax revenue. In Iowa alone, online gambling proponents estimated that 150,000 residents were playing poker illegally.

Legislative progress, though, is slow. Opponents include an influential casino industry wary of competition and the traditional antigambling factions, who oppose it on moral grounds.

Silicon Valley is hardly discouraged. Companies here believe that online gambling will soon become as simple as buying an e-book or streaming a movie, and that the convenience of being able to bet from your couch, surrounded by virtual friends, will offset the lack of glittering ambience found in a real-world casino. Think you can get a field of corn in FarmVille, the popular Facebook game, to grow faster than your brother-in-law's? Five bucks says you cannot.

Betable has set up shop in San Francisco, where 15 studios are now using its back-end platform. "This is the next evolution in games, and kind of ground zero for the developer community," Mr. Griffin said.

As companies eagerly wait for the American market to open up, they are introducing betting games in Britain, where Apple has tweaked the iPhone software to accommodate them. Facebook began allowing online gambling for British users last summer with Jackpotjoy, a bingo site; deals with other developers followed in December and this month.

Overseas, online betting is generating an estimated $32 billion in annual revenue — nearly the size of the United States casino market. Juniper Research estimates that betting on mobile devices alone will be a $100 billion worldwide industry by 2017.

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#2 Growled


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Posted 19 February 2013 - 02:44

With money as tight as it is, I can see this happening really easily. It wouldn't have happened a few years ago but with everyone from local to state to federal governments fighting for every bit of money they can get......

#3 OP Hum


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Posted 19 February 2013 - 02:46

We'll all be in the poorhouse in no time. :p

#4 Torolol


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Posted 19 February 2013 - 03:01

as long U.S ban foreign gambling site from entering U.S market, America doesn't need to worry about capital outflow.

#5 PGHammer


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Posted 19 February 2013 - 03:49

as long U.S ban foreign gambling site from entering U.S market, America doesn't need to worry about capital outflow.

And that has indeed been the major concern (for governments - national and local) on Internet gaming (not just in North America, even).

Non-US gaming operations look at the United States the same way that US manufacturers used to look at the PRC - they look at the numbers of gamblers and gamers and salivate.

What makes it all the sillier is that the United States has a major player in gaming (onsite and offsite) actually based within the US - IGT. (While IGT is best known for slot machines and lottery systems, they also own WagerWorks - THE company behind the back operations of many existing - and non-US-based - Internet gambling and gaming operations.)

IGT has not exactly been asleep at the switch, either. Quite aside from lobbying efforts that they have been doing in Nevada and New Jersey, IGT (via Wagerworks) acquired DoubleDown, an existing/extant online free gambling/gaming site with a Facebook portal. Since that acquisition, DoubleDown (which, along with Wagerworks, now is the core of IGT Interactive) has basically become IGT Interactive's research and development arm - DoubleDown itself is now built on a version of the existing Wagerworks back-end operations software. I don't hate IGT for doing this - it makes a ton of sense.

Surprisingly, IGT is an oddity in that it also makes sure their operations software works with the hardware - and software - of their erstwhile competition. (It's just as true in the Internet gaming space as it is in real/physical casino gaming operations - where the supradominant player is IGT's sb-X.) In the free Internet gaming space, the IGT Interactive/Wagerworks back-end operations software is also used by other social-gambling sites, such as High 5 (owned by the slot machine manufacturer of the same name) and even Jackpot Party Casino (owned by WMS Gaming, IGT's biggest competitor in the slot space).

However, the issue isn't (for once) preserving (or even establishment) of US dominance in the Internet gambling space - the issue is a far simpler one: following (and properly taxing) the winnings. (Hasn't the same issue cropped up in Canada?) I strongly suspect that both Nevada and New Jersey are looking at the British Columbian model - especially since it's already in operation. The bigger issue - for both states - remains one particular national law - the Wire Act.

The Wire Act is of such prime importance because it affects the core of multi-state gaming operations outside of multistate lotteries - which were at the core of the ONLY amendment said Act has seen recently. What most folks don't realize is that the Act is - quite literally - the legal vestige of Elliott Ness and the "Untouchables" - the target business of the Act was numbers rackets connected via telegraphics and telephone. (The Wire Act goes back to the end of Prohibition and predates the Great Depression.)

What worries non-US gaming operations is that a hostile-to-outside-operations United States government could well bring NSA (and its computational firepower) in to gum up the works. (Despite the fact that a large part of the NSA workforce are members of the military, the Posse Comitatus Act does not apply to the NSA - far scarier, though, is that it would take no more than a telephone call from the Director of the FBI - or the Secretary of Homeland Security (enforcement of the Wire Act remained with the United States Secret Service - now part of DHS) to bring NSA's computers into the mix. How much do other countries rely on gaming operations for revenue? Is it worth facing the wrath of the NSA?)

The issue is simple - however, the NSA is the elephant HERD in the room.

#6 FloatingFatMan


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Posted 20 February 2013 - 08:19

I've always thought it incredibly dumb that gambling is illegal in a large part of the US...