Casino operators gearing up for online poker

Northern Nevada casino operators are working feverishly to usher online gaming into Nevada despite working under a regulatory environment that's still defining how the whole process will work.

Most of the large casino operators in northern Nevada have applied for interactive operator's licenses, says AG Burnett, recently appointed commissioner of the Nevada Gaming Control Board.

The license is required for casino operators, who in turn are either partnering with technology companies or executing in-house strategies to develop poker software and Web sites that are expected to go live late next year pending regulatory approval of their products.

The Eldorado, Atlantis and Siena are among early leaders working through the challenges of bringing online poker to Nevada-based players.

Play is limited to gamblers within the Silver State, though most operators expect to have a much wider jurisdictional reach in coming years. Currently, only online poker has been legalized in Nevada by the Gaming Control Board.

David Farahi, chief operating officer for Monarch Casino & Resort, says the executive team at the Atlantis has looked at this new approach to gaming for the past several years.

Monarch was among the first casino operators in state to get its interactive operators license, which allows Monarch to run a online wagering poker site. The license is separate from the gaming license required to operate the Atlantis.

Licensure for online gaming depends on a company's level of involvement, Burnett says.

"There is a license for operator of the interactive gaming website; there is a license for a manufacturer of the interactive system itself; and there is a license for those who make products associated with the Web site," he says.

Monarch seeks to partner with a technology provider to develop software and run the back-end operations of a new web site for poker wagering, much like the joint venture announced by the Eldorado and Reno's 3G Studios. Farahi says Monarch is being courted by companies seeking to license their gaming software to the company and to provide IT services for the new site.

"We are doing our due diligence and researching potential partners. As we learn more we are developing our plan on how we are going to get into this industry."

The new Web site likely would tie into the Atlantis' current site in some fashion, Farahi says, in part to capitalize on the strength of the Atlantis brand and also to leverage its strong relationship with northern Nevada customers. Because gaming sites currently can only be accessed by Nevada-based players, the property would use some form of geo-location software to ensure compliance, Farahi says.

Tech companies, software development firms or Internet service providers can't run for-money poker sites themselves because they don't have the required interactive operator's license. The bucks stop with brick-and-mortar institutions such as the Atlantis, Eldorado and Siena because those businesses already have the financial controls in place monitoring, compliance, auditing to ensure that each process conforms with Gaming Control Board standards.

David Colvin, majority owner of the Siena Hotel Casino, is taking a much different approach to the concept of online gaming.

The Las Vegas-based gaming mogul also owns bingo and keno giant Gaming Arts, and he's spun off a new company, Z4 Poker, to handle all three aspects of online gaming. He's got about a dozen employees working for Z4 Poker, and another 20 Gaming Arts staffers sharing time on the venture as well.

The Siena would be the operator, Gaming Arts would be the service provider, and Z4 Poker would be the interactive content provider to have everything under one umbrella. Colvin says once all the wrinkles are ironed out that he would bring in other casino properties as either fully licensed operators or affiliates.

Colvin expects to go live with a free-to-play site in the second quarter of 2013 and could transition the site to a revenue model pending regulatory approval. The landscape of how online gaming will actually work still is a little muddled, he says.

"It is a foggy now as it has ever been."

Like 3G Studios, which already has developed a host of additional games in anticipation of a much broader scope of gaming options than just poker, Z4 Poker has nearly 100 games already developed, including a full suite of keno and bingo games.

On the other side of the coin, staff at the Gaming Control Board and Nevada Gaming Commission have been working diligently to encompass the myriad aspects of legalized online gaming in the state. Burnett says the board and commission had to become experts in the field on the fly.

"I can't stress enough the level of understanding our staff in every division has reached on these matters," he says. "We really ramped up for this and made a hard push to keep Nevada at the forefront of this emerging industry."

The biggest obstacles overcome so far have been reviewing a host of competing products in house and from independent test labs to ensure that each company's software complies with newly developed regulations. Once that process is complete, Burnett says, the operators will be free to get their sites up and running.

A separate regulatory structure has been established for online service providers. Those companies will have to be vetted by the Gaming Control Board and contract their services to casino operators.

Revenue models will work differently depending on how deals are structured.

For instance, the Atlantis is looking at a revenue-share model in which a portion of the revenue goes to the technology provider and the casino's revenue is generated from the poker rake, or the money taken from each pot for the house, Farahi says.

The Siena, on the other hand, would likely participate in a similar revenue-share scenario with larger casinos that get an operator's license from the state. However, smaller properties that aren't able to pony up the half-million licensing fee would work under a fee-based model, Colvin says.

The advent of online wagering is a natural extension of the products offered on casino floors, Farahi notes.

"Gaming is a form of entertainment, and people come to a casino because they want to be entertained. We work hard at doing that, and being able to entertain someone in their living room playing on their computer is just another form of entertainment. We have learned how to entertain people, and this is just another way of doing it."


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