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September 3, 2015

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Jon Ralston:

The clear and present danger to Nevada’s economy

The economic skies are brightening in Nevada.

The signs are all around. Gov. Brian Sandoval has been saying since late last year that various indicators — sales and gaming taxes, tourism numbers — indicate a gradual recovery is in the works. And Gov. Sunny also has a new economic development plan that envisions 50,000 new jobs by 2014 — an ambitious but admirable goal, perhaps. Only a Chicken Little would say anything but that blue skies are ahead.

If I may cluck — quietly, I assure you, so as not to darken the mood — has anyone considered what is really going on in the gaming world? No, I am not referring to the billions some companies are spending half a world away in the most important gaming destination on the planet. No, Macau is but a trifle compared with what is happening across the United States, a quiet temblor so far but one that could start registering on the economic Richter scale with cataclysmic consequences for this state’s economy.

Sorry, Gov. Sunny, for the apocalyptic language, but the federal government’s failure to act on Internet gaming, and that Christmas gift to lotteries and the states on web wagering could undo all that you are trying to accomplish.

Let me explain:

The Department of Justice changed the playing field on Dec. 23 by reversing its long-held position that the 1961 Wire Act banned all online gaming — the new interpretation only prohibits sports betting on the Internet. Without any federal governor, that opened up two new frontiers. One was for lotteries to expand their presence onto the web; the other allowed states to authorize intrastate Internet gaming, and, perhaps, form compacts with other states.

It doesn’t take Bill Gates to realize what this could mean. Like the Internet itself, web gaming is an unstoppable phenomenon that will eventually be accessed by tens of millions of people in the U.S. It’s not a matter of if, but when.

And that’s where Gov. Sunny and the rest of the state’s Poylannas better take notice. About half the states are considering web poker or Internet gambling legislation — and the list will soon grow. Some examples:

• California: A bill would permit unlimited Internet gambling operations

• Florida: A proposal would allow the Florida lottery to provide poker on the Internet.

• Illinois: State officials hope to launch an Internet platform this month.

There are many more, all leading in the same general direction: Legislation enabling some form of Internet gambling this year.

Nevada’s law is predicated on the federal government taking action, but so far that has not occurred for a variety of reasons. Senate Majority Leader Harry Reid has not been able to use his mastery of legislative legerdemain because of all the roadblocks. And the recent public opposition from Gondolier Numero Uno Sheldon Adelson, who says he worries about underage gamblers, has all but entombed the efforts in the House, whose GOP leaders like Adelson almost as much as they like his money. Adelson said in an interview with Politico recently he would testify in Congress against web gaming. I think he’s adamant.

What’s ironic is that with the proliferation of online lotteries, underage bettors are likely to explode much more quickly than they would with poker or games that only allow adult participation. That is a real possibility, considering where some of these states are going.

Most of the major Nevada gaming companies are ready to launch and would have a leg up on the competition because of their brands. No welovepoker.com site is going to be able to match what Caesars or MGM or Boyd could offer. But in the current universe, companies such as GTech and Scientific Games will get their feet in the web door first and be able to establish operations before the Nevada companies know what hit them. With billions upon billions at stake, this industry could lighten the load on some of the Strip giants. No one knows the ultimate impact if it happens without them, but there will be a substantial one.

I acknowledge that since Atlantic City came, ahem, online in 1977, there have been a succession of faux apocalypses for the Nevada economy — Indian gaming, Bible Belt gaming, California gaming, international gaming. But if the Chicken Littles were wrong then, will they be wrong again when the Internet comes alive with lotteries and slots and web poker?

Yes, some of these Nevada companies have made their own beds, portraying Indians, Mississippians, Asians as the enemy until they found it more lucrative to lie down with them for the money. But that doesn’t make the threat any less real of a burgeoning Internet gaming market that leaves out Nevada, a scenario that would darken Gov. Sunny’s world and allow the Chicken Littles to point and cluck.

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