PokerUpdate: How did you get your start in gaming analysis? Tell us about your role at GamblingCompliance. What are your day-to-day responsibilities?
Chris Krafcik: I started as an intern at an internet gambling trade publication called Interactive Gaming News in July 2006. My first day on the job, I covered the arraignment of David Carruthers, the former chief executive of BetonSports, the defunct sports betting firm, in Federal District Court in Missouri. It was a surreal introduction to the industry.
Some days I just have to pinch myself and laugh. I was a graduate student at Katholieke Universiteit Leuven studying philosophy — I wanted to teach and write weird books. When I returned home to Missouri in 2006, I stumbled upon Interactive Gaming News through the significant other of a close friend of my mother. Mark Balestra — the significant other in question — gave me the internship. I’ll always be grateful to him for that.
Almost six years later, I’m research director for North America at GamblingCompliance. Here I track and analyze land-based and internet gambling policy in the United States. I’ve spent most of my career making connections throughout various levels of industry and government, and my job is to gather intelligence from those connections, analyze it, and pass it on to our worldwide client base. It’s stimulating work — most days, I get a front-row view of the policymaking process.
Before I answer further questions, a brief disclaimer: the views I share do not necessarily reflect those of GamblingCompliance. I’m speaking strictly on my own behalf here.
PU: Absolutely. What are your thoughts on regulation in the United States? Do you think only US-based interests will be granted business-to-customer licences as has been outlined in proposed legislation?
CK: I get this question a lot, and I’ve tried answering it in a lot of different ways. Rather than speculate about what I think will or will not happen with regard to B2C, B2B or B2G licensure, I think it’s wisest to say that the industry has not seen anything even resembling a final legislative product on Capitol Hill.
Sure, the draft language circulated last December by Senate Majority Leader Reid of Nevada did give U.S.-based businesses — casinos, racetracks, card rooms, equipment manufacturers and some tribal governments — semi-exclusive rights to B2C licensure. And, sure, it is easy to think that because Reid is the shot-caller on internet gambling issues in Washington that fresh draft language from his office — circulated, perhaps, later this year — will look something like last year’s language.
But so much has changed since then. For instance, the state lottery industry — a disjointed, $60 billion behemoth that had little to no presence on The Hill as recently as last year — is now undertaking a vigorous and increasingly effective lobbying campaign against federal regulation of internet gambling. Moreover, the fragmented Indian gaming industry — which, according to its lobbyists, was largely ignored during negotiations last year — has united behind one idea, at least: that internet gambling legislation is going absolutely nowhere unless and until Indian Country is given a seat at the bargaining table.
My view, in short, is that a consensus bill — one that includes input from most, if not all, stakeholder groups — is a ways off. Until Reid’s office circulates new draft language and a transparent stakeholder-consultation process begins, speculating about b-to-whatever licensure is a pointless exercise. Unless, of course, gambling businesses leverage such speculation for purposes of enhancing their standing in the financial markets. (And, as you’ve probably seen, many of them do).
PU: The US House of Representatives held a follow-up hearing earlier this month on the potential legalisation of online poker. What are your thoughts on the hearing? Do you think legislation will be passed this year?
CK: The informational hearing in the House subcommittee was interesting, I guess. Admittedly, I tend not to get too excited by informational hearings. I don’t mean to sound cynical or undemocratic. I’ll definitely concede that from the point of view of crafting transparent public policy, informational hearings are absolutely necessary. I just don’t think such hearings have done much, if anything, to help internet gambling legislation advance.
Looking back, internet gambling was broached in December 1995 by Sen. Kyl of Arizona. The issue has been around almost 17 years. Although it’s been a nonstarter for most of that time, I guess I’m still amazed that there has been just one committee vote on an internet gambling regulatory bill in congressional history. Hard to believe. And not. After all, internet gambling regulation simply doesn’t rate in the current political climate; for now, a few big issues — namely, taxation, health care and defense — carry the most weight.
Since April 2007, when Rep. Frank of Massachusetts introduced the first internet gambling regulatory bill, I’ve been hearing the This-Year-Is-The-Year rallying cry from highly placed sources on the industry and policy side of things. Interestingly, though, I’m hearing much, much less of that kind of optimism this year. Looking ahead, I can’t say for certain whether 2012 will be the year that internet gambling finally moves in Congress. But I seriously doubt that it will be.
PU: In April, Washington D.C. became the first jurisdiction in the United States to legalise online poker. However there have been numerous delays, from allegations of conflict of interest to delays in public hearings. What is the latest update?
CK: That Washington, D.C., was the first U.S. jurisdiction to legalize internet poker is a mistake I see reported often. Nevada, actually, was first to legalize it. Enabling legislation was enacted there in June 2001.
In Washington, the D.C. Lottery has just completed a series of public hearings on whether its proposed internet gambling program — which will cover poker, bingo, blackjack and scratch-card games — should be implemented. The lottery will summarize the views gathered at those hearings and present them to the District Council Committee on Finance and Revenue. My colleague at GamblingCompliance, James Kilsby, reported last week that the revenue committee hearing will take place sometime before February 2012, but possibly as soon as this month. If the revenue committee signs off on the lottery’s internet gambling program, it must then be approved both by the Office of the Inspector General and by the district’s chief financial officer.
Assuming the lottery secures those approvals, it could launch a free-to-play site within 30 days and, subsequently, a real-money site. District Councilmember Michael Brown, the legislature’s chief internet gambling advocate, told my colleague he is “pretty hopeful” the internet gambling program will proceed to launch given that public opposition has been light.
PU: Do you favour a federal or state-by-state approach? What is most likely?
CK: Historically, in the United States, gambling regulation has been managed by the 50 states. Looking ahead, I believe that states will — and should — have a meaningful role in how internet gambling regulation is handled within their borders. The question, though, is: how best to do that given the cross-border nature of the internet?
Generally speaking, I’m in favour of a solution whereby the federal government plays a central role in shaping regulatory standards that can be applied uniformly across states and Indian nations that opt in to, say, an interstate internet poker regulatory program. I think those regulatory standards should not favour one group of gambling industry stakeholders over another; commercial casinos, card rooms, state lotteries, tribal governments, racetracks — whoever — should be able to compete with each other in accordance with a non-discriminatory set of rules.
In the coming years, I believe that a handful of states will legalize internet gambling before the federal government does. During that initial period, the market will probably look something like the European Union does now — a patchwork of governments with disparate regulatory frameworks. Where Europe has dot-country regulation, perhaps it’s safe to say that the United States will someday have dot-state regulation.
Eventually, I believe that states will seek to compact with other states for purposes of operating internet gambling across borders. Given the Constitution grants the federal government authority over cross-border commerce, it will have little choice but to get involved if states wish to press forward with compacting.
Just to be clear, this is not an original theory — it’s been around since the mid 1990s. I’m just the latest guy to peddle it.
PU: What are your thoughts on the regulation of the European Market? A big trend has been the proliferation of dot country websites. Do you expect the dot country market to overtake the dot com one?
CK: Europe, like the United States, is just beginning to find its feet on questions of internet gambling regulation. Eventually — and by “eventually,” I mean many years from now — I believe that governments around the world will craft as near a uniform, international regulatory policy for internet gambling as can be agreed to.
For now, however, European operators will likely have to deal with several more years of clumsy, dot-country regulation. And if the marked outgrowth of dot-country regulation continues, the cost of doing business — at least for those operators wishing to accept deposits from multiple dot-country jurisdictions — will probably rise dramatically. I’m not an economist, but you don’t have to be one to see that too long a run of dot-country regulation in Europe could pose problems of sustainability for businesses that do not — or cannot — diversify away from the region.
PU: In general what does the future hold for the online gaming market? For the rest of the year and next what are two or three big themes to look for?
CK: I used to co-edit a mammoth compliance guide called Internet Gambling Report. Its founding editor, Anthony Cabot, a highly respected internet gambling legal expert, subtitled the report “an evolving conflict between technology and law.” In six years, I’ve yet to hear anybody offer a more apt description of the nature of the internet gambling business.
So, to borrow a little from Cabot, I think the future promises one thing for internet gambling: more conflict. More conflict between technology and law. More conflict between policy and politics. More conflict between economics and ethics. In my view, when the current set of conflicts is resolved — the question of dot-country regulation, say, or the question of whether operators should commingle player deposits with capital — another set of conflicts will invariably arise. Conflict, resolution, then evolution, it seems, is just the cycle of this business. Cabot nailed it over a decade ago.
To your question about big developments in 2012, I’ll be watching to see whether Tapie can resuscitate whatever assets he might acquire from the various companies comprising Full Tilt. Full Tilt was one of the largest internet gambling businesses in industry history. The story of the company’s rise and fall has already been written. Will Tapie write the story of its resurrection?
Of course, there are so many interesting issues to track next year: whether the United States will adopt internet gambling regulation; whether Internal Market Commissioner Bernier will broker a deal between gambling regulators in the European Union on the development of common regulatory standards; whether Florida will approve legislation authorizing construction of massive destination-resort casinos; whether Macau will sustain its run of incendiary year-on-year growth. The list goes on and on. I’m quite excited to see what 2012 has in store for gambling.
Anyway, thanks very much for inviting me to interview with PokerUpdate. It was a pleasure. Readers, if you are interested in contacting me with questions or opinions, feel free to email me — email@example.com — or find me on Twitter @ckrafcik.