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23rd October 2008

Public sector lotteries moving into online gaming activities

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Canadian-based Lotto IP, a company focused on developing and licensing intellectual property rights surrounding a variety of gaming and lottery processes, has announced the development of a new business method which it says may revolutionize the social and economic impacts of the online gaming sector. The company is marketing the product under the trade name Game With Us™ (GWU).

In the current North American environment, U.S. state and Canadian provincial legislatures are forbidden by federal regulation from organizing and conducting interstate online gaming sites. However they are permitted to conduct intrastate online gaming—under the Unlawful Internet Gambling Enforcement Act (UIGEA). GWU allows States to operate online sites while ensuring appropriate and jurisdictionally specific revenue flows, oversight and taxation.

Online gaming has always been of key interest to lawmakers because without regulation it can have serious social impacts on lower income populations, but also because offshore ownership of these activities sends billions in potential tax revenue out of regional coffers and into the pockets of foreign site owners.

While some lawmakers have been trying to expand existing legislation to forbid the activity and prosecute offshore gambling barons, regional public lottery corporations have also been looking for ways to tap into the vast revenues now generated by poker sites and other forms of online casino activities to help them redirect more profits from the sector into social development programs now primarily funded by lotteries.

U.S. lawmaker Rep. Barney Frank, D-Mass, recently put forward the Payments System Protection Act (H.R. 6870). He and other opponents of the older legislation, the Unlawful Internet Gambling Enforcement Act of 2006, maintain that online gambling can’t be outlawed because there are many offshore gambling sites that are difficult or impossible to regulate and that many Americans use the offshore sites anyway.

“Rather than prohibit an activity millions of Americans enjoy in the privacy of their homes, just as they can in a casino, Congress should create a framework to regulate Internet gambling as a way to protect consumers and collect billions in much-needed federal revenue,” remarked Jeffrey Sandman, spokesman for the Safe and Secure Internet Gambling Initiative.

According to Lotto IP, the GWU solution is precisely designed to help guarantee the level and value of public oversight that Sandman is alluding to while ensuring that profits from these activities continue to fund worthwhile public policy initiatives.

To get an idea of the size of the pie that lawmakers are looking for a piece of, Price-Waterhouse-Coopers’ Global Entertainment and Media Outlook thru 2009 has stated that revenue from legal casino gambling worldwide will top $100 billion by the end of the decade. Similarly, Christiansen Capital has indicated that online gambling worldwide totalled about $12 billion last year and by 2010 the consulting firm is forecasting that online gambling will total $24.5 billion annually worldwide.

Lotto IP’s solution, that is as easy as purchasing a Powerball™ lottery ticket, has been to develop a simple business method whereby tickets issued by state or provincial lottery retailers can now carry unique validation codes that will allow the bearer to log onto a state-controlled gaming site. Ticket purchasers can then access popular games such as Texas Hold’em, slots, or Blackjack and play against the site or other ticket buyers, then later redeem their online winnings at a local lottery retail outlet.

The key to the Game With Us™ method is that it now provides public officials with the ability to define a regionally specific audience for an online site while employing traditional local lottery regulations, infrastructure and resources. The method would likely operate on the same business rules, sales strategies and operational models as existing lottery offerings. The technological requirements leverage existing online casino and poker products that are well proven and inexpensive to implement due to the maturity of the market.

“We’re already in discussion with a number of U.S. state legislatures as well as Congress at the federal level and there is significant excitement being generated around the impact this could have on the public and private gaming sectors,” said Edward McBride, spokesperson for Lotto IP. “In some districts laws are being crafted now to permit the application of the new Lotto IP method and we expect to start signing agreements over the next 24 months.”

Lotto IP has not stated whether it will run the licensing operations generated by its new method itself or if it will be seeking an outright buyer for the process. It has stated that it is also in discussions with some of the major private sector online and offline gaming providers who are looking upon this development with interest.

“Essentially for these companies it’s a question of how they can be a part of the inevitable transformation that this will bring to the sector,” Mr. McBride continued. “No matter what their decision, however, the impact that this will have is going to cause significant repercussions to the market share of existing private gaming sites and to how online gaming will be delivered in the future.”

This entry was posted on Thursday, October 23rd, 2008 at 9:46 pm and is filed under National News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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