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Harrah's Entertainment Seeking Approval for Online Gaming Business Partner;
Suitability at Issue as a Result of  Unlawful Internet Gaming Enforcement Act

By Howard Stutz, Las Vegas Review-JournalMcClatchy-Tribune Regional News

Apr. 15, 2010--Harrah's Entertainment is seeking suitability approval from Nevada gaming regulators for its business partner, an online gaming company based in Gibraltar that is providing the software for the casino operator to manage three Internet gambling sites in the United Kingdom.

The application was filed last week by Harrah's on behalf of Dragonfish, a division of 888 Holdings, under the state's Foreign Gaming Act.

It is the first time Nevada gaming regulators have been asked to investigate the suitability of an online gaming company that took wagers from American gamblers before the enactment of the Unlawful Internet Gaming Enforcement Act in 2006.

The bill, signed into law by President George W. Bush, made it a crime for banks and other financial institutions to process transactions used in online gaming.

Before 2006, it had been technically illegal for Internet gaming Web sites, which are incorporated and located outside the borders of the United States, to accept wagers from Americans. Many, however, took the bets because the law was rarely enforced.

Gaming Control Board Chairman Dennis Neilander said a company that had previously accepted online wagers from Americans has never sought licensing or suitability approval from the state.

"It's a question the board and the (Nevada Gaming) Commission have never formally ruled on," Neilander said. "It's something that may need to be resolved because it's possible we'll see more of these type of relationships in the future."

Companies like 888 Holdings offered legal opinions in support of accepting the wagers from American citizens until the act became law. Some online gambling sites, such as PokerStars and FullTilt, continue to accept wagers from American citizens, having found ways to get around dealing with U.S.-based financial institutions.

Neilander said it was un- clear how long it would take for Nevada to investigate 888 Holdings. The holding company has been listed on the London Stock Exchange since September 2005.

Harrah's application with the state is under the law that covers a Nevada gaming company's dealings with a foreign business. It was the law used in 2007 when gaming regulators found Hong Kong businesswoman Pansy Ho to be a suitable business partner for MGM Mirage in their shared ownership of the MGM Grand Macau.

A Harrah's spokesman declined comment on the regulatory filing.

Dragonfish provides Harrah's with the technology to manage and operate online gaming sites in the United Kingdom under the company's World Series of Poker and Caesars brands. The Web sites can not be accessed by American gamblers.

The software package includes poker and casino management tools, a process for electronic payments, customer support and other services.

The partnership is with Harrah's Interactive, the company's Montreal-based division that oversees the World Series of Poker and the Internet gaming sites. In September, when the agreement was announced, Harrah's Interactive Chief Executive Officer Mitch Garber said, "As we develop and roll out our interactive strategy, we have chosen to work with 888, primarily for their world-class technology, scalability, and a strong commitment to compliance, and responsible gaming."

Garber, who joined Harrah's last May, is the former CEO of PartyGaming, which is based in Gibraltar and also listed on the London Stock Exchange. He helped rebuild the PartyGaming site after it lost customers from the U.S. after the Unlawful Internet Gambling Act became law.

The three Harrah's Web sites were launched earlier this year.

Harrah's supports legalizing Internet gaming and has backed a bill by U.S. Rep. Barney Frank, D-Mass., that would establish a framework to permit online gambling operators to accept wagers from U.S. residents.

The American Gaming Association estimated $5.9 billion was wagered by U.S. residents with offshore online gambling companies in 2008 while $21 billion was bet by players worldwide.

Recently, Nevada gaming regulators began looking at the contractual relationships between casino operators and the nongambling arms of Internet gaming sites that still accept wagers from U.S. residents. No decision or industry advisement ruling has been reached.

Contact reporter Howard Stutz at hstutz@reviewjournal.com or 702-477-3871.

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Copyright (c) 2010, Las Vegas Review-Journal

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