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Multi-billion dollar business of gambling

Last updated on: May 23, 2013 09:43 IST

Multi-billion dollar business of gambling

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Sue Zeidler in Los Angeles

States and casinos racing to legalise online gaming in the United States may find some unwelcome visitors on their websites: product liability lawyers.

A group of 10 lawyers and academics with experience in prior liability cases met in Indianapolis in mid-April to discuss whether a lawsuit claiming online gaming further promotes gambling addiction has a shot at winning.

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Image: A dealer holds chips between his fingers in Budapest, Hungary.
Photographs: Katoly Arvai/Reuters

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The legal strategy under consideration would be modelled on the class action lawsuits that forced cigarette companies to agree to pay $206 billion over 25 years to compensate for medical costs, caring for people with smoking-related illnesses, and to fund anti-smoking advocacy groups.

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Image: A croupier deals a hand of cards for a poker at the Casino Barriere in Toulouse, France.
Photographs: Jean-Philippe Arles/Reuters
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Boston-based lawyer Scott Harshbarger said that more than 20 attorneys from high-profile law firms were among those invited to the meeting in Indianapolis and who have been communicating for the past few months.

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Image: A dealer shuffles playing cards at the World Series of Poker Europe competition at the Empire Casino in London.
Photographs: Luke MacGregor/Reuters

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The meeting was billed as a "gambling litigation study group", according to emails reviewed by Reuters.

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Image: Jonathan Duhamel of Canada stacks chips in the finals of World Series of Poker Main Event at the Rio hotel-casino in Las Vegas, Nevada, United States.
Photographs: Las Vegas Sun/Steve Marcus/Reuters
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Harshbarger, a former Massachusetts attorney general who led states' efforts against Big Tobacco, said he could not attend the Indianapolis meeting but is working with the group in studying the parallels with the gambling industry.

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Image: Chips are stacked up next to a five pound note and mobile phone during the Poker Stars tournament in London.
Photographs: Suzanne Plunkett/Reuters

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Former Assistant US Attorney Michael Fagan, who prosecuted 30 cases against offshore sports betting operations from 1997 to 2008, helped put together the Indianapolis meeting, according to one email. He declined comment.

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Image: A gambler plays a hand of poker at the Casino Barriere in Toulouse, France.
Photographs: Jean-Philippe Arles/Reuters

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The National Council on Problem Gambling estimates that gambling addictions account for $7 billion a year in added health care and criminal justice system costs.

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Image: People play poker during the finals of the Russian Masters Poker Cup at the Azov-City gambling zone, some 90km south of Russia's southern city of Rostov-on-Don.
Photographs: Vladimir Konstantinov/Reuters

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Gambling industry critics argue that casino companies use deceptive practices to lure consumers, depend on addiction for profits and should be held liable for the billions of dollars in costs to society.

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Image: A dealer tosses out a card in the $10,000 buy-in, no limit Texas Hold 'Em main event during the World Series of Poker at the Rio All-Suite Hotel & Casino in Las Vegas, Nevada, United States.
Photographs: Steve Marcus/Reuters
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Gambling company representatives reject the charges, saying their industry has a history of acting responsibly and helps to identify customers who may need treatment.

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Image: People play poker during the finals of the Russian Masters Poker Cup at the Azov-City gambling zone, some 90km south of Russia's southern city of Rostov-on-Don.
Photographs: Vladimir Konstantinov/Reuters
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"It's a government-approved, regulated product," said David Stewart, a Washington-based lawyer with Ropes & Gray and general counsel to the American Gaming Association.

"Nobody's made Nordstrom reimburse somebody who is a shopaholic."

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Image: Betting company Bwin Interactive Entertainment logo is pictured with chips and cards on a poker table during an event in Paris, France.
Photographs: Charles Platiau/Reuters

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Previous lawsuits targeting traditional gambling have been thrown out by the courts, Stewart said. "The legal arguments are flawed," he said. "It's gambling. And when you gamble, you lose."

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Image: A player checks his cards during the finals of the Russian Masters Poker Cup at the Azov-City gambling zone, some 90km south of Russia's southern city of Rostov-on-Don.
Photographs: Vladimir Konstantinov/Reuters
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Nevada became the first state to go live with online poker this week as Ultimate Gaming, a subsidiary of Station Casinos, launched its Internet poker site Ultimate Poker in the state and began taking bets.

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Image: People play poker during the finals of the Russian Masters Poker Cup at the Azov-City gambling zone, some 90km south of Russia's southern city of Rostov-on-Don.
Photographs: Vladimir Konstantinov/Reuters

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Ultimate Gaming CEO Tobin Prior said his company offers safeguards against problem gambling. "We offer an extensive array of limits that players can place on themselves as well as the option to opt out of betting entirely," he said.

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Image: Chips are seen on the table after the World Poker Tour Venice event at the Casino di Venezia in Venice, Italy.
Photographs: Michele Crosera/Reuters

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But critics think betting and time limits should be mandated rather than options, and also have found fault with the enforcement of so-called "opt out" or self-exclusion programmes. New Jersey is expected to release regulations for online gaming in coming weeks.

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Image: Chips and cards are shown on a poker table during the World Series of Poker no-limit Texas Hold 'em main event at the Rio hotel-casino in Las Vegas, Nevada, United States.
Photographs: Las Vegas Sun/Steve Marcus/Reuters

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Massachusetts,California, Hawaii, Illinois and Mississippi are among states also considering online gambling. MGM Resorts, Caesars and Wynn Resorts have all applied for web operating licenses.

All three companies deferred their comments to the American Gaming Association.

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Image: People play poker during the finals of the Russian Masters Poker Cup at the Azov-City gambling zone, some 90km south of Russia's southern city of Rostov-on-Don.
Photographs: Vladimir Konstantinov/Reuters

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It was not clear how the Indianapolis group might deal with past precedents working against them, including a 2004 federal appellate ruling that millions of gamblers could not be declared a single class because each gambles for different reasons.

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Image: A contestant covers his cards during the Poker Stars tournament in London.
Photographs: Suzanne Plunkett/Reuters

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That ruling derailed a decade-old legal effort to prove slot machines were inherently deceptive devices. The recent gathering, though, examined possible similarities between gambling addiction and addiction to cigarettes.

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Image: Betting company Bwin Interactive Entertainment logo is pictured with chips and cards on a poker table during an event in Paris, France.
Photographs: Charles Platiau/Reuters
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"Big product liability litigators are comparing Big Tobacco cases in depth with gambling cases involving casinos and addiction," said University of Illinois professor and author John Kindt, who attended the meeting in Indianapolis.

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Image: A card dealer deals a hand for a poker at the Paradise Walker-hill casino in Seoul, South Korea.
Photographs: Jo Yong-Hak/Reuters

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Critics claim that in addition to depending on addiction for profits, gaming companies pulled a page from Big Tobacco by running ads that glamorize their offerings and target youth.

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Image: A card dealer adjusts cards at the Paradise Walker-hill casino in Seoul, South Korea.
Photographs: Jo Yong-Hak/Reuters

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Attorney Lori Stoltz of Canadian law firm Adair Morse represents 10,000 problem gamblers in a suit against Ontario Lottery and Gaming Corp, who claim they were exploited and suffered losses because government-owned OLGC did not prevent them from gambling despite their signing self-exclusion forms.

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Image: People play poker during the finals of the Russian Masters Poker Cup at the Azov-City gambling zone, some 90km south of Russia's southern city of Rostov-on-Don.
Photographs: Vladimir Konstantinov/Reuters

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Stoltz was not at the meeting, but believes similar lawsuits are likely.

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Image: A dealer lays a playing card on the table at the World Series of Poker Europe competition at the Empire Casino in London.
Photographs: Luke MacGregor/Reuters
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"Self-exclusion and where there isn't appropriate follow through is one area that has come under challenge," Stoltz said.

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Image: People play poker during the finals of the Russian Masters Poker Cup at the Azov-City gambling zone, some 90km south of Russia's southern city of Rostov-on-Don.
Photographs: Vladimir Konstantinov/Reuters
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"There's bound to be more litigation in this area," said Stoltz.

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Image: Betting company Bwin Interactive Entertainment logo is pictured with chips on a poker table during an event in Paris.
Photographs: Charles Platiau/Reuters
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Gambling proponents say it is impossible to measure the social costs of gambling addiction.

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Image: A man reacts during a game at the Betfair Asian Poker Tour in Singapore.
Photographs: Nicky Loh/Reuters
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"We don't dispute but don't confirm the $7 billion (in estimated costs) because pathological gambling often occurs in individuals with other addiction issues and to specifically attribute the costs to one disorder is a leap," said American Gaming Association spokeswoman Holly Wetzel.

Meanwhile, Bwin.party has targeted cost savings of $90 million this year as it joins other online gambling companies pulling back from markets where regulations are not clear cut, reports Keith Weir in London.

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Image: A player checks his cards during a poker game at a Budapest casino in Hungary.
Photographs: Katoly Arvai/Reuters

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Bwin.party, which offers sports betting, casino games, poker and bingo to online customers, has opted to focus on a core of around 10 European markets, rather than chasing business in more than 30 countries.

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Image: A dealer shuffles a deck of cards during a poker game at a casino in Budapest, Hungary.
Photographs: Katoly Arvai/Reuters
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The strategy, set out in March, is similar to one being followed by betting exchange operator Betfair and sacrifices short-term revenues to try to produce a more stable business model.

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Image: A poker player wears the World Series of Poker logo on his cap at the no-limit Texas Hold 'em main event at the Rio hotel-casino in Las Vegas, Nevada, United States.
Photographs: Las Vegas Sun/Steve Marcus/Reuters
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However, bwin.party shares fell more than 5 per cent in early trade in London on Tuesday, with some analysts concerned at the pace of decline in revenues which fell 17 per cent to 180.2 million euros ($232 million) in the three months ended March.

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Image: Betting company Bwin Interactive Entertainment logo is pictured with chips on a poker table during an event in Paris.
Photographs: Charles Platiau/Reuters
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Revenues were also hit by lower than expected activity in poker and casino games after moving users to a new platform at the end of last year.

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Image: A croupier deals a hand for a poker at the new Casino Barriere in Toulouse, France.
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CEO Norbert Teufelberger said revenues were unlikely to start improving until the second half of the year, but was confident the group would hit targets outlined in March.

"We guided the market that we expected revenues will decline this year by up to 10 percent versus 2012," he said.


Image: Players take part in the World Strip Poker Championship in London.
Photographs: Stephen Hird/Reuters

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