Linda Goldstein is a partner in the Advertising, Marketing & Media practice at law firm Manatt, Phelps & Phillips LLP who has followed online gaming for many years. We spoke to her recently about her theory that legalizing Internet poker will create an online advertising boom.
Tell me about your background.
I had been a promotions and gaming lawyer for over 25 years. I am the chair of Manatt’s Advertising, Marketing and Media division. We handle a broad spectrum of issues relating to advertising and marketing. One of the areas in which I practice is sweepstakes, promotions and online gaming. I am not a casino lawyer, but I became very involved in online gaming because dating back to the 1990s, even when the Internet first appeared on the scene, there were many sort of quasi-gaming sites that have evolved today into many of the online gaming sites that were really pushing the line between bona fide sweepstakes and some form of online gaming.
When the original Internet gaming act was passed, I represented various segments of the industry, particularly on behalf of the fantasy league industry and other promoters of various skill-based games that were being offered online, tournament type games, to try to ensure that the Internet gambling act at the time was not overly broad and didn’t sweep within its purview pure skill-based games or fantasy games. You’ll note that there’s a specific carve out in the Act which I actually drafted.
I would say that in many respects that is a precursor to poker having the ability to be carved out. There has been a continuous debate about whether poker is a game of chance or a game of skill. I think the reason poker has been singled out for different treatment is recognized as a game of skill.
It is clear that some people are a lot better at it than others. Talk about fantasy sports leagues and how that relates.
The concern there was sports-related betting has often been viewed as different and in many ways more problematic than poker. Looking at the original Wire Act, one of the arguments as to why poker was never covered was those were historically aimed at sports betting. There was a concern back then that fantasy games might have more vulnerability than casino games because there was a sports element. Ultimately, we were successful in getting a carve-out on the principle that if properly structured, these were primarily games of skill rather than chance. If you look at the carve out for fantasy games, it can’t be dependent on a single game. Picking the winner of this week’s Monday Night Football game is not a bona fide fantasy game. A bona fide fantasy game is where the players really step into the shoes of the managers and there’s a lot of effort and skill in managing your team week to week.
I just got eliminated in our office fantasy football league [NFL week 14]. I lost $15.
There you go. If you think about the regulatory dislike for gaming, it’s the compulsion to continue to pour money on the chance that you’re going to hit it big. My experience with lobbying on the fantasy games was that there was a lot of regulatory understanding that games that require a lot of effort and commitment on the part of the participants don’t appeal to the same gambling instincts as pulling a lever on a slot machine.
Tell me about how you see this playing out in advertising.
I think you’re going to see a different model. Here, you’ve got a very restrictive regulatory framework where operators are going to have to be licensed by the state. Companies that have been operating under an existing license are going to have an initial advantage.
Online poker is happening, but it’s been veiled. I think you’ll see direct, no pretense advertising inviting consumers to gamble online. The idea of gambling will no longer be a dirty word, you won’t have to dance around it. It’s going to be a source of new advertising revenue. Like any other product or service, I think they’ll advertise anywhere they think will be an appropriate demographic. I think it will be on ESPN’s site, on certain music sites. I think it will be interesting to see how social media plays into this. When you have the initial carve out for fantasy games, you didn’t have the same impact of social media that you do now.
One of the most interesting trends right now is the evolution of casual gaming sites, many of which operate on a fee-based model, but there are no prizes, such as Farmville. You only have virtual prizes within the virtual site. These are huge phenomena.
In terms of online advertising revenue, I think it will be a huge booster. We know, for example, when the Department of Justice began to crack down five to seven years ago on online advertisers that were carrying advertising for online gaming sites, there was a significant loss of revenue. They went after Yahoo, Microsoft, other online portals.
These activities are happening. It’s not like this bill will bring into the marketplace activity that is not already there. It’s a huge industry from a dollar standpoint, from a participation number standpoint. It’s like repealing Prohibition. It’s taking something that exists and putting it in a position where it’s above board and transparent and the government can earn revenue from it.