Tags: cronyism | gambling | move | century

Will Cronyism Restrict Gambling's Move Into the 21st Century?

Will Cronyism Restrict Gambling's Move Into the 21st Century?
AP/Wayne Parry

By    |   Wednesday, 02 August 2017 12:15 PM

Almost no matter where we look industries and companies are positioning and repositioning themselves for the changing landscape around us.

Whether it’s Amazon’s pursuit of Whole Foods Market to grow its exposure to the shifting consumer preference to foods that are good for you to Facebook, Amazon, and YouTube looking to stream live sporting events, we’re seeing a sea change in consumer preference that is altering the competitive playing field.

We’re even seeing teens push off getting their drivers licenses, which we at Tematica chalk up to the simple fact that through social media and video calling applications, teens can talk to whoever they want to, when they want to, where they want to.

It’s a different twist on what’s driving the consumption of streaming content, but much like that industry it’s resulting in creative destruction.

Despite the prevailing tailwinds that are powering those transformations, there are companies that either simply don’t see the changing landscape or prefer to ignore it. One of the more classic examples was the one-time mobile phone juggernaut Nokia totally missing the shift to smartphones.

Another example was Blackberry’s one-time domination of the early smartphone market with the “Crackberry” until Apple unveiled the iPhone with its touch capacitive screen that was substantially larger than a keyboard filled Blackberry. Try to find a smartphone with a keyboard today.

The last example is the creative destruction that Amazon has unleashed on brick & mortar retail, which has prompted us here at Tematica to call for a transformation in the mall to entertainment and dining hub with select high end or showcase stores from brick & mortar retail shopping.

When faced with a change that may alter an industry’s playing field, we’ve seen entrenched players look to quash that creative destruction that would challenge existing business models and potentially their market share. One such tactic that has made its rounds around the Beltway is cronyism and another is a word making the rounds today - collusion.

This brings us to the debate regarding the gambling industry and the potential to move out of the casino to online, much the way shopping, banking, and content consumption has.

On the one hand we have technology that would change how, where and when gambling occurred resulting in new business models, and most likely change the cast of characters that dominate the industry. Amazon vs. Macy’s if you will.

On the other hand we have Sheldon Adelson, the founder and CEO of Las Vegas Sands Corporation, which operates mega resort-style hotel casinos all over the world. Adelson as it turns out was the biggest political donor in both the 2012 and 2016 elections, and odds are it means politicians are apt to return favors when it comes to thwarting the push toward online and mobile gambling.

Why would Adelson look to ban online gaming? Probably because it would take people of of the casinos where they would eat, drink, shop and stay, not to mention potentially gamble less. Why did people stop going to Blockbuster Video? Because they could first get Netflix to ship DVDs to their home, and that has given way to a variety of streaming services from Apple, YouTube, Hulu and even AT&T’s DIRECTV Now.

Currently being brandied about is the Restoration of America’s Wire Act (RAWA). If RAWA becomes law, all online gambling and state-run lotteries will be banned, but a special exemption would be granted for fantasy sports games – something that doesn’t compete with Adelson’s casino operations. There is little doubt Adelson is behind RAWA considering it was authored by Darryl Nirenberg, a registered lobbyist for Adelson’s company.

Senator Lindsey Graham (R-SC) and Congressman Jason Chaffetz (R-UT) were the first to pick up Adelson’s banner when they introduced RAWA, unsuccessfully, in June of 2015. A year later, Sen. Tom Cotton (R-AK) joined the Adelson team re-introducing RAWA once again. Recently the Senate Leadership Fund received a $20 million contribution followed by “three GOP senators introduced legislation that would effectively ban online gambling — a measure Adelson has long pushed for.”

RAWA has been promoted to correct some shortcomings of the Federal Wire Act of 1961, but the fact is it doesn’t truly have a connection with the existing law. The House Judiciary Committee report that introduced the Wire Act of 1961 was titled “Sporting Events - Transmission of Bets, Wagers and Related Information.” When questioned about the scope of the law during Senate Hearings, Assistant Attorney General Herbert Miller was asked if the law covered other forms of gambling. Miller responded, “This bill, of course, would not cover that because it is limited to sporting events or contests.”

The fact that RAWA excludes fantasy sports from the new law, therefore, doesn’t even make any sense because there were never any amendments made to the bill that would apply to anything other than wagering on sporting events or contests. There is nothing about the original law that needs “Restoration.” The Wire Act was meant to stop “bookies,” not guys sitting on their couch playing a few rounds of poker.

Wisely, Congress has consistently stopped the bill from advancing, but that hasn’t deterred Adelson. Recently, he attempted to have Attorney General Jeff Sessions reverse the DOJ’s position on the matter unilaterally. Fortunately, Sessions did allow a reversal to overturn state laws legalizing online gaming and online sales of lottery tickets.

It should come as no surprise that Adelson is not ready to give up just because Attorney General Sessions turned him away. Rumor has it there is about to be an Amendment offered to the State Justice Commerce Appropriations bill that once again seeks to advance Adelson’s agenda.

Rather than comply with this latest round of cronyism, perhaps the federalism-preaching Republican-controlled Congress should focus on the greater good, like tax reform and rebuilding America’s deteriorating infrastructure, rather than protecting a friend’s business that is shunning change.

Christopher (Chris) Versace is the Chief Investment Officer at Tematica Research, editor of the newsletter Tematica Investing, co-host of the Cocktail Investing Podcast and is a featured columnist to The Street.com as well as a contributor to Business Insider and Forbes.com

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The gambling industry faces the potential to move out of the casino to online, much the way shopping, banking, and content consumption has.
cronyism, gambling, move, century
1020
2017-15-02
Wednesday, 02 August 2017 12:15 PM
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