Scientific Game

Mr Adelson’s War

The billionaire casino magnate has seen the evil, and it’s Internet gambling. He is determined to crush its head. So far, he hasn’t succeeded. But certainly he’s got the money. And now he may have himself a Congress

Wednesday, 04 February 2015 14:47
Share
Visit us

It had to be galling for Sheldon Adelson, who has vowed to spend “whatever it takes” to outlaw Web gambling in the United States, to have his US$15 billion casino company come under Internet assault not once last year, but twice.

In February, a cyber-attack apparently launched by vigilantes angry over his nuke Iran remarks, crippled Las Vegas Sands’ systems, virtually shutting the company down for two days and wreaking damage reported in the tens of millions of dollars.

A few months later, the company learned that a slew of unknown registrants behind something like 35 Web sites in China, where LVS derives most of its earnings, were freely, and illegally, using the company’s logos and casino images to promote their gambling services—an embarrassment, to be sure, hardly comparable to that epic malware invasion, yet it may have been the more bitter sting. Because Mr Adelson hates Internet gambling. He considers it a danger to families, to children especially, a plague on society. It is a moral issue of overriding concern. 

He is far from alone in this view. Years of lobbying and legislative starts and stops at both the federal and state levels have resulted in all of three regulated markets.

At the same time, as an individual who’s amassed one of the world’s great fortunes from gambling, his skeptics are legion. But at 81—he professes never to have used a computer—his crusade is an impassioned one. And backed by a net worth ranked by Forbes at No. 8 globally, it has divided the US casino industry and touched off a war of words and dollars that is rattling the power alleys in Washington. 

“When I started to imagine what would happen with legalized Internet gaming, it scared the heck out of me, because of what’s it’s going to do to our society,” he told Nevada TV journalist and political commentator Jon Ralston.

That was last February, a few weeks before a prohibition bill crafted by his lawyers would make its way to Congress in the form of the “Restoration of America’s Wire Act,” courtesy of two recipients of the Republican mega-donor’s legendary largesse, Senator Lindsey Graham of South Carolina and Representative Jason Chaffetz of Utah. The act specifically extends to the Internet a longstanding ban on the interstate transmission via phone lines of any wagering information or information assisting in the placing of any bet or wager, including in Nevada, New Jersey and Delaware, the states where Web gambling is legal. The phone ban dates back to the early 1960s and Bobby Kennedy’s war on organized crime. It is known popularly as the Wire Act, and under the administration of President George W. Bush it would be broadly interpreted to sanction a war on Web gambling. Then things changed in a big way in December 2011, when the Obama Justice Department responded to an inquiry by several state lotteries with a memorandum stating its opinion that the act applies only to sports betting, a view also supported by some federal court rulings.

That’s when Mr Adelson took up his jihad.

As he would later complain to Mr Ralston: “Can you know your customer? No! Can you prevent money laundering? No! Can you prevent underage children? … I’m concerned about college students. They are of age, and I’m concerned about poor people who really can’t afford to do it, that we’re putting all these temptations smack on their kitchen table.”

He reiterated his views last fall in an address he delivered at the Global Gaming Expo in Las Vegas: “I see no benefit, and coming from a family—the working class family, a less-than-working class ... people that are going to be exploited, that are going to be abused the most. I don’t want those people to get abused. Because when I look at people like that, I see the faces of my parents.”

But despite the billionaire’s standing as one the GOP’s largest individual donors and a Republican majority in the House of Representatives, RAWA went nowhere in the 113th Congress. As a measure of Internet gambling’s traction as a national priority, the House Judiciary Committee, half of whose 22 members had signed on as co-sponsors of the bill, couldn’t bring it to a hearing. It was even less visible in the Senate, where the Democrats still held a slim majority.

The arm-twisting on its behalf was reported to be furious after the November election, but the few weeks that remained in the lame-duck session weren’t enough to scare up the support needed to bring it to a vote. A last-ditch effort was mounted in December to include its language in a must-pass $1.1 trillion measure to fund most government operations through the end of the current fiscal year. But when that failed there was nothing for Mr Adelson’s top lobbyist Andy Abboud to do but vow to renew the fight, and he was not wanting for metaphors in expressing his confidence that his boss ultimately would prevail.

“The die is cast on this,” he said. “The cake is baked.”

SELF-INFLICTED WOUNDS 

The chances that Mr Adelson and his supporters will get Internet gambling banned look a lot better heading into 2015. This is not to say they’re a lock by any means.

On its surface, the composition of the 114th Congress that took office the first week of January is precisely to the billionaire’s liking and one over which his influence in several key policy respects promises to be greater than at any time in the past. 

The Republican Party has taken back control of the Senate for the first time in a decade, and for the next two years will enjoy its largest overall majority on Capitol Hill—247 seats in the House, 54 in the Senate—since the Congress that presided over the onset of the Great Depression in 1929-31.

Mr Adelson spent upwards of $100 million in the 2012 electoral cycle to prevent President Obama’s re-election and achieve the Republican Congress he finally has in hand. Several tens of millions of that were poured into a quixotic comeback bid by Newt Gingrich, a former speaker of the House and an avatar of the New Right a generation ago whom Mr Adelson, a fervent Zionist, supported for the GOP presidential nomination for his militant support of Israel. In June of that year, Mr Adelson gave $10 million to the main political action committee backing front-runner Mitt Romney’s campaign for the nomination. A month later, Mr Romney was seated at Mr Adelson’s right, pledging support for Israel at a fund-raiser at the King David Hotel in Jerusalem that raised more than $1 million for his eventual victory. Much to the chagrin of both men, he would be defeated by Mr Obama in November.

In the clearest indication yet that Mr Adelson’s hard-bought influence is finally paying off, last month, House Speaker John Boehner stirred a hornet’s nest in the volatile Middle East by inviting Israeli Prime Minister Benjamin Netanyahu to Washington in March to address a joint session of Congress on sanctions against Iran, a move Mr Obama has threatened to veto if it arrives on his desk as legislation.

It’s a game less calculated to neutralize whatever effectiveness the president can hope to exercise over foreign policy in his last two years in office as it is to shore up support from the likes of Mr Adelson for the likes of Mr Boehner, a 25-year veteran of the House and a protégé of Mr Gingrich’s who for reasons that remain unfathomable to many Beltway insiders continually finds his conservative credentials under suspicion. Twenty-five of his own House members voted against his re-election as speaker last month, twice as many as tried to unseat him in 2013.

As for Mr Adelson, it’s well-known that he considers Iran’s nuclear program a direct threat to Israel, and punishing the country for continuing to pursue it is an issue dear to his heart. He has in the past provided sizable cash support through a family foundation to a group called United Against Nuclear Iran, according to tax documents cited by venerable liberal weekly The Nation. UANI advocates food and medicine blockades among other sanctions. And in one of his less guarded public moments, and he’s been known to have a few— this one occurred in October 2013 in a speech at New York’s Yeshiva University—he suggested dropping a nuclear bomb as a warning: “What are we going to negotiate about? … You pick up your cell phone and you call somewhere in Nebraska and you say, ‘OK let it go.’ And so there’s an atomic weapon, goes over ballistic missiles, the middle of the desert, that doesn’t hurt a soul. Maybe a couple of rattlesnakes, and scorpions, or whatever. Then you say, ‘See! The next one is in the middle of Tehran. So, we mean business. You want to be wiped out? Go ahead and take a tough position and continue with your nuclear development. You want to be peaceful? Just reverse it all, and we will guarantee you that you can have a nuclear power plant for electricity purposes, energy purposes.’”

Mr Netanyahu’s ties to Mr Adelson and the neocon wing of the GOP run long and deep. He has spoken before Congress three times, twice at Mr Gingrich’s invitation, on one famous occasion blasting the Oslo peace accord that established the Palestinian Authority, and again in 2011 at the invitation of Mr Boehner. That last appearance was notable in its own right for the prime minister’s sharp criticism of Mr Obama for calling for peace with the Palestinian Authority based on Israel’s 1967 borders. He received, according to one news report, 29 standing ovations.

Mr Netanyahu is now running for re-election with his relations with the Obama White House in shambles, and he is seen as vulnerable to opponents calling for more moderate policies both toward the Palestinians and Iran. According to Israeli press reports, the idea for his March appearance was first suggested by Israel’s ambassador to Washington, Ron Dermer, described by James Zogby, president of the Arab American Institute, as an ex-Republican operative and confidante both of Mr Netanyahu and Mr Adelson. The appearance was suggested days after the GOP took the reins on Capitol Hill, and reports are the agreement for Mr Boehner to extend the invitation was reached prior to Mr Obama’s annual State of the Union address with no prior notice to be given to the White House or the State Department.

So call it what you will, Mr Adelson has juice, serious juice. Even opponents are loathe to resist him outright. Nevada Democrat Harry Reid, majority leader of the Senate up until this year and the Silver State’s most powerful national politician, was strangely silent through most of the back and forth over RAWA during 2014—this despite the fact that Nevada authorizes Web poker and most of the major gaming corporations based there have called for a supportive federal framework that would allow legalization to proceed in jurisdictions where they operate. Certainly MGM Resorts International has been vocal about it, and Caesars Entertainment runs gambling sites both in Nevada and New Jersey. Jan Jones Blackhurst, Caesars’ senior vice president of government affairs, has said, “We believe that banning Internet gaming is bad public policy from our perspective.” Gone with the loss of his Mr Reid’s Senate leadership is Nevada’s outsized clout in Washington, and it seems that Mr Reid, whose party opposes Mr Adelson on nearly every issue, would prefer to cut a deal with the billionaire to salvage a carve-out for poker should RAWA come up for consideration in 2015, and Mr Reid believes that it will. Also, Mr Reid wants to run for a fifth term in 2016, when he’ll be 76, and it would help him immensely if Mr Adelson and his money don’t go out of their way to make that difficult.

In December, speaking to the Las Vegas Review-Journal in his waning days as majority leader, the senator denied that anything resembling such a deal was on the table. But it didn’t sound like he and Mr Adelson were enemies either. “I think the proliferation of gambling on the Internet is not good for our country,” he said. “I think it is an invitation to crime. I think it is hard to control for crime when you’ve got brick-and-mortar places, let alone something up in the sky someplace, and it is very bad for children.” He added, “If there is a chance to [legalize] poker, I will do that, but I am not for the Wire Act.”

In the meantime, the American Gaming Association, the land-based industry’s federal lobbying arm, had already caved.

In 2013, the AGA, backed by Caesars, MGM Resorts, Penn National Gaming and Boyd Gaming, among others, had organized its own coalition to meet the threat of a federal ban, though no actual proposal existed at the time. In testimony before a House of Representatives subcommittee in December of that year, the association’s new President Geoff Freeman maintained on behalf of his members that prohibition “simply does not work” and to attempt it would only create “a thriving black market and drive its economic benefits offshore”.

“The government cannot put the Internet back in the bottle,” he proclaimed. “Make no mistake, Internet gaming is here to stay.”

But within weeks it was revealed that Mr Adelson had a team working on just such a ban, the details of which were soon leaking to the press. By February, Mr Adelson was threatening to take Las Vegas Sands out of the AGA. In March, Messrs Graham and Chaffetz introduced the bill the Adelson forces had drafted for them. In May, much to the disappointment of Web gambling supporters within the industry and without, Mr Freeman announced the AGA would no longer advocate for legalization.

It is, he said, “an issue that the association cannot lead on”. 

“One of the things I’ve learned in this industry is we are extraordinarily competent at shooting at one another,” he said.

‘CRONY CAPITALISM’

Sheldon Adelson and his wife personally gave more than $5.9 million to Republican candidates for national office during the 2014 mid-term election cycle, making them the country’s eighth-biggest individual donors for the year, as ranked by the non-partisan Center for Responsive Politics. This does not include money the Adelsons may have given to pro-GOP non-profit groups that are not required to identify their donors. And the casino magnate has made it widely known that he intends to spend millions more in 2016 to obtain a president of his choosing, ensuring that just about every Republican with White House aspirations will actively be courting his favor.

Given his clout and GOP control of both the House and Senate it is certain the “Restoration of America’s Wire Act” will be reintroduced this year and will handily make it to the committee hearing stage. Actually, if it came to a straight vote along party lines it would pass because the Democrats, its ostensible opponents, don’t have the numbers to stop it. Except that it’s more complicated than that. Because for as many senators and representatives who oppose expanded gambling on moral grounds, and they’re to be found in both parties, there are at least as many if not more who oppose federal interference—anti-“big government” conservatives and pro-personal freedom liberals alike—into an issue traditionally left to the states. Certainly this would sum up the significance of the Obama administration’s 2011 reinterpretation of the Wire Act which so nettles Mr Adelson.

Ironically, the supreme achievement of the Republican Party in making “taxes” a dirty American word is what fed the proliferation of casinos in the states in the first place as a means for cash-strapped governments to raise revenue by the back door. Now, with land-based gambling having grown to the point where it’s outstripped consumer demand, or close to it in most regions, and the sorely needed taxes it provides in general decline as a result, something like 20 states are considering taking the Internet plunge. This is according to a recent report by investment bank Morgan Stanley, which forecasts a legal Web sector of that magnitude could be generating revenues of more than $5 billion a year by the end of the decade. If all 50 states were regulating, the figure would be more like $10.7 billion.

It’s true that results in the three regulating states of New Jersey, Nevada and Delaware have been lackluster to date. But what if California, the holy grail for Web advocates, were to legalize? Two bills are under consideration there. The state’s potential from poker alone has been estimated at upwards of $263 million in revenue the first year, growing to more than $380 million by Year 10. That’s according to a model assembled by Academicon, a research and consulting firm based in Germany, and data portal Poker Scout. And it’s probably conservative. They arrived at their projections, which were released in December 2013, from a 2009-10 survey of some 180,000 real-money players who each accounted at that time for $867 in average annual revenue. New Jersey, with one-fourth of California’s population of 38 million, has more than 250,000 open accounts.

As D.C.-based gaming attorney Jeff Ifrah has said: “California coming online would dwarf any success that those other markets had.”

Nor does this count the potential impact of shared player pools among states, something the National Council of Legislators From Gaming States has envisioned with its development of a regulatory template for states considering legalization. Released for consultation last May, the framework “should serve as a guide for states considering enacting Internet gaming legislation and perhaps multi-jurisdictional initiatives,” said the council, which crafted it as part of its mission to advocate “a state’s right to choose what gaming is implemented within its boundaries”.

The same month the NCLGS released its guidelines, the National Governors Association sent a letter to congressional leaders saying they were “concerned with legislation introduced in Congress that would ban online Internet gaming and Internet lottery sales. … The regulation of gaming is an issue that has historically been addressed by the states,” they said. “Regardless of whether governors are in favor of offering gaming—through whatever form—within their own states, decisions at the federal level that affect state regulatory authority should not be made unilaterally without state input.”

The Democratic Governors Association also has come out against RAWA, although some Republican governors, notably Texas’ Rick Perry, a presidential hopeful, have expressed their support.

Paradoxically, though, it is not the Democrats, but the very conservatives who have supplanted them, and Mr Reid, in setting the nation’s legislative priorities that pose the greatest obstacle to Mr Adelson crusade. This was made abundantly clear last November when RAWA failed to make it to the House floor for a vote. Two core principles of the Right butted heads—“family values” and “states’ rights”—and the outcome was a push.

It was at that time, when the lame-duck Congress returned to work after the election and the lobbying surrounding RAWA got hot and heavy that the influential Grover Norquist, president of Americans for Tax Reform, weighed in, along with leaders of 10 like-minded advocacy groups, including the American Conservative Union, and penned a letter to lawmakers urging them to reject the proposed ban and “preserve” the states’ traditional authority over gambling policy. The states “don’t need the federal government babysitting them,” Mr Norquist said.

The Casino Association of New Jersey, where Republican Gov. Chris Christie is considering a presidential run, also issued a statement declaring its opposition to RAWA, saying, “It would effectively undermine New Jersey’s successful regulation of Internet gambling that has been in place for a year now. CANJ is asking the N.J. congressional delegation to take all action to oppose the RAWA and preserve the state of New Jersey’s authorization and strict regulation of Internet gambling and the right of all states to determine whether or not they desire to allow or prohibit specific forms of gambling.”

The Norquist letter didn’t refer to Mr Adelson specifically, but a strident online column by former Texas congressman Ron Paul, a libertarian hero and father of potential presidential candidate Rand Paul, did. In it he blasted RAWA as “crony capitalism” devised “for the benefit of one powerful billionaire”.

In the end, the House Judiciary Committee, which had tentatively set a hearing on the bill for early December in hopes of sliding it through before Congress adjourned, called the hearing off. 

In January, a US District judge ruled in favor of Las Vegas Sands’ trademark infringement suit against the Chinese Web sites. If LVS can ever find them, they owe the company $2 million.

 

Current Issue

2017 Inside Asian Gaming Power 50: Meet the Selection Panel

2017 Inside Asian Gaming Power 50: Meet the Selection Panel Andrew W Scott CEOInside Asian Gaming Inside Asian Gaming’s CEO first entered a casino in 1986, fell in love with the surrounds and has been around them ever since. Andrew founded World Gaming Group and launched WGM in 2009, took over IAG in 2015, debuted a third magazine called High Life in ... Tuesday, 05 December 2017 19:28

2017 Inside Asian Gaming Power 50: Ten Years On

2017 Inside Asian Gaming Power 50: Ten Years On A decade of making the Asian Gaming Power 50 By Andrew W ScottIAG Asian Gaming Power 50 selection panel Chairman EVERY year for the last decade, Inside Asian Gaming has completed a task that is fascinating, exhilarating, intellectually stimulating and industry-defining whilst simultaneously bei... Tuesday, 05 December 2017 19:12

2017 Inside Asian Gaming Power 50: Number 19 -  James Murren

2017 Inside Asian Gaming Power 50: Number 19 - James Murren 19 James Murren CHAIRPERSON AND EXECUTIVE DIRECTORMGM China Holdings POWER SCORE1,165 LAST YEAR12 CLAIMS TO FAME • Chairman of the world’s second largest casino company • Credited with keeping MGM Resorts afloat during the GFC If the strong domestic results achieved by MGM China’s pa... Tuesday, 05 December 2017 14:44

2017 Inside Asian Gaming Power 50: Number 18 - Chen Lip Keong

2017 Inside Asian Gaming Power 50: Number 18 - Chen Lip Keong 18 Chen Lip Keong CEO AND EXECUTIVE DIRECTORNagaCorp POWER SCORE1,234 LAST YEAR20 CLAIMS TO FAME • Casino monopoly within 200 kilometers of Phnom Penh runs to 2035, license to 2065. • Owns 65% of first gaming company ever listed in Hong Kong • NagaWorld extension Naga2 debuted in Novemb... Tuesday, 05 December 2017 14:39