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Online gambling triggers big change in Internet, CEO says

| Sunday, June 29, 2014, 9:00 p.m.
Matthew Katz, founder and CEO of Central Account Management System
Matthew Katz, founder and CEO of Central Account Management System

Online gambling might do more than generate tax money and let people play from their living rooms.

“This industry is forcing a massive change in how the Internet works,” says Matthew Katz, founder and CEO of Central Account Management System, or CAMS, which provides payment processing and player verification services to online casinos in New Jersey.

CAMS connects online-casino operators with third-party companies that verify players' identity and location and allow gamblers to deposit or withdraw money.

States that allow or are considering online gambling require that players be at least 21 and physically in the state. Katz says the casinos' need to provide that information is shifting the Web from a network that knows no borders to one that independently verifies exactly where and who its users are. That eliminates some of the anonymity Internet users have come to expect.

“The whole concept of the Internet, when it was created, is it's everywhere,” Katz says. “Now, we have an industry coming into play where borders are critically important for making sure the operators adhere to state law.”

“That's a significant change in the Internet — from anonymity to full transparency, from no validation to a true validation that's applicable under state law.”

Katz predicts the changes required for online gambling will be a test for future taxation across the Internet.

In most states, approval of online gambling — whether the lottery, poker or all forms of casino games — is a matter of when, not if, he says.

Legal online poker is probably two years or more away in Pennsylvania.

“It's a matter of time before Pennsylvania goes down this path,” says John Pappas, executive director of Poker Players Alliance, which supports government regulation of online poker. “There is near consensus among the (state's) brick-and-mortar gaming industry that the Internet is something they want to get into.”

Sue Schneider, a founder and former chairman of the Interactive Gaming Council, says Pennsylvania is an attractive online poker market because of its size, but Internet gambling regulation typically takes a couple of years to gain approval — more if it generates controversy.

Even state Sen. Edwin Erickson, R-Chester County, who this month introduced a bill to legalize and regulate online poker, says the state should move slowly to ensure the technology works and to allow time to gauge the potential impact on traditional casinos.

Only Nevada, Delaware and New Jersey offer legal online gambling now. Nevada allows only poker, while the others permit additional casino games. Georgia and Illinois sell lottery tickets online.

States with online gambling can form compacts to share players, much like the Powerball and MegaMillion lotteries offer games that cross state lines.

Other states considering proposals for online gambling include New York, California, Mississippi, Iowa and Illinois.

Pappas describes Pennsylvania as “the next emerging market” for online poker and says it could become “the crown jewel of the East Coast.”

“Liquidity,” or having enough players to provide a wide range of games and betting ranges, is especially important in poker.

That's one reason Schneider has described California, population 38 million, as the “Holy Grail” for online poker. It's so large that state officials say it would not have to enter compacts with other states. This month, 13 Native American tribes that operate casinos in California announced that for the first time they had agreed on language regulating online poker.

Pennsylvania, population 12.8 million, could become “a very attractive partner” for smaller states that approve online poker, Pappas says.

“Any other state would rather compact with Pennsylvania than Nevada, Delaware or even New Jersey,” he says.

Mark Gruetze is administrative editor for Trib Total Media. He can be reached at 412-320-7838 or players@tribweb.com.

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