Online poker stuck in U.S. red tape, but social gaming growing

Mon Nov 12, 2012 4:47pm GMT

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(Reuters) - International Game Technology does not expect much progress towards legal online poker in the United States in the next year, but its chief executive said a recently acquired social gaming firm that could help kickstart its online betting operations is growing faster than expected.

Nevada and Delaware are the only U.S. states that have legalized online gambling but several others are considering it, after the Justice Department ruled last year that only online betting on sporting contests was unlawful.

"We don't expect legislation in the U.S. to move significantly in the next 12 months," Patti Hart, CEO of the casino games maker, said in an interview.

Whether or not federal legislation passes in the next year, a majority of officials polled in an American Gaming Association survey released October envision the U.S. market growing to $10 billion or more over the next several years, from about $4 billion in unauthorized gambling in 2011.

DoubleDown, one of the biggest providers of games on Facebook, was acquired by IGT in January, in a deal that could total $500 million including milestone payments.

The business offers free-to-play online games such as poker, blackjack and slot games. It generates revenue through the sale of virtual gaming chips rather than from customers betting with real money, which is prohibited across most of the country.

"(DoubleDown is) way ahead of plan, meaningfully contributing to revenue, EBITDA (earnings before interest, tax, depreciation and amortization), and cash flow in the company," Hart said.

DoubleDown had revenue of $35.8 million for its fourth quarter ended September 30, a 20 percent rise from the third quarter.

"(IGT's gaming license is) for people who reside in Nevada, so the pool of potential players is not significant enough," Hart said.

A proposed federal bill, which would legalize online poker and off-track horse wagers but bar most other types of internet gambling, has been criticized for limiting the ability of states to regulate this inside their borders.

MGM Resorts International Ltd CEO Jim Murren told Reuters in October that at least a dozen states were discussing the creation of a viable interactive gambling market.

"We've been slowed down by the legislative process, there's no question about it," said Hart, who left Yahoo Inc's board earlier this year amid the fallout from the resignation of the internet company's CEO Scott Thompson.

"Our reaction was to find a way to extend a gaming experience to the public that is not really encumbered by the legislative process and that's what we've done (with DoubleDown)," Hart said.

"The online gaming environment looks social for an extended period of time in the United States," she added.

(Editing by Saumyadeb Chakrabarty)