Excellence on the East Coast

As former DGE chief David Rebuck (shown with show organizers Lloyd Levenson and Michael Pollock) was honored at the impressive East Coast Gaming Congress, panelists and speakers assailed the rise of so-called “skill games,” illegal online gambling, and debated responsible gaming and financial issues. (All photos courtesy Tom Briglia/PhotoGraphics)

ATLANTIC_CITY_NJ_APRIL_18: Day #2 of The East Coast Gaming Congress held at the Hard Rock Hotel & Casino.Keynote speaker Luncheon. First Award honoring the Legacy of Steve Norton presented by Lloyd Levenson to his son Rob Norton; VP of Cordish Gaming. Lifetime achievement award David Rebuck; Director of NJ DGE. Keynote speaker NJ Attorney General Matthew J. Platkin on Thursday April 18, 2024 in Atlantic City NJ. Photo: Thomas E.Briglia /PhotoGraphics

The annual East Coast Gaming Congress (ECGC), held last week before a record turnout at the Hard Rock Hotel & Casino Atlantic City, honored former New Jersey Division of Gaming Enforcement Director David Rebuck with a Lifetime Achievement Award. It was only the fifth time in the 27-year history of the conference that the honor was bestowed.

Meanwhile, at conference sessions and 10 Industry Leader Presentations by prominent CEOs, several subjects were emphasized continuously—the threat to the industry from the spread of so-called “skill games,” the debate on whether or not internet gaming is cannibalizing brick-and-mortar revenues, the importance of responsible gaming initiatives in the era of legal iGaming and sports betting, and the persistent operation of illegal internet gaming sites.

Rebuck, who retired earlier this year after 13 years at the helm of the DGE, led the industry through its most tumultuous periods in the closing of five casinos in the mid-2010s and the Covid crisis shutdowns, reopenings and recovery. He also took a lead role in the state’s most notable achievements, including the implementation of online gaming in 2013 and the fast-track implementation of sports betting after the U.S. Supreme Court repealed the sports wagering ban in 2018.

In his second consecutive ECGC keynote address, New Jersey Attorney General Matthew Platkin recalled Rebuck’s proactive action on sports betting, particularly the fact that he had all regulations in place for an immediate launch following the May 2018 Supreme Court decision.

In his acceptance speech at the Keynote Luncheon, Rebuck expressed optimism for the local market despite recent sagging gaming revenues reported by Atlantic City casinos. “I remain very positive on the future for gaming success in New Jersey,” he said, “but only if all persons remain committed to engage in a call for action both in supporting the Atlantic City market and the state’s efforts to tether new gaming opportunities to its existing retail operators.”

That comment touched on two recurring topics at the conference—optimism on the future of Atlantic City and the importance of linking iGaming to brick-and-mortar properties.

At the start of the event, Casino Control Commission Chairman James Plousis commented that while several challenges still exist, the Atlantic City casinos are “stable, and headed in the right direction.” He noted that occupancy is up, there are overall revenue records, and the casinos have spent hundreds of millions on capital improvements.

“We have nine destinations, nine unique properties people want to visit,” he said.

Atlantic City Mayor Marty Small, Sr., who pointedly declined to comment on his recent legal woes concerning child abuse, painted a similarly positive picture in his comments.

“We want to continue to work with our properties,” he said. “They’ve invested millions to diversify our offerings. They’re our largest taxpayer and biggest employer. My personal problems don’t change my commitment to the people of Atlantic City, our businesses and our partners.”

Challenges Debated

Issues related to online gaming surfaced in the opening Industry Leader Presentation by Anna Sainsbury, co-founder and CEO of GeoComply, the geolocation technology provider that was instrumental in convincing lawmakers and regulators that geolocation would be reliable in assuring only in-state players could access the nascent legal iGaming sites.

Sainsbury noted that the identification of legal online gaming sites with well-known industry names is vital, because illegal online casinos are still strong in their operations, and players normally can’t tell the difference between a legal iGaming site and an illegal offshore internet casino. She rattled off statistics showing the strength of the illegal online gaming market, which accepted $400 billion in wagers last year, compared to $117 billion wagered on legal sites.

She noted studies that show 75 percent of consumers believe it is important to wager only on legal, sanctioned sites, but because there are no restrictions on advertising and promotion on the internet and social media, many are lured to illegal offshore sites by innocent-looking promotions, and even sponsorships of online cooking shows and other attractions by offshore sites. She even cited one social media advertisement that made no qualms about the illegality of a site, brazenly promoting better odds and betting lines than available on legal sites.

The first panel discussion of the conference, moderated by Spectrum Gaming Executive Vice President Joe Weinert, examined the rising competition in the Eastern gaming market, emphasizing the three planned casinos in the New York City area and the burgeoning threat from unregulated, untaxed slot-like games in several states that claim to have skill-based elements.

Stacey Rowland, chairwoman of the New York Gaming Association, described the long process so far toward the initial acceptance of license applications for what will be three downstate New York casinos, all located in and around New York City’s five boroughs, and the delays inherent in adjusting city zoning rules to account for casinos. She also noted the delays announced last month by the New York Gaming Commission due to ongoing startup requirements.

(The delays have been roundly criticized by New York state Senator Joe Addabbo, who has championed the downstate casino process in the legislature. Addabbo had been slated to participate on the panel, but was a no-show.)

Mark Giannantonio, president and CEO of Resorts Atlantic City and president of the Casino Association of New Jersey, commented on the panel that the coming New York competition definitely poses a threat to Atlantic City, but that it also will drive visitation to the Northeast from other parts of the country. He said the best thing Atlantic City stakeholders can do to face the competition is to focus on fixing the problems with the Atlantic City market, such as improving local infrastructure and adding amenities to secure the city as a true destination resort.

The panel also evaluated the competition posed to the Atlantic City casinos by online gaming sites, particularly the leading national brands like DraftKings and FanDuel that are not identified with a local casino. Rob Norton, president of Cordish Gaming Group, contended that contrary to many opinions, iGaming is in fact cannibalizing the revenues of the brick-and-mortar casinos. (Giannantonio disagreed, maintaining iGaming revenues have been “additive” to land-based revenues.)

Norton added that online casinos and sports betting are hurting the image of the land-based industry in general, particularly in the deluge of advertising for the sites and wagering apps. He said the industry is “sliding backwards” from its hard-won acceptance as a valid entertainment option because of the growing prevalence of iGaming and sportsbooks. He said the industry risks drawing unwanted attention and new restrictions from legislators and regulators.

Norton also stressed the emphasis by operators such as Cordish on providing the “critical mass of entertainment experience” that cannot be matched online, and disagreed with arguments that online and land-based players are fundamentally different.

The panel also addressed the increasing competition from unregulated skill games, which Norton said is the “biggest threat” on the horizon to licensed casinos. Panelists noted that the slot-like games, which have proliferated in convenience stores, gas stations, pizza parlors, bars and other locations, offer a gambling experience with cash payouts while not being subject to the same scrutiny as slots operated by casinos—no age restrictions, no responsible gaming protections, no guarantees of fairness to players, and perhaps most importantly, no payment of state taxes.

The skill-game threat was explored in detail in the second panel discussion, a look at emerging technology moderated by Cooper Levenson partner Lynn Levin Kaufman. Kevin O’Toole, executive director of the Pennsylvania Gaming Control Board, noted that the manufacturer of the prevalent Pennsylvania skill games has won court decisions in lawsuits over seizure of the games, although a major appeal involving a game seizure is pending before the court.

O’Toole said one possible end to this ongoing controversy could be the bill filed recently in the state Senate that would license, regulate and tax the skill machines.

That bill would restrict the games to liquor-licensed establishment and charitable clubs, with a limit of three machines for each bar and five machines for social clubs. The bill would tax the machines at 16 percent, a fraction of the 54 percent tax imposed on casino slot machines. The total number of machines would be capped at 30,000.

Panelist Jeff Morris, vice president of public affairs for Pennsylvania-based Penn Entertainment, estimated that the exact number of these games—though unknown because they are not regulated—could soon approach 100,000 across Pennsylvania, which he described as the “epicenter” of the unlicensed skill game business.

Morris said if the skill games are regulated and taxed, they should be required to follow the same license requirements, and pay the same tax rate, as casino slots. “We don’t think there should be any of these machines operating in the state, but if there are, we need parity,” he said.

RG Focus

Another key panel at ECGC focused on challenges and opportunities related to responsible gaming and problem gaming. Moderated by West Virginia state delegate Shawn Fluharty, who is president of the National Council of Legislators from Gaming States, the panel featured prominent experts in the field.

Dr. Jennifer Shatley, executive director of the newly formed Responsible Online Gaming Association (ROGA), said the biggest challenge in responsible gaming is to foster collaboration between stakeholders across the country, and the sharing of research tools among online and land-based operators.

Shatley noted that ROGA’s mission is to research best practices, promote responsible gaming efforts—including monitoring advertising practices—and to emphasize the difference between “responsible gaming” and “problem gaming.”

“The aim of responsible gaming is prevention,” she said. “People aren’t using RG tools, because they think they’re problem gambling tools. (Responsible gaming) should be more than providing money for treatment. We should be evolving best practices in how to prevent problem gambling.”

Jamie McKelvey, deputy attorney general for the New Jersey DGE, likened responsible gaming to a seat belt—“something everyone should use to prevent issues arising down the road.” She said one way this might be achieved is by using artificial intelligence technology as a way to predict possible future problems. AI could be a good way to proactively identify player behavior that maybe is not problem gambling now, but could eventually develop a problem gambling issue,” she said.

Leaders Speak

The issues discussed by panelists were in large part reprised by the CEOS in their Industry Leader Presentations. One notable presentation was by James Allen, CEO of Hard Rock International and Seminole Gaming, and the ultimate host of the conference.

On iGaming, Allen said the threat from illegal offshore markets has not diminished, which is the reason a high-profile, international brand like Hard Rock is instrumental in battling the threat. He said internal studies show that 85 percent of players at the Hard Rock online site said “they came to our site because it is legal.”

Allen also attacked the proliferation of skill games, zeroing in on the current efforts in Virginia to legalize and regulate them. “If you’re going to legalize 50,000 gray-market machines, how can you ask us to invest millions in capital in these states?” he said. He commented that competing operators, for once, all agree on something—the need to control the spread of “these illegal machines.”

Jay Dorris, president and CEO of PCI Gaming, the gaming division of the Poarch Band of Creek Indians, also addressed the skill-game threat, in this instance the proliferation of the games in Pennsylvania, where the tribe operates the Wind Creek Bethlehem casino.

Dorris noted that the games offer no assurances that winners will be paid, that the games are being watched to ensure integrity, or even that there are no children playing. He pounded the point home with a picture showing a conveniences store clerk reading a magazine while slot-like skill games sit unmonitored in the background.

Dorris said if Pennsylvania does regulate skill games, their operators and manufacturers should be held to the same standards as the casino slot sector. “They should be taxed at the same rate as slots, 54 percent. If we can have a record year for slot revenue at that rate, they could too,” he said. Without a level playing field, he said, current casino licensees could eventually start replacing their current regulated games with lower-taxed skill games.

“If you’re going to have skill games, incorporate them into the existing system,” he said.

Tim Drehkoff, CEO of Rush Street Gaming, said the VGT program in the operator’s home state of Illinois provides a glaring example of how skill games can drain casino revenues. He said since the implementation of the program that placed an eventual 30,000 VGTs in distributed locations across Illinois, casino slot revenues have plummeted by 35 percent.

“This is a pretty good proxy to what will happen in Pennsylvania and Virginia when the skill games start popping up everywhere,” Drehkoff said. “There is no question these games are hurting our business.”

Other industry leaders addressed rising competitive threats to casinos in the East. David Cordish, chairman of the Cordish Companies, identified internet gaming as one of those threats. Cordish reprised the position of the late gaming legend Sheldon Adelson on iGaming, saying it runs counter to a position that he shares with what Adelson said—that gaming should be one aspect of an integrated entertainment experience.

Cordish said iGaming “increases gambling addiction,” comparing the 24-hour easy availability via smartphone to loading up an alcoholic’s cabinet with liquor. He also contended that iGaming is cannibalizing brick-and-mortar casinos, and ultimately will cost jobs. “Ask unions what they think of iGaming,” he said.

Ray Pineault, CEO of Mohegan Gaming, noted that there is a wide range of opinion on whether or not iGaming cannibalizes brick-and-mortar operations, with studies often showing opposing results. “Whether yes or no, digital gaming is happening, and we have to be prepared for it,” he said, suggesting that property presidents work together to take an omnichannel approach to market brick-and-mortar casinos along with their online counterparts. “We want our brick-and-mortar customers to continue to access the brand online,” Pineault said.

Jay Snowden, CEO of Penn Entertainment, departed from the themes covered in other leader presentations to address what he said is a different threat to the industry—artificial intelligence.

He offered an audio of a voicemail message to one of his executives that utilized “vishing,” an AI technology that can replicate someone’s voice. The audio sounded exactly like Snowden’s voice, but asked the executive to take action on recent litigation. It’s the same AI technology that has been used in recent cases where employees delivered cash off-site after receiving phone calls they thought were from their superiors.

Snowden noted that the next iteration of AI technology will add video to these messages, with an avatar lip-synching instructions to scam victims. He said AI also is instrumental in the cyberattacks that are plaguing the industry.

Despite the cyber-threats, Snowden said AI does have positive potential, particularly as a proactive tool to identify behavior that could lead to problem gambling, and to aid customer service in analyzing predictive behavior to provide real-time response to customer needs.

Norton Honored

Also at the East Coast Gaming Congress, tribute was paid to former casino executive Steve Norton, who pioneered gaming first in Atlantic City, later in the Midwest with riverboats and then around the world in various international jurisdictions. Norton late last year and show organizer Michael Pollock paid tribute to him.

“Many of us wouldn’t have chosen this career or advanced as far as we have if it wasn’t for Steve Norton,” he said in a video tribute highlighted at the show’s welcome reception.

The Norton family gathered to recognize the honor.

Articles by Author: Frank Legato

Frank Legato is editor of Global Gaming Business magazine. He has been writing on gaming topics since 1984, when he launched and served as editor of Casino Gaming magazine. Legato, a nationally recognized expert on slot machines, has served as editor and reporter for a variety of gaming publications, including Public Gaming, IGWB, Casino Journal, Casino Player, Strictly Slots and Atlantic City Insider. He has an B.A. in journalism and an M.A. in communications from Duquesne University in Pittsburgh, PA. He is the author of the humor book How To Win Millions Playing Slot Machines... Or Lose Trying, and a coffee table book on Atlantic City, Atlantic City: In Living Color.