Online bettors furiously ante up for March Madness - Saturday 12th of March 2005
It's the day before the NCAA tournament, and Danielle can't wait to be part of the madness.
From a laptop computer in her Los Angeles apartment Wednesday, she eagerly picks 20 games in the NCAA tournament's first round for $25 to $50 each. It's the first time she's bet on the event after five years of Internet wagers on the NFL. "It's boring when the football season ends, and you have the betting bug," says Danielle, 30, who works in sales.
In Fort Lauderdale, Chris D., a longtime online bettor, plans on putting down up to $20,000 this weekend. He'll play four to five games a day. "When I was younger, I was a complete degenerate. I'd bet on everything," says Chris, 30, a writer and editor. "Now, I try to be disciplined."
Chris hopes to repeat his success from last year, when he walked away with $3,700. Like Danielle, he asked that his last name not be revealed because of a controversial law that the federal government says prohibits Internet wagers.
Hundreds of Internet sports-betting sites are expected to rake in $1 billion to $1.3 billion in wagers during March Madness, several market researchers say ??? at least double this year's Super Bowl. Sixty-four men's basketball teams are in the tournament, which tipped off Thursday and concludes April 4.
The betting bonanza marks the annual jackpot for the fledgling online-gaming industry, which collected $15 billion to $20 billion in sports bets from Americans last year, gaming consultant Michael Tew and other market researchers say. "The Internet has become a safe, anonymous replacement for the office pool," says Kevin Smith, an analyst at River City Group, which supports online gaming.
It's never been easier, or more acceptable, to bet on sports over the Internet. There are 1,000 sports-betting sites. Advances in software, wireless and electronic-payment technology let millions of Americans plunk money down anytime and anywhere ??? even in the middle of a game.
The new technology comes as the stigma of online gaming is dissipating and federal lawmakers struggle to update and enforce a creaky anti-gambling law. The 1961 federal Wire Act bans use of phones to place sports bets but does not mention casino games, and it came years before the Internet. Gaming experts also chalk up the growing acceptance of online gaming to the popularity of virtual poker and self-regulation among offshore Web sites.
"Consumers are more comfortable betting because they don't feel they're being ripped off. The sky hasn't fallen," says Calvin Ayre, CEO of Bodog.com Sports Casino Poker, which expects to haul in $40 million in wagers from the tournament, up 54% from a year ago.
A sure bet
If March Madness weren't already a staple of sports Americana, it would be conjured up by gaming-site operators. Almost everything about it is geared toward sports addicts with a gambling Jones.
Over the weekend, a dizzying 48 games will be played while couch potatoes bask in beer-and-nacho bacchanalia. And every step of the way, they can wager on thousands of propositions from bars or a friend's home.
"There's action all day. If you lose a game, you can always bet on the next," says Stuart Doyle, waging director at BetWWTS.com, which expects $20 million in bets on its site throughout the tournament, compared with $16 million last year.
An estimated $3.5 billion to $4 billion will be bet worldwide on the tournament, a third over the Internet, Tew says. Legally, $80 million to $90 million will be bet on the tournament in the 182 legal sports books in Nevada, the American Gaming Association says. Most of the bets pour in from the USA.
"It's not just college people," says Jim Quinn, president of for-profit watchdog group Off Shore Gaming Association (OSGA). "It's professional people, work pools."
What is turning online gamblers mad in March:
???Technology. As with cyberporn, gaming sites have prospered from innovation. New software lets anyone with an electronic device put down money anonymously.
Software from companies such as Phantom Fiber lets consumers bet from 640 different wireless devices, a vital tool because it offers instant access to scores, injury reports and point spreads. The result is the ability to bet on games or any imaginable statistic before and during games.
"Before, it might be hard to boot up a machine and make a quick bet," says Jeff Halloran, CEO of Phantom Fiber. "Now, betting is like holding a remote control at home."
The newest wrinkle in online gaming permits wagers between inveterate gamblers. Similar to file-sharing programs such as Morpheus, BetBug software can be downloaded by U.S. bettors and lets them propose a wager with anyone on the network. BetBug gets a fee from a third-party payment company that handles escrow accounts of players and oversees payouts, says Anthony Novac, president of 1X, which designed the software.
At the same time, electronic-payment systems have made it possible to wager without cash, checks or credit cards. Several banks ban the use of credit cards on gaming sites. Epocket has developed software that securely shuttles digital currency between computers, cell phones and PDAs. This year, it will license the software to banks, merchants and a company representing gaming sites.
??? Public acceptance. It's not only easier to bet online but also increasingly fashionable. The wild popularity of poker, a cable-TV fixture, invigorated an already flourishing industry. About 2 million people bet on online poker daily, up from 88,000 two years ago, says researcher PokerPulse.com.
The revolution has attracted many first-time gamblers, who are as comfortable playing Texas Hold 'Em poker as putting down $50 on Oklahoma State in the first round.
The appeal of March Madness is reflected in visits to gaming sites last year. In the week before the 2004 tournament, there were 8.9 million, compared with 10.5 million in its first week and 11.2 million in the second week, says market researcher ComScore Networks.
Gaming sites have also gained trust. Several years ago, about 1 out of 10 calls the Off Shore Gaming Association received was from a gambler who never received his or her winnings. Today, it is 1 in 50.
OSGA, founded in 1998, helps online gamblers find legitimate gaming sites. It vets offshore operations by using their sites and visiting their offices, "so that you can see that there aren't just three guys sitting around a computer," Quinn says. It makes its money by selling ads to gaming sites. The ads are sold for a flat rate to prevent bias, he says. "We're a benign form of entertainment," says Ayre of Bodog.com. "After 10 years of not missing a payout, people trust us."
??? A toothless law. Online gaming's renaissance has further undercut the 1961 federal law that prohibits sports bets over telephone lines but does not mention the Internet.
The law's fuzzy nature ??? compounded by failures of federal lawmakers the past decade to update it amid requests by the NCAA and others ??? has yielded few arrests and emboldened legislators in North Dakota, Illinois and Georgia to edge closer to online gaming with bills. "Online gaming is not a panacea for money laundering and fraud as the government warns," says Mike Foreman, marketing director at BetUS.com.
Vegas casts wary eye
While some form of gambling is legal in many states, sports betting is allowed only in Nevada. Online gaming, however, has had an impact on the industry since its first site surfaced a decade ago.
The industry's 2,000 offshore sites generated about $10 billion in revenue last year and could reach nearly $17 billion by 2009, says Christiansen Capital Advisors. Most of them are in the Caribbean and South America. "It's a good job down there," Quinn says. "It's better than working at McDonald's."
Most operators of land-based casinos cast a wary eye on their virtual upstarts. Publicly, they say they aren't threatened financially ??? an estimated $1.5 trillion was wagered in all forms of gambling worldwide last year, says consultant Tew ??? but privately they are closely tracking its legal path. If online betting were legalized, many are poised to dive into the market.
For now, most are opposed to an unregulated industry that is the focus of federal lawmakers.
"We don't believe the technology presently exists to have appropriate regulation," says Frank Fahrenkopf Jr., CEO of the American Gaming Association, the casino industry's trade group. That technology would include ways to prevent minors from betting and identify the location of a bettor, to comply with local laws.
Others downplay online betting as a fringe element. Lois Rice, executive director of the Colorado Gaming Association,says Internet gambling tends to be a solitary activity, while casino gambling is a social event.
The financial impact for Nevada goes beyond bets. Earlier this week, remaining rooms at the MGM Grand, Caesars Palace and Luxor casinos started at about $400 a night. The Bellagio was sold out. "You can't get a hotel room in Las Vegas (during the NCAA tournament)," Fahrenkopf says. "You can't get a rental car. You can't get a reservation for dinner."
The booming business is one sign Internet gambling has not taken a big bite out of the traditional casino industry. Casinos have become vacation destinations with golf courses, luxury restaurants and entertainment. An increasing percentage of casino revenue comes from non-gambling sources. "A guy who's going to go into his den with a can of Coors and place a bet in Antigua" doesn't really hurt that, Fahrenkopf says.
The future of Internet gambling will depend on its ultimate legal status in the USA, Fahrenkopf says. About 65% of the illegal gambling market comes from the USA, he says. "If it's legalized in the United States, the future is very strong," he says.