Gaming Companies Bet on Internet Poker Returning to U.S.

Zynga, King could bring social media gambling to U.S. using new laws.

Casino industry representatives and exhibitors watch an online poker game during the industry's G2E conference, Tuesday, Oct. 4, 2011, in Las Vegas.
By + More

Social media would be a hot platform for gambling if Internet poker returns to the U.S., as some of the very people who helped shutter American Internet gambling now advocate for its return.

Online poker in the U.S. folded after the Department of Justice shuttered several online poker websites in 2011. The Republican-controlled Congress in 2006 passed a law banning the use of credit cards for illegal Internet gambling.

The time has come for Congress to revaluate how it can make legal online gaming available to American users so they will not be tempted to place themselves "at grave risk" by using potentially unscrupulous websites, said Rep. Lee Terry, R-Neb. Terry spoke on Tuesday during a hearing of the House Subcommittee on Commerce, Manufacturing and Trade, of which he is the chairman.

"While unfettered online gaming here in the U.S. is surely not the ideal, absent a clear mandate from Congress, we risk exposing our constituents to an environment where

a 'race to the bottom' could present itself," Terry said.

[READ: Powerball Jackpot Soars to $360M]

Some form of Internet gaming is legal in more than 85 countries, including the U.K., according to the American Gaming Association. Some of those players now gamble on websites based in foreign countries, as American users accounted for 15 percent of the global revenues to the approximately 2,700 websites hosting online gaming, which amounts to more than $1 billion every year, according to data provided by the subcommittee. Online gambling laws vary in different states. New Jersey and Nevada have broad laws that permit Internet gambling.

The hearing on Tuesday focused on the Internet Poker Freedom Act, sponsored by Rep. Joe Barton, R-Texas, which would legalize online poker nationwide with licensing run by the states. Rep. Peter King, R-N.Y., also introduced a bill in June that would legalize all forms of online gambling, with the exception of sports betting.

Online gaming companies including Zynga and King have prospered from real-money gambling websites in areas where online gambling is legal, including the U.K. Zynga designs games, including FarmVille, which are used on Facebook and mobile applications. King, which is based in the U.K., developed social media puzzle game Candy Crush Saga, one of the highest ranked games on Facebook, iOS and Android applications.

[ALSO: Why Is Harry Reid Betting on Online Poker?]

Congress is moving slow because of partisan gridlock, but those companies are well-positioned to profit if new laws clarify that online gambling is legal in the U.S., says Lewis Ward, research director for gaming at the International Data Corporation market research firm.

"Any of the games on Facebook or other download websites that have a casino theme with cards, dice or slots monetize very well," Ward says.

Social media gaming companies could use the extra revenue from online gambling. Zynga laid off 500 workers in June as it searches for a new way to make a significant profit off its games.

"Social media could be a channel of online gambling for people who are casual gamers and don't go to casinos," Ward says.

Internet gambling also highlights the larger problem of online security and what children should be allowed to access online, Ward adds. If federal regulations legalized online gambling then Web companies would likely avoid lawsuit risks by rolling out games slowly and adapting best practices from operations in the U.K., Ward explains. "Children using mobile applications sometimes spend hundreds of dollars before their parents stop them," Ward explains. "There will also be concerns with digital privacy and security because there will be high cash flows at stake."

The moral question of addiction risk remains a concern for Rep. Jan Schakowsky, D-Ill., as Internet poker would bring gambling to a larger audience in the U.S.

"The government should not be in the business of increasing the number of people struggling with gambling addiction," Schakowsky said during the hearing on Tuesday.