The move brings to an end — or at least a hiatus — to MGM Mirage’s U.S. industry-bucking effort to cash in on Internet betting. It follows by just a few months a similar action by Bahamas-based Kerzner International, which shuttered its Web casino in March.
Las Vegas-based MGM Mirage was successful in creating a “model that provided the proper checks for jurisdictional control, age verification and the necessary security and responsible gaming measures required to function in a regulated market,” according to CEO Terry Lanni. But, the “legal and political climate in the U.S. and several countries around the world remains unclear.”
Lanni added that million of Americans “currently participate in online gaming in an unregulated environment” and MGM Mirage continues to believe that “a more sound and realistic public policy would be to regulate the activity …”
“The day will clearly arrive when this activity will be legalized and regulated and we will participate fully at that time,” Lanni concluded.
On Tuesday, the U.S. House of Representatives failed to come to a vote on a bill that would have clarified some laws on Internet gambling and banned the use of credit cards and other financial instruments. Most issuers already bar the use of their cards for online gambling.
The U.S. is thought to be the world’s largest market for online gambling . Offshore operations, usually based in sketchy jurisdictions in the Caribbean, take in billions from American gamblers every year. Companies like MGM Mirage, however, are frozen out of this lucrative trade for fear of endangering state-issued licenses to operate brick-and-mortar casinos.
“The biggest impediment is not whether it is legal or illegal but that those questions remain unanswered,” said Sebastian Sinclair, an analyst with Christiansen Capital Advisers.
As a result, Playmgmmirage.com was limited to accepting bets from a handful of countries and was “forced to adhere to the highest of all possible standards to protect their license,” which put it at a competitive disadvantage.
British operators William Hill and Ladbrokes, he said, “are doing great because they are not hindered by only taking bets from five or so countries.”
Sue Schneider, chairman of the Interactive Gaming Council, said “if you don’t have access to the U.S. market, it makes it tough to make a buck in this business.”
MGM Mirage’s competitive problems, she added, were compounded by a lack of brand awareness in the markets it was allowed to operate: “Where they had recognition,” namely the U.S., “they were not able to take advantage of it. A lot of people around the world still think of them as a movie company.”
As a result of the shutdown, the company expects to record a loss from discontinued operations of about $5 million, net of tax, in the second quarter.
Shares of MGM Mirage were up almost 3 percent at $29.55 in recent action.
By William Spain, CBS.MarketWatch.com
