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How skill-based gaming and DFS redefine the gaming landscape

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At a recent conference, I was asked to participate on a panel covering the hot topics in gaming. Identified so far are skill-based gaming, daily fantasy sports (DFS) and the future of legislation to legalize casinos in Mexico.

My knowledge of Mexico’s prospects is limited, other than to know that the hodgepodge and piecemeal approach to expanded gaming has made a mess south of the border, and nearly everyone must agree it is time for rational and national laws.

As such, I look forward to learning about Mexico from my fellow panelists.

However, the topics of daily fantasy sports and skill-based gaming are ones on which I have some opinions that may be worthy of sharing.

Skill-Based Gaming

You can count me as a skeptic on the impact that skill-based gaming will have on casinos and gaming suppliers, especially in attracting the millennial generation, which has become something of an industry obsession.

It is early in the development of skill-based casino games, with Nevada having just issued its regulations and technical standards still to be written. But the first skill-based games displayed recently at G2E in Las Vegas were mostly just modest extensions of existing games.

And that’s OK. Anything that makes slot machines more appealing or entertaining is welcome and, no doubt, many of the extensions shown, and other games to follow, will accomplish that.

But skill-based games in casinos will not, and cannot, match the immersive experience, player empowerment and social interaction of the video games that enrapture so many millennials.

Here’s why:

• Regulators will not allow the development-with-abandon practiced by countless video game developers. They will have to control the games for fairness and honesty.

• The immersive experience isn’t possible amid the clanging, flashing, crowded, music-blaring atmosphere of a casino.

• Video gaming changes very fast. Changes can be made overnight. Players can attach themselves to a new game as fast as it is released. Regulators cannot, and should not, act as rapidly.

Whereas a video game developer can change a game overnight, he or she can’t even get a game trialed or a regulatory hearing scheduled that fast in the real-money environment.

In other words, regulators and the industry cannot maintain the pace of change players expect in the video gaming world.

• Casino games will always be designed for the house to win, thus limiting the types of payouts and the degree of victories players can expect.

None of this means efforts at skill-based gaming shouldn’t be tried. Nanotech Gaming, for example, is a small company that attracted considerable interest at G2E with a brand-new kind of casino game based on a pinball model that looks promising.

Meanwhile, skill-based games already are succeeding in casinos. They’re called table games.

Walk into a casino and you’ll see those much-sought millennials at the so-called carnival table games cheering and high-fiving, playing games that are more fun than serious and, with progressives and bonus bets, often with the prospect of the big hit once absent from the green felt experience.

One argument discounting the importance of attracting millennials is that they don’t have much money to spend at this stage of their lives.

But if they do, and if attracting them is important, then casinos need only do what they have always done best—provide the entertainment experience millennials want, whether at the tables, in nightclubs or in creating party pits on the casino floor.

Daily Fantasy Sports

DFS has rocketed from obscurity to almost oversaturation in a matter of months.

By now, the major arguments are known: It is a game of skill, therefore legal. It has elements of chance and therefore is gambling, thus illegal in most places, and certainly needing regulation. It is a gray area unaddressed by legislation or regulation in most states.

The legal arguments are interesting. And the future of DFS might well be decided in the courts.

But more interesting are the prospective political battles and the irony of the battles.

If DFS is found by the courts to be gambling, it will chill the industry to the point of freezing. Entities such as Major League Baseball and Disney do not want to be seen as owners of, or profiting from, gambling operations.

And that is why the outcomes might be decided in the halls of government rather than in courtrooms.

DFS has the potential to be a lucrative business if it becomes established. And the current owners and stakeholders are bigger and more powerful than those of the casino industry: the aforementioned MLB and Disney, Google, Comcast, Time Warner, Fox, Yahoo, CBS, the National Basketball Association and others.

If the legal battles start to turn against DFS, don’t be surprised to see those powerful media and sports enterprises turn to legislatures for clear exemptions from gambling laws.

That could have several ramifications for the casino and betting industries.

On one hand, if legislatures clear the way for DFS, casino and betting companies could be largely on the outside looking in at the big boys having stolen this golden goose. That would be especially ironic if gambling companies continue to fail to get states to legalize sports betting.

On the other hand, DFS might finally force the issue of the hypocrisy and futility of banning sports betting to the fore. If so, that could be the vehicle for expanding legalized sports betting, a positive for the industry.

Whatever happens, expect the final decisions to be made more in legislatures than in courts.

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