Jamar Johnson

Part A. Assessment
In your essay you will need to explain why, despite being home to some of the worlds most
famous land-based gambling locations such as Las Vegas and Atlantic City, the U.S. has
prohibited online gambling. You will need to identify and explain the factors in the market and
nonmarket environments (for land-based and online gambling) that explain the different policies
in the U.S. surrounding the legalization of online and land-based gambling?
The U.S. has prohibited online gambling within its borders stemming from both market
and non-market factors. To begin, it is important to outline the non-market environment which
significantly shaped the market environment for gambling in the United States. Concerning
online gambling, The U.S. Department of Justice ruled that the 1961 Wire Federal Act applies to
online gambling thereby prohibiting the supply and consumption of gambling conducted on the
internet. The U.S. Government through the Department of Justice, ruled against the adoption of
online gambling citing increased incidences of fraud, money laundering, abuse of minors, and a
weak legal environment to convict those found in breach of law. While Antigua attempted to cite
the adoption gambling for U.S. horseracing market in support of their position, the U.S. countered
by stating that, its ban on online gambling was a legitimate measure to uphold moral values. (pg.
7).
Online gambling faces additional challenges from the American Gambling Association,
an influential lobbyist group utilized by the major-to-small scale casino operators working to
influence legislation in its collective favor. Naturally, any opposition or threats (i.e., online
gambling) to its market position would encounter formidable challenges to gain legitimacy in the
U.S. On the opposite end of the spectrum, online gambling would be opposed by the National
Commission Against Legalized Gambling (NCALG) supported by American conservatives and
anti-gambling supporters, are worked to curtail the growth of gambling within the United States
citing repeated incidences of gambling addition, job loss, bankruptcy, increased crime activity,
unemployment, and divorce stemming from the complications of financial stress to the institution
of marriage (pg. 3 of the Case).
Aside from non-market elements, the traditional casino industry had a vested interest in
protecting its sustainability and held significant influence on within its local communities. The
casino industry maintained a reputation for embedding itself into the community fabric (pg. 3),
thereby making it nearly impossible for them to be extracted from the community. Casinos
provided direct and indirect employment opportunities to local residents (estimated at 700,000,
pg. 3), tax revenue to many U.S. state governments (to an average of 18.2% of all revenue
generated where states allowed casinos to legally operate, Exhibit 10) along with producing
operational revenue due to its physical assets ($80 per slot machine) to local regulatory
commissions. It worth noting that by 2003, the casino industry in the United States generated
revenue of $73 Billion dollars (Exhibit 5 of the case).
The reputation of online gambling was also mired in a number of difficulties which
damaged its perception and ultimately its potential adoption. Most notably, online gambling sites

contacted customers through the use of spam and other unwanted communication methods. While
industry leaders in the online gambling industry worked to broaden its reach and credibility to
those skeptical of its safety, there was legitimate concern that some existing online gambling
companies are used for fraudulent and otherwise illegal activities. Additionally, scrutiny had been
placed on the regulatory commissions created by online gambling leaders. However, the online
gambling community failed to deliver on its aim of impartiality as created regulatory
commissions were financed by the companies they were expected to regulate, undoubtedly
fostering an inherent conflict of interest.

Part B. Recommendation
In your essay, you need to make a recommendation to Rita regarding what she should
advise Miracle to do. Specifically, should Rita advise Miracle to: a) continue with its current
position of opposition to online gambling; b) switch sides and start pushing for legalization of
online gambling in the U.S.; c) something else? You should clearly and persuasively explain the
reasons behind your recommendation. In doing so, you should address both relevant market and
nonmarket factors and identify and respond to key arguments that go against your
recommendation.
There are a number of regulatory and market challenges one must seriously consider
when evaluating Miracle Casino degree of involvement related to online gambling. While
increased saturation of physically-based casinos threaten growth (Exhibit 5) and could spell antitrust pressure (pg. 8), the current socio-political environment within the U.S. concerning online
gambling suggests great difficulty in generating the required support in influencing policymakers, regulatory bodies in committing to repeal the existing interpretation of Wire Federal Act,
along with countering the reach and influence of lobbying groups such as the American Gambling
Association and National Commission Against Legalized Gambling (NCALG). There is a strong
precedence against online gambling adoption, with regulatory pressure applied to businesses
(e.g., payment processors from U.S. Government enforcement agencies) acting sluggishly in
adhering to the rulings or serving as a participant in circumventing American law. Taking on the
unpopular position of lobbying for the legalization of online gambling could damage the brand
equity of Miracle Casino and its market leadership position within the industry.
On the other hand, should Miracle Casino ignore the forthcoming decision from the
World Trade Organization and its expected favorable ruling to Antigua, Miracle will be left in a
precarious state by not capitalizing on a new avenue for corporate growth. Substantial demand
exists for online casino gambling. Within a ten year span, the industry has grown from a baseline
of 0 and surged to $10-12 billion industry (pg.4). More impressively, Party Gaming PLC
underwent momentous growth between the years of 2002-4 to experience a 50-fold expansion in
its revenue generating capabilities (pg. 4). Critically, the online gambling industry, remains
plagued by with negative perceptions, extreme stock price volatility, and failed compliance and
enforcement capabilities. Taking on a first-mover advantage point, Miracle stands to leverage its
respected and established brand, resources, and influence to provide the online gambling industry
the credibility it needs to develop further traction. Not to mention, the scale and return on
investment in a less than a year in some cases, as a result of distinct technological advantages,
serve as compelling points to take the leap financially.
All this considered, Miracle stands to lose more should it open the debate in support of
online gambling. While the financial promises of online gambling are nearly impossible to
ignore, re-framing the perception of online gambling and packaging it as a safe alternative to onsite gambling lacks the necessary evidence it needs to be supported by influential actors in the
non-market environment. Similarly, within the market environment, Miracle will subjugate itself
to intense price competition initiated by on-site casino companies working to weaken the

company position of Miracle. The vulnerabilities of Miracle Casino during this time will be great.
Not only must you work to compellingly argue your case for legalized online gambling to
enforcement authorities, we will be required to engender support from the public, as we will be
alienated from former influential policy-makers who will stand with the American Gambling
Association.
Lastly, the support of the World Trade Organization in favor of Antigua and its
international allies assumes that the United States will abide by its decision. For all intents and
purposes, the U.S. Government could provide nominal concessions in light of the WTO ruling yet
give little of substance in the implementation of regulations designed to provide a foundation for
legalized online gambling. Although the chances are remote, U.S. Government could essentially
ignore the ruling of WTO. Such an action would serve as a direct blockade. In conclusion, I
recommend that our best course of action regarding the matter is to remain in opposition of online
legalized gambling. For opening the debate and/or lobbying in support of legalized online
gambling will generate market and non-market consequences which we are not equipped to
handle and manage.