White Paper on Parimutuel Gaming

by

United States Patent:
#US 8,277,311 B2
Date of Patent: October 2, 2012
Platis, et al.

Wagering Web Service System and Method
Inventor: Harry Platis, Lynnwood, WA (US)
Application Number: 12/472,344
Filed: May 26th, 2009

http://parimutuel.net/wp-content/uploads/2012/12/US_Patent_No._8277311.pdf

 

Wagering Web Service Summary

A wagering web service operates on a wagering web virtual server and coordinates, wagering  on events such as tournaments, wagering on entrants in such events, wagering event-location applications and databases (such as casino applications and their related databases), financial institutions (such as bank applications and databases), and the  individual wagering events themselves (such as various types of wagering scenarios, for  example a win bet, a choose “n” to win, (wagering on a large entrant groups, etc …)).

The wagering web service acts to synthesize and coordinate the disparate applications to create a Virtual Totalisator System. This Virtual Totalisator System utilizes a scalable technology platform and encrypted communication channels to provide a secure Web service.  The service utilizes in one embodiment a Web Service Definition Language or WSDL. The Web Service method interfaces and interacts with the various databases discussed above utilizing a Simple Object Access Protocol or SOAP to exchange the structured information regarding the transactions. The protocol utilizes XML as its message format.

The bandwidth limitations are only limited to the local portals within which the end transactions are taking place. With regard to security protocols, the primary control of security exists at the Wagering Web Service administration application location, and shares security with each of the locations, for example, at the event locations, financial locations, and at the wagering locations. Therefore, security is shared disparately between each location and provides a separation of information. With regard to regulatory control, the parimutuel wagering takes place at the local level, and the Wagering Web Service administration can take place off-site because no wagering is taking place there.

With regard to verification of tickets and IDs, the system uses a GUID regime which provides for near unique ticket ID generation. While each generated GUID is not guaranteed to be unique, the total number of unique keys 2 to the 128th or 3.4 X 10 to the power 30 is so large that the probability of the same number being generated twice is extremely small.

 

The purpose of this White Paper is to elaborate on:

A. The people behind the Parimutuel Wagering concept.
B. The potential for Government revenue creation from Parimutuel Poker.
C. The gambling industry’s shift to one of fairness for all participants.

This white paper will show how the gaming industry can potentially become more transparent, as compared to it’s current state. Among other things, this white paper will demonstrate the potential long-term benefits of Parimutuel Event Wagering and the revolutionary impact it can have on gaming as a whole.

1 – Executive Summary Parimutuel Group

Parimutuel LLC has been in existence for six years. Parimutuel wagering has been around since the late 1800’s. Our system provides risk free options to the operator, and the best odds payouts to the bettor. Our system addresses concerns raised by gamers, who believe they are being manipulated and defrauded by unregulated foreign corporations, illegal bookies, and unethical offshore corporations.

Parimutuel LLC provides parimutuel style wagering on a wide range of competitive tournaments, events, contests, games, and activities, all of which have a long history of play, a large number of entrants and are regulated.

Parimutuel LLC’s innovative wagering system can easily be adapted by existing state lotteries, thereby providing additional revenues to local, state and federal governments. The system’s ground-breaking entertainment value will attract both foreign and domestic players.

Parimutuel LLC’s technology allows players to place bets on top-ranked individuals entered worldwide in an event, tournament, activity or contest, such as: a poker tournament (e.g., The World Series of Poker), pocket billiard tournament, automotive race, golf tournament, tennis tournament, soccer tournament (e.g., The World Cup), motorcycle race, and many other competitive events.

Parimutuel LLC’s offering hinges on the adoption of our technology for legal online social gaming. Our long term objective is to create revenue for all levels of government. We will provide a competitive best odds alternative to all participants, players, and bettors. Parimutuel LLC’s technology reduces the current profit margin on all online gaming. We bridge the technology gap by offering Android, Iphone, and tablet based games, events, activities, and tournaments for all small and medium sized bettors. Our offering is not geared toward “whales”. The patented system moves away from the current format where the house takes side against the bettor.

We provide active pools where bettors wager against each other within a system that is 100% riskless to the operator. The technology provides a fixed rate of return over time close to 5% while the current model for event wagering margin depends on a risk reward mathematical formula. There may be cases where the current format performs slightly better than our parimutuel system and other cases where we have a small margin advantage compared to current wagering systems. Again, we offer a risk-less venture. The more bettors using the parimutuel betting system the greater the value to our business. We supply a pure betting system where the bettors receive optimum entertainment value across multiple electronic platforms. Our business model is a technology play rather than a pure gambling play. The future of gaming is all about mobile and tablet technology.

We are moving forward with state regulatory applications, licensing and software certification.

Contact us for further information.

Harry B. Platis
Attorney at Law
Founder, Parimutuel LLC
16300 Mill Creek Road #105
Mill Creek, WA 98012
Cell: 206-999-6655
Email: hplatis@gmail.com

Christopher Holden
Director of Operations
Parimutuel LLC
16300 Mill Creek Road #105
Mill Creek, WA 98012
Cell: 760-409-3195
Email: cholden@parimutuelgaming.com

 

 

2 – Introduction (Overview of Internet Gaming)

According to the statutes of the U. S. Federal Government and many states, gambling is defined as risking something of value upon the outcome of a contest of chance.

The latest U.S. Federal legislation on September 30, 2006 — H.R.4411 the Internet Gambling Enforcement Act of 2006 Sec. 5362 defines illegal betting or wagering as the purchase of a chance or opportunity to win a lottery or other prize (which opportunity to win is predominantly subject to chance).

This Federal legislation includes a specific allowance for online competitions–betting on games of skill, such as the competitions offered by The Parimutuel Group, to continue in the states where they have always been legal.

In 2005, millions of U.S. residents went online to bet more than $4 billion on casino games, sporting contests and poker. Despite the official hostility of the federal and most state governments, Internet gambling among U.S. residents continues to grow at a rate of more than 20 percent a year. Most online gambling businesses now operate from obscure jurisdictions such as Antigua, the Kahnawake Mohawk Nation of Canada, Alderney (an island in the English Channel), and in the United Kingdom.

We are targeting all gaming, both land and internet based, where an event, competitive tournament, contest, game, or activity, is wagered upon. Our customers are all participants, players, and bettors who are legally allowed to bet on such a competitive event, tournament, contest, game, or activity. This market exceeds $1.44 Trillion Dollars per year worldwide.

 

3 – What is Parimutuel Wagering?

The parimutuel technology is a method to provide betting pools on events, competitive tournaments, contests, games, and activities over any and all electronic platforms. In gaming terms the parimutuel technology presents the lowest cost action to bettors giving the player “the best of it” on every wager.

Our technology coordinates a wagering event using a virtual Web Server with an administration application and server database. The administration application is an executable code which can generate a first event page from an event category page. The administration application also has a player management page, pool page and ticket management set of pages. The administration application inter-operates with banking and casino applications on the floor of a sports book or through any land based kiosk located in any authorized gaming establishment. The administration application will send the event information to the casino application, coordinate wager amounts with the banking application, close the wagering, monitor the event, update the pool, close the pool, and allocate individual account winnings and losses.

In simple terms Parimutuel Wagering is the formation of pools of bets made similar to the win, place and show pools used at horse races. The winners of each individual event are paid out of the pool, after first deducting administrative costs and taxes.

Parimutuel betting (from the French: Pari Mutuel or mutual betting) is a betting system in which all bets of a particular type are placed together in a pool; taxes and the “house-take” or “vig” are removed, and payoff odds are calculated by sharing the pool among all winning bets. In some countries it is known as the Tote after the totalisator which calculates and displays bets already made.  The parimutuel system is used in gambling on horse racing, greyhound racing, Jai Alai, and all sporting events of relatively short duration in which participants finish in a ranked order.

Parimutuel betting differs from fixed-odds betting in that the final payout is not determined until the pool is closed. In fixed odds betting, the payout is agreed at the time the bet is sold. Parimutuel gambling is frequently state-regulated. It is offered in many places where gambling is otherwise illegal. Parimutuel gambling is also available at “off track” facilities, where players may bet on events without actually being present to observe them.

Our patented parimutuel wagering technique uses a pure parimutuel pool to cover bets made on events, activities, contests, games, and competitive tournaments. Straight odds systems, presently offered in licensed sports books in the State of Nevada, offer lines on any event, activity, contest, and tournament. There is a specific difference in implied odds between a line created by a sports book and a line created within a parimutuel pool. Sports books hope to profit from each event, activity, contest or competitive tournament by setting a line resulting in an equal distribution of money on all participants. In the parimutuel wagering system, the house is paid a small commission to manage the pool. There is no incentive for the house to favor one outcome over another. Our patented parimutuel system avoids a conflict of interest, unlike the present system in use by the licensed sports books. The risk to the house is ZERO.

Our parimutuel wagering approach favors the bettor, not the operator (sports book), via reduced commissions (vig) and therefore provides more favorable odds to the betting public. When less is reduced from a pool due to risk more can then be paid to bettors in winnings (better odds).

4 – Parimutuel Poker is Legal

To determine whether a particular contest falls under state anti-gambling prohibitions, most states employ a common law test called the “Dominant Factor Test,” or, alternatively, the “Predominance Test.”

In applying the Dominant Factor Test, a court asks whether “player skill” or “uncontrollable chance” is the most likely factor that will influence the outcome of a contest. For example, in applying the Dominant Factor Test, the Nevada Supreme Court found that because player skill was the dominant factor in influencing the outcome of a hole-in-one golf contest, such contest was a game of skill and players could pay an entrance fee and compete for a prize in that contest.

While the Dominant Factor Test is fairly easily applied to roulette (clearly a game of chance) and chess (clearly a game of skill), there lies a large “grey middle ground,” populated by hundreds of games that contain both an element of chance and an element of skill. Not surprisingly, in evaluating games with hybrid characteristics, two different courts in different states applying the Dominant Factor Test to identical games reached opposite conclusions. For example, poker has been described both as a game of chance and a game of skill. Differences, however, can be attributed to the determination of skill and [*1205] chance as being a question of fact as opposed to a question of law. Therefore, the skill or chance decision can be influenced by the quality of evidence presented; the experience and qualifications of counsel; and the experience, qualifications, and biases of the triers of fact. As the Plissner case and the Kansas Attorney General Opinion set forth in the footnotes illustrates, juries can be difficult to predict and their decisions may be even more difficult to overturn on appeal.

A second test used by some courts is the “Material Element” test. Under this test, courts find a particular activity to be a game of chance if chance plays a material element in the outcome. This test is more subjective than the Dominant Factor test.

Lastly, some states prohibit betting on skill games altogether either by statute or effectively by using a conservative common law test. For example, a small number of states use tests called the “Any Chance Test” or the “Gambling Instinct Test.” Under the Any Chance Test, if the contest contains any element of chance, however small, wagering on such contest is always prohibited as gambling. Similarly, courts employing the Any Chance Test prohibit an activity that “appeals” to the player’s “gambling instinct.”

The question of gambling on an event comes down to whether or not the event is a game of skill or a game of chance. If betting on an event that is at least 50.1% skill based then the event is a skill based event.

Therefore wagering on such an event is not gambling. Kindly review the ruling made by Senior United States District Judge Jack B Weinstein regarding poker as a game of skill:

Judge Rules Poker a Game of Skill

Please also take the time to review Professional Poker Player Annie Duke’s view on poker as a game of skill listed in the additional information section.

Wagering on poker tournaments within our parimutuel poker wagering system is by definition not gambling — it’s entertainment. Poker is not a game of chance. Parimutuel wagering is exempt under all U.S. laws that refer to Internet Gambling.

See: The following article regarding last year’s incredible sequence of events that led up to the Department of Justice announcement regarding Internet Gambling:

http://parimutuel.net/authority-for-parimutuel-concept/

Betting on parimutuel horse racing events is legal in the United States. In some states they go so far as to show races on television so that you can watch the race you just bet on over the Internet. Betting on horse races over the Internet is 100% legal.

See:  http://uscode.house.gov/download/pls/15C57.txt

As it relates to our parimutuel wagering technology you can verify our patent online by going to this link:

http://parimutuel.net/wp-content/uploads/2012/12/US_Patent_No._8277311.pdf

The Parimutuel Group’s patented technology is in line with other parimutuel wagering, from horses to greyhound dogs, and everything in between. The patented parimutuel wagering method was developed to be utilized in parimutuel events such as horse races, greyhound dogs, Jai Alai, and lottery draws. Our parimutuel wagering system can be used for other contests, activities, events, and competitive tournaments at absolutely no risk to the operator.

4.a – Parimutuel Poker Revenue Projections

In order to build a critical mass of users we will use targeted television ads, mobile/tablet ads, and hundreds of keyword based search engine ads (both paid and organic) to drive traffic to our offering. Our 24 hour a day marketing strategy will focus on the best odds offerings to participants, players, and bettors. We will emphasize the legal status of our offering vs. illegal online poker or event wagering websites. We will be the operator who provides the best payment system at the best odds, for the lowest cost. The Parimutuel Group will offer a transparent affiliate program to all online marketing agents where we will share information with affiliates. The days of blind affiliate gaming programs are over. The parimutuel auto racing and golf offering will be affordable to the masses, not simply to big time players. The product development will be geared to updating our mobile, tablet, and electronic platforms. As new technologies emerge, we will always be on the cutting edge.

In 2009 MSNBC produced a documentary on illegal event wagering in the U.S. The numbers were so high, they were beyond belief.

See: http://illegalgambling.cnbc.com

Estimated Annual Wagering across Multiple Events

NFL Wagering: $80 Billion Dollars annually
Super Bowl: $6 Billion Dollars annually
College Football: $60 Billion Dollars annually
College Basketball: $50 Billion Dollars annually
NCAA Basketball: $6 Billion Dollars annually
NBA: $35 Billion Dollars annually
MLB: $30 Billion Dollars annually
Hockey / NASCAR: $1 Billion Dollars annually

Total event wagering USA: $268 Billion Dollars annually

Currently in Canada, the Ontario Lottery and Gaming Corporation allows straight wagers on all professional and amateur sporting events under a non-parimutuel-based betting line (similar to the Nevada sport betting systems). The Ontario Lottery and Gaming Corporation charges a minimum 15% commission or vig for these wagers.

Our worldwide estimates for event wagering are based on the proven willingness for people to wager in the State of Nevada. The Nevada estimate data for the entire U.S. and the rest of the world is $1.44 Trillion Dollars a year, combining both legal and illegal event wagering. This is a conservative estimate at a ratio to global GDP of $65 Trillion Dollars. Our figures reflect 2.2153 percent of the total global GDP.

We have calculated the following annual revenue estimates (2012) from specific parimutuel events, as follows:

Total Wagers:

1. Parimutuel Events $850 Billion Dollars annually
2. Parimutuel Poker $184 Billion Dollars annually
3. Parimutuel Billiards $60 Billion Dollars annually
4. Parimutuel Games $284 Billion Dollars annually
5. Parimutuel Contests $62 Billion Dollars annually

Total: $1.440 Trillion Dollars per year

Total Revenues based upon a 5% commission rate, except for Games which use a 45% rate

1. Parimutuel Events $42.50 Billion Dollars annually
2. Parimutuel Poker $9.2 Billion Dollars annually
3. Parimutuel Billiards $3.0 Billion Dollars annually
4. Parimutuel Games $127.80 Billion Dollars annually
5. Parimutuel Contests $3.1 Billion Dollars annually

Total: $185.60 Billion Dollars annually

The offshore commission rate of 10 to 15 percent is 2 or 3 times our estimated commission rate for all non-game commissions. Therefore, with the current system, it is estimated the annual non-parimutuel game related commissions (vig) to offshore, unregulated, event betting entities, is believed to be at least $115.60 to $166.40 Billion Dollars. This amount is growing by over 15 percent a year while Internet Gaming is mostly illegal and offshore dealings are not exactly fair and balanced. There is a lot of money involved in parimutuel event wagering. As we mentioned above, the total estimated parimutuel poker wagering is at least $184 Billion dollars a year.  This figure will increase dramatically as wagering on poker tournaments is regulated and legalized. The State of Nevada took the first step by legalizing online poker. New Jersey and Delaware were quick to follow suit. Other States will soon jump on the bandwagon.

The Parimutuel Group’s technology is superior to any current offering in the gaming market. We offer bets on parimutuel events, competitive tournaments, contests, games, and activities. We take on any size entry pool where legal bettors want to wager on the results. Our focus is on micro gaming and the creation/management of bettor pools. We do not profit from the results of the pool, rather we earn a small commission for arranging the pool, and supplying the technology across all electronic platforms. This is the biggest difference between the current wagering system and our patented parimutuel web wagering system.

The current base of massively profitable Internet wagering offerings will no doubt adapt and react to our system. The Parimutuel Group’s technology can legally go up against the biggest players in the gaming market, due to superior technology, protective software, web betting patents, social network marketing and search engine advertising techniques. We have an unstoppable desire to provide the best odds to bettors for all events, competitive tournaments, games, contests, and activities. The key to success in a market dominated by big players is the ability to give a great yield to bettors. The Parimutuel Group technology is way ahead of the curve on this front.

The Parimutuel Group’s focus will rest on the entertainment value to small and medium sized bettors. Our method encourages micro-betting. We deliver where other systems cannot afford to handle the action.

We are competing directly against brick and mortar casinos, and all other existing licensed (and some unregulated) sports books, both land based and online.  We will survive because of our low overhead, and we will focus on smartphone marketing, and advertising. We will go straight to the end user and deliver technology that allows for action at a miniscule fee compared to the current system. Our concept is similar to a multi-state lottery, where the prize is significantly large while costs are small. We need to cover our cost of applications, compliance, licensing, insurance, servers, processing, marketing, advertising, social media, web hosting, server administration, Internet security, and customer service. Our system is a technology play and not simply a gaming offering at a lower fee.

Federal Gambling Laws and Limitations

On Oct. 13, 2006, President George Bush signed the Unlawful Internet Gambling Enforcement Act into law. This law banned internet gambling and created a task force to stop and punish violators of the law.

The excitement to get back in the game has been halted, however, as federal as well as state legislation pending approval prohibits former sites from operating for five years minimum. This leaves new faces like The Parimutuel Group to point their future efforts toward Internet gambling.

The U.K. is currently the largest online gambling market in the world. In 2012, online gambling in the U.K. raked in $2.5 billion and gambling in Europe overall is predicted to reach $42 billion in 2015. This, however, is not even the most staggering statistic. In 2010, there was a 30% growth in online users from the 2009 numbers (which was already 5.6% of the adult population). If this growth trend continues across Europe, the market could size could double in the next five years.

When poker was legal in the U.S. from 2001-05, revenue grew from $82.7 million to $2.4 billion. Internationally, online gambling generated $117.6 billion in 2011 and is predicted to grow annually at 9% to reach $182 billion in 2015. According to MSN Money, online poker alone could generate $6 billion to $8 billion a year.

State Gambling Legislation

Legal gambling in New Jersey and Pennsylvania was $3.05 and $3.16 billion, respectively, and they are just No. 2 and No. 3 on the U.S. gambling list. No. 1 last year was Nevada, making a whopping $10.8 billion. Nevada believed gambling was moving to an online venue in the future and wanted to ensure its place in the emerging market. Below are states considering legislation concerning online gambling and a timetable for completion of the legislation:

  • California — Still waiting.
  • Delaware — Fully passed Online Gambling Bill and are currently putting infrastructure into place to get it up and running by September.
  • Florida — Considering a bill, but could be next year before approval. They estimate online gambling will produce $10 million in tax revenue starting out.
  • Hawaii — Proposed a bill, but are still waiting for support and have no real timetable, but would like to move quickly as they see possible revenue from Asian markets as well.
  • Illinois — State Rep. Bobby Moak, D-Bogue Chitto, is rolling the dice again in the 2013 legislative session on online gaming legislation that could have a profound impact on the future of legal gaming in the state. The bill would have a 5% tax and limit licenses to companies already with land licenses in the state.
  • Iowa — Are looking to move quickly on a gambling bill as they estimate 150,000 people in their state already illegally online gamble on offshore sites.
  • Maine — Having been discussed for over a year now and not gone anywhere, it does not seem important on the agenda even though the idea is frequently thrown around in committee.
  • Massachusetts — Proposed by State Treasurer, would allow online Social card games, fantasy sports, and the lottery.
  • Mississippi — Failed to get bill out of committee so far.
  • Native American Tribes — Have proposed and discussed bills, but need federal legislation to allow population to gamble on a Native American land-based gaming server.
  • Nevada — Signed into law a bill that legalizes online gambling and sets up framework for interstate online gambling.
  • Pennsylvania — Will introduce their online gambling bill this week and is expected to pass within the week.
  • Texas — Proposed Poker Gambling Act of 2013 but does not have a timetable and has considerable resistance.
  • Washington — Proposed bill legalizing in home online gambling, has yet to be voted on. Should be resolved in the next few weeks.

According to The New York Times, online gambling from mobile devices will be $100 billion by 2017.

What sets The Parimutuel Group apart is its connection to the growth of social media sites such as Facebook, LinkedIn (LNKD), and Twitter. The legalization of online poker in the U.S. according to a Goldman Sachs could create $12 billion in revenue alone, an estimate nearly twice as much as previously thought possible.

According to a research report by KPMP titled “Online Gaming: A Gamble Or A Sure Bet?,” one of the four key drivers that will shape the industry over the coming years is:

Combining online gaming and social networking: social networking will be a key driver of activity and growth in the online gaming world, as it represents a natural extension to users of digital and mobile technology. Social networking’s role in driving online gaming is especially significant because of its high levels and ease of remote access.

5 – Legal Resources and Support

Online Poker Legal

Technology to Drive Online Entertainment (Zynga Gaming)

Nevada Legalizes Online Poker

Judge Rules Poker a Game of Skill

Is Poker a Game of Skill

Nelson Rose on Poker as a Game of Skill

DoJ flip flops on Internet Gambling

US Justice Department Opinion on Internet Gambling

Rules for Parimutuel Events on Tribal Lands in California

http://www.indian.senate.gov/hearings/upload/Nelson-Rose-testimony020912.pdf

U.S. Patent No. 8,277,311 entitled “Wagering Web Service System and Method”

  • Patent granted on October 2, 2012
  • All rights assigned to Harry Platis
  • Additional patent application has been filed to ensure someone doesn’t try to design around the granted patent

At its core, the patent is directed to:

  • A computer program which is used to coordinate wagering events, including pari-mutuel wagering events.
  • As part of the process of coordinating wagering events, the computer program communicates with a casino’s software program, so that the event can be displayed and so that individuals can place wagers.
  • The computer program also communicates with a financial institution’s banking software program, which ensures that wagers being placed are properly funded.
  • After properly-funded wagers have been place, odds are calculated and displayed via the computer program.

Among other things, the computer program also:

  • Controls the opening and closing of wagering time periods associated with an event.
  • Records the event players in a database.
  • Records the results of each wagering event in a database.
  • Communicates with the casino’s software program to display the results of each wagering event.

6 – Summary and Conclusion

The patented Parimutuel System allows regulated legal betting on a wide variety of events, activities, contests, and competitive tournaments. The technology permits a bettor to wager on numerous contestants in events, contests, games, activities, or competitive tournaments. The parimutuel concept is applicable to poker, pocket billiards, golf, tennis, car races, World Cup Soccer, and many other events, activities, contests, games, and competitive tournaments.

As parimutuel poker wagering is adopted within the event wagering industry the benefits to bettors, operators, and governments, will become apparent. The parimutuel wagering industry will benefit from a transparent open wagering system that operators can use without risk of loss.

Affiliate marketing agents will have full information concerning users and revenue sharing data. Bettors will suddenly have the best odds for a given result, and therefore, a greater entertainment value.

Finally governments can regulate and tax a user friendly parimutuel wagering system to generate additional income.

The offshore operators will have to reduce their margins in order to compete with the parimutuel event wagering system. Bettors will be paid from all parimutuel wagers. This will place additional pressure on offshore operators who do not pay their patrons and who must absorb huge processing charges in order to operate outside of U.S. laws. Offshore entities will not be able to compete with the parimutuel wagering system as handicappers experience the value in all that is parimutuel wagering.

We have explained who is behind this revolutionary industry changing patented technology. We have also shown how governments can create billions of dollars of additional tax revenues at no cost, without risk. Finally, we have demonstrated how the betting public will achieve the best odds running in a parimutuel wagering system with costs minimized and winnings maximized. The big winner will be the skill-based game of poker.

Harry B. Platis
Attorney at Law
Founder/CEO
Parimutuel LLC
16300 Mill Creek Road #105
Mill Creek, WA 98012
Cell: 206-999-6655
Email: hplatis@gmail.com

Christopher Holden
Director of Operations
Parimutuel LLC
16300 Mill Creek Road #105
Mill Creek, WA 98012
Cell: 760-409-3195
Email: hplatis@gmail.com

Nevada Parimutuel Event Wagering

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July 1, 2010

VIA FACSIMILE AND U.S. MAIL

Dennis K. Neilander, Chairman Nevada State Gaming Control Board

555 East Washington Avenue, Suite 2600

Las Vegas, Nevada 89101

Re: Application Letter for Approval of Wagering on Certain Events Pursuant to NGC Reg. 22.120(1)(e) and A.B. 218 (Enacted) Our File Number: 100370-001

Dear Chairman Neilander:

As you may recall, we represent Harry B. Platis (“Mr. Platis”), a well-respected Washington attorney and gaming visionary. Specifically, for the last few years, Mr. Platis has been diligently pursuing his dream of making parimutuel wagering possible on various regulated and competitive events (specifically, poker, blackjack, baccarat, roulette, craps, and slot tournaments) held in Nevada and elsewhere by casinos and their affiliates. In the past, Nevada race and sports books have, of course, limited their wagering activity to horse races and athletic sporting events, pursuant to NGC Reg. 22.120(1)(e).   At the same time, with regard to poker and many of the other events referenced above, it is not an exaggeration to say that many of these events and tournaments are so popular they are virtually on fire.1

By proposing wagering on these new types of tournaments at Nevada sports books, Mr. Platis hopes to harness their popularity for the benefit of the Nevada gaming industry and the State of Nevada. For example, under Mr. Platis’s proposal, a person at a Nevada sports book could now wager on Chris Moneymaker winning the World Series of PokerTournament.

In Regulation 22, the Commission has already defined a “sports pool” as “a business that accepts wagers on sporting events and other events.” NGC Reg. 22.010.20 (2008) (emphasis added).

In continuing discussions that Jeff Silver has had with Member Sayre, we have been anticipating a change in the law that would provide the regulation with appropriate statutory support to permit wagering on other activities. With the enactment of A.B. 218 on June 3, 2009, the Nevada Legislature has expressly endorsed that Commission definition, as well as provided a specific mandate. See A.B. 218 (Section 3). In particular, with the enactment of A.B. 218, the Nevada Legislature has expressly clarified that permissible games, events, and tournaments on which wagers might be accepted at Nevada sports books could include those “other events” that are currently proposed by Mr. Platis and not just strictly athletic “sporting events.” See id.

Specifically, we believe that A.B. 218 now allows the gaming industry and the Board to be as innovative in the sports book area as they can be on the casino floor. See e.g., http://www.washingtonpost.com/wp-dyn/articles/A64457-2004Sep5.html For example, when a new type or style of wagering device is introduced by a licensed manufacturer for the casino floor, it merely requires technical approval. In sharp contrast, the sports book regulations, without the additional permission for wagering on “other events” (as now expressly set forth in A.B. 218), have been less susceptible to timely innovation for wagering on new types of events and tournaments.

This is a shortcoming that has now been remedied with the enactment of A.B. 218.   In particular, pursuant to A.B. 218, the gaming industry can now be as innovative in the sports book area as they have been on the casino floor. This opportunity for new innovation will undoubtedly come at a time when it is desperately needed by our state. Accordingly, pursuant to NGC 22.120(1)(e) and A.B. 218, we respectfully seek a “waiver” or “determination” that poker, blackjack, baccarat, roulette, craps, and slot tournaments are all “other events” on which wagering can now be readily accepted at Nevada sports books.

Thank you for your kind consideration.

Very truly yours,

GORDON SILVER LOUIS V. CSOKA, ESQ. LVC/

cji cc: Randall E. Sayre, Member

Mark A. Lipparelli, Member

Business Summary — PPM Penny Racing Machines

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This document provides a brief overview of PPM Penny Racing technology and the corresponding financial forecasts.

Pari-Mutuel wagering has been around for a very long time. Our technologies are based on the use of Pari-Mutuel pools wherein bets are aggregated; and from which winning wagers are paid.

The idea of utilizing data from previously run horse races for wagering purposes is a new concept for use in the horse racing industry. The PPM Penny Racing Machine draws upon a database of results from historical horse races to create new pools to be used for multi-race pari-mutuel events displayed in the framework of a new gaming machine. Players are not merely seeing the experience from an individual cost benefit equation, but more importantly as entertainment. A large number of machines are networked together in a pari-mutuel style gaming experience. The basic premise of the PPM Penny Racing Machine concept allows wagers to be made on previously run horse races via electronic machines. The machines store and automatically deliver the race to the bettor–who then has multiple wagering options. The system is similar to wagering on a live event, except the minimum bet is a penny. Our system provides a multi-tiered payout format that gives players an advantage.

The concept of Post Pari-Mutuel Penny Racing Machines linked to previously run horse races has been legalized in multiple states.

Our target markets are Indiana and Kentucky due to existing laws permitting wagering on previously historically run races.

We provide horse tracks and off-track betting establishments with entertaining, high speed gaming options. The successful implementation of our PPM Penny Racing Machines at race tracks and off-track betting locations will ultimately benefit the entire horse racing industry.

The concept has multiple applications for both land and internet-based operations. The worldwide interest in event wagering exceeds one Trillion Dollars per year.

Our patent broadly relates to a Wagering Web Service, used to coordinate a wagering event. It includes an administration application which:

1. Generates a first pool page for managing a first wager pool.
2. Interoperates with a banking application.
3. Interoperates with casino applications.
4. Sends and receives wagers from casino applications.
5. Coordinates a wager amount to the banking application.
6. Credits the first pool with the wager amount in a wager ledger.

It is in effect a system for Real-Time Pari-Mutuel Wagering. Among other things, the system includes sensors (e.g., on a card table) configured to generate readable data component signals when interoperating with readable data components (e.g. one, two and three-dimensional bar codes on playing cards, RFID tags in playing cards, and combinations thereof). The readable data component signals are received by a game-play component, allowing for Real-Time Wagering on an event (for example a poker game).

Current State of the Target Market for the Pari-Mutuel Penny Racing Machine.

With recent changes in gaming habits, the racing industry has been ravaged by the loss of bettors to other forms of wagering. The industry has moved towards a Racino style operation, mixing casino style games with traditional Pari-Mutuel horse racing options, to attract players back to the race tracks.

The PPM Penny Racing Machine has the capacity for high speed betting. We provide opportunities to wager on previously run horse races within a server based Pari-Mutuel payout structure. Pools are created and payments are distributed to players over time. The PPM Penny Racing Machine does not payout funds in a straight line odds schedule similar to traditional slot machines. Therefore the PPM Penny Racing Machine players benefit from a more generous redistribution of funds. This allows for more flexibility and choice in wagering options. We provide the potential for an extended period of wagering time, unlike the straight odds payment systems, currently the norm in the slot machine industry.

Our system is flexible. We can provide pools for race tracks worldwide. The server-based technology provides a risk-averse source of income to operators and state coffers alike. Pari-Mutuel pools cannot be negative. Therefore there is never a loss to the operator on any game or pool. The PPM Penny Racing Machine System provides the player an exciting gaming experience, the operator a consistent source of revenue, and the state a growing tax base.

Revenue Breakdown for the Pari-Mutuel Penny Racing Machine.

PPM Penny Racing Machines offer automated wagering on fifty races per a 30 to 45 minute game. By determining an average number of wagers a minute, and the average wager, we can calculate fairly precise estimates of gross and net revenues per machine. In the below calculations, we have used a figure of twelve races per minute with an average wager of $0.62 per race. It is likely new players will go slower and bet less, while experienced players will bet faster, and wager more. As more and more players become accustomed to the PPM Penny Racing Machine we will see them wager more, and play faster.

Daily Revenue Example:

1. $4,464 per machine per day — based on 12 wagers per minute (or one bet every 5 seconds) at an average bet of $0.62 for 10 hours of daily play.
2. The operator will hold 10% of the daily take, or in this case $446.40 per machine per day.
3. State taxes of 1% will be removed, in this example $44.64 per day.
4. Processing fee of $10 per machine per day.
5. Revenue sharing agreement with racetrack at a 50/50 split, will net $195.88 each.

Example:

6000 machines for 365.25 days = Net Revenues $428,977,200 per year each

Racetrack revenue may be used to:

1. Increase purses;
2. Market the Post Pari-Mutuel Penny Racing machines;
3. Hire additional workers, and provide better wages and benefits; and
4. Fuel breeders and agriculture businesses within the state(s).

General required steps for the implementation of PPM Penny Racing Machines:

Step 1: The racetrack puts aside and rehabilitates a dedicated space in their grandstand specifically for the PPM Penny Racing Machines, and supplies electricity to the machines.
Step 2: We will provide machines. Our initial estimate for full deployment is 6,000 machines between the States of Indiana and Kentucky alone.
Step 3: Our Tote affiliate runs the operation, tying the machines into the Tote system of the track thereby creating crossover wagering for the Race Track.

PPM Penny Racing Machines vs. Slot Machines at Race Tracks.

A racetrack requires an expensive license to add slot machines to their offering. The current environment demands a licensing fee of $150 to $250 Million Dollars, with a supplemental per machine tax of $25,000 as they are installed, plus an additional cost of $14,000 per machine. Each operator could potentially be required to invest $500 million for the right to have slot machines at their respective racetracks. Therefore, prior to a single bet being placed, each racetrack is potentially in debt $500 Million Dollars. Authorities could also theoretically require an additional separate building for the slot machines, updated parking, additional staff; and more. The racetracks could spend well over One Billion Dollars in order to install 6000 slot machines.

In comparison, because the PPM Penny Racing Machines are simply another form of Pari-Mutuel Wagering, the race tracks main cost is to renovate their current facility to hold the PPM Penny Racing Machines. There is no licensing fee or a per machine tax of $25,000.00. In general, the difference between PPM Penny Racing Machines and slot machines is a net saving of $950 million dollars.

Traditional slot machines are taxed on a machine by machine basis, at a higher marginal tax rate than the PPM Penny Racing Machines. The average slot machine may yield revenues of $385 dollars a day, however, after reductions for taxes, financing, and facility renovations, the racetrack owner may be left with less than $100 per machine per day.

Compare the risk reward for the traditional slot machine vs. the risk reward for the PPM Penny Racing Machines. You will see PPM Penny Racing technology is superior on every front.

Conclusion

The bottom line is revenue payback for slot machines extends over several years at a minimal 9% cost of capital compared to PPM Penny Racing Machine’s revenue payback. We estimate slot machine costs of more than One Billion Dollars compared to a $50 Million Dollar renovation costs by using our PPM Penny Racing Machine technology.

A final added benefit is, our machines will take bets on actual horse races. Slot machines cannot fulfill this function.

The PPM Penny Racing Machines are the best fit to fulfill the needs of the current race tracks and off track betting parlors as they move into the future.

We have assembled a team of dedicated gaming and business development professionals who are now turning these estimates into reality.

We have limited this analysis to current commitments to the States of Indiana and Kentucky. Over 40 other jurisdictions are also available to us in the United States.

Our eleven patents provide worldwide protection and coverage for up to 20 years.

The Pari-Mutuel process of the PPM Penny Racing Machine has inherent advantages over fixed-odds slots. Coupled with our patents, it allows us to offer many exclusive features to players.

Example: Change Odds Jackpots will revolutionize the market-place. Fixed odds slots cannot follow us because of statutes and patent protection.

Finally, it is very important to note that Pari-Mutuel betting on horse races using our Post Pari-Mutuel Racing Machine technology is exempt according to the 1961 Interstate Wire Act. This allows us to access the worldwide internet and to attract foreign bettors.

Our system will create tax revenues and profits in the United States of America.

Internet Gaming – Are Native American Tribes In or Out?

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Tribes and the New Internet Gambling
 
By I. Nelson Rose
 
On February 9, 2012, I testified before the U.S. Senate Committee on Indian Affairs on what impact the recent Department of Justice (“DoJ”) announcement would have on tribal gaming.
 
The DoJ’s surprise gift for the states, announced two days before Christmas, came from federal prosecutors, who had changed their position on the reach of the Wire Act. From now on, the Wire Act would only be used against interstate sports betting.
 
This amounted to an abandonment of the federal government’s main weapon in its war of intimidation against illegal Internet gambling.
 
But, it also means the states are now free to legalize every other form of gambling online. And, the states themselves can enter into compacts allowing interstate and even international pooling of players and wagers.
 
In preparing my remarks and written statement for the Senate Committee, I started with the thought that perhaps this would be a gift to tribes as well. I knew that the Indian Gaming Regulatory Act (“IGRA”) limited Class II gaming – poker and bingo – to Indian lands. But, I thought that if a state leglized Class III Internet gambling, including lotteries and casino games, tribes could demand compacts that would allow them to also take bets online from anyone in the state. And maybe there was an argument that Internet poker was not really the form of poker defined as Class II under IGRA, since it did not involve real “cards.”
 
But the more I researched the issue, the more I came to realize that current law simply does not anticipate tribes taking bets off-reservation.
 
There is an express exemption in IGRA for tribal lotteries from the federal anti-lottery statutes. But this only proves Congress intended to allow tribes to send lottery tickets across state lines and through the U.S. Mail. The statutes do not necessarily indicate Congress intended to allow sales off-reservation.
Tribes also can clearly operate off-track betting (“OTB”), even though the races are taking place on non-Indian lands. But even though states have to agree to compacts allowing their tribes to operate OTBs, it is not clear that states would have to allow tribes to accept wagers from bettors who are not physically on Indian land. A majority of states allow remote betting conducted by state-licensed OTBs through Advanced Deposit Wagering (“ADW”), where players fund their accounts in advance over the phone or through the Internet. Even though a state might agree to tribal ADWs, that does not mean it had to.
 
The Unlawful Internet Gambling Enforcement Act (“UIGEA”) expressly allows tribes to take bets across state lines for inter-tribal Internet gambling, Class II or III. But, again, gambling is limited to bettors who are physically on Indian lands.
 
I think courts would find tribes could demand compacts if states legalized Internet lotteries, casinos, sports betting and other Class III gaming. But, again, the bettors would have to be on Indian lands.
So, if a state legalized Internet poker, tribes could also set up their own Internet poker sites. As a Class II game, they would not need a tribal-state compact. But players could only participate if they were on Indian land. If a state allows people to play poker on a computer from home and office, why would they drive two or three hours to play the same game on a computer on a reservation?
 
And if a state permits Class III gaming online – Internet lotteries, casinos and, in a few states, sports betting – the tribes can demand the right to operate the same gambling under a compact. The state would have to give in. But it could again limit participation to patrons physically on the tribes’ lands.
 
This does not mean that tribes are prohibited from taking bets off-reservation. They can, but if and only if the state agrees. And unlike Class III gaming under IGRA, the tribes cannot sue a state for bad faith if it refuses to negotiate. Legally, this means that even if the state itself is taking bets over the Internet, tribal betting not on Indian lands is merely a privilege, not a right.
 
Most states will probably go with issuing a small number of licenses for Internet gambling, starting with poker. Tribes are thus going to be forced into competing against powerful and wealthy landbased and online operators for a license.
 
But the bigger risk for tribes comes from state lotteries. A governor and state legislature could easily decide that there is more money to be made by having the state run the poker and even casino games themselves, rather than issuing licenses. With conventional state lotteries, tribes can at least ask to be lottery retailers. But, if the state lottery is the monopoly operator of Internet gaming, there won’t be any other retailers.
 
Online poker probably won’t particularly hurt tribal casinos. At the Senate Committee hearing, the Poker Players Alliance made a good point, that only 1% of tribal casino income comes from poker. And many poker players want to play in live games with real cards. There is something fundamentally different in playing face-to-face, rather than against avatars.
 
But tribes should be worried about state lotteries selling instant tickets online. Without formally asking for the right to operate an Internet casino, a state lottery could bring competing games into every home. Put a scratcher on a video screen and it is virtually indistinguishable from a slot machine.
 
Some players will still want to go to casinos, for all the things that casinos can offer. But if the patrons’ main interest is being able to make a lot of fast bets on a slot machine, they may decide to do that from home.
 
Some tribes can protect their gaming operations from the coming explosion of online competition. Every state, and in fact, every tribe in every state, has a unique legal history and set of laws spelling out its relationship with the state where the tribe is located. A few tribes are fortunate enough to have compacts that are already in place that give them some protection from the state expanding competitive legal gambling. For these tribes, they will at least no longer have to pay millions of dollars for an exclusive right that they will no longer have.
 
Other tribes have the political and financial muscle to ensure that if the state legalizes Internet gambling, it will be through licensing and those tribes will get the licenses. Foxwoods and the Mohegan Sun are the two largest employers in the state of Connecticut. If, and when, Connecticut legalizes online gaming, there will be only two operators: the Mashantucket Pequots and the Mohegans.
 
The big losers will probably be small casinos operated by tribes far from population centers. In states like California, these already compete against larger casinos, closer to cities; racetracks, cardclubs and bingo halls in better locations, and a state lottery. Internet gambling will not only bring gambling into patrons’ homes, it is not even clear that a tribe could prevent a state-operated game from competing for players on the reservation.
 
Only Congress can protect remote tribal casinos. Of course, any attempt to expand Indian gaming rights will undoubtedly be met with strong opposition from most of the states. And this Congress has not exactly been quick to act on anything.
 
But the states are acting. In 1962, there were no legal state lotteries in the U.S. It took more than 45 years before almost all the states made lotteries legal.
 
Internet years are like “dog years.” Developments now happen so fast, that it won’t take four decades before Internet gambling is legal in almost every state.
 
And many tribes may be out of luck.
 
END
 
© 2012, I. Nelson Rose. Prof. Rose is recognized as one of the world’s leading experts on gambling law, and is a consultant and expert witness for governments, industry and players. His latest books, INTERNET GAMING LAW (1st and 2nd editions), BLACKJACK AND THE LAW and GAMING LAW: CASES AND MATERIALS, are available through his website, www.GAMBLINGANDTHELAW.com.

Parimutuel Gaming

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What is Parimutuel Gaming?

Parimutuel Gaming is the concept by Harry Platis to provide wagering on activities, events, contests, games, and competitive tournaments in a fashion that is exactly the same as the current horse racing system.. This is how Parimutuel Gaming will revolutionize the Internet and Gaming.

What is a Parimutuel Bet?

Parimutuel betting (from the French language, Pari Mutuel or mutual betting) is a betting system in which all bets of a particular type are placed together in a pool; taxes and a house “take” or “vig” are removed, and payoff odds are calculated by sharing the pool among all winning bets. In some countries it is known as the Tote after the totalisator which calculates and displays bets already made. Parimutuel pools exist in Horse Racing, Greyhound Racing, Jai Alai, and all Lotteries. The parimutuel system is used in gambling on horse racing, greyhound racing, Jai Alai, and all sporting events of relatively short duration in which participants finish in a ranked order. A modified parimutuel system is also used in some lottery games. Here are a few well known parimutuel type bets:

Win – To succeed the bettor must pick the horse that wins the race.

Place – The bettor must pick a horse that finishes either first or second.

Show – The bettor must pick a horse that finishes first, second or third.

Exacta, perfecta, or exactor – The bettor must pick the two horses that finish first and second, in the exact order.

Quinella or quiniela – The bettor must pick the two horses that finish first and second, but need not specify which will finish first (similar to an exacta box).

Trifecta or triactor – The bettor must pick the three horses that finish first, second, and third, in the exact order.

Superfecta – The bettor must pick the four horses that finish first, second, third and fourth, in the exact order.

Box – a box can be placed around exotic betting types such as exacta, trifecta or superfecta bets. This places a bet for all combinations of the numbers in the box. A trifecta box with 3 numbers has 6 possible combinations (of the horses in the ‘box’ 3 can finish first, 2 can finish second, and one can finish third, 3 x 2 x 1) and costs 6 times the betting base amount. A trifecta box with 5 numbers has 60 possible combinations and costs 60 times the betting base amount (5 x 4 x 3). In France, a ‘box’ gives only the ordered permutations going along an ordered list of numbers such that a trifecta box with 6 numbers would cost 20 times the base amount.

Any2 or Duet – The bettor must pick the 2 horses who will place first, second or third but can finish in any order. This could be thought of as a double horse show key.

Double – The bettor must pick the winners of two successive races (a ‘running’ or ‘rolling’ double); most race tracks in Canada and the United States take double wagers on the first two races on the program (the daily double) and on the last two (the late double).

Triple – The bettor must pick the winners of three successive races; like doubles, many tracks offer ‘running’ or ‘rolling’ triples. Also called pick three or more commonly, a treble.

Quadrella or Quaddie – The bettor must pick the winners of four nominated races at the same track.

Sweep – The bettor must pick the winners of four or more successive races. In the US, this is usually called pick four and pick six, with the latter paying out a consolation return to bettors correctly selecting five winners out of six races, and with “rollover” jackpots accumulating each day until one or more bettors correctly picks all six winners.

Win, place and show wagers class as straight bets, and the remaining wagers as exotic bets. Bettors usually make multiple wagers on exotic bets. A box consists of a multiple wager in which bettors bet all possible combinations of a group of horses in the same race. A key involves making a multiple wager with a single horse in one race bet in one position with all possible combinations of other selected horses in a single race. A wheel consists of betting all horses in one race of a bet involving two or more races. For example a 1-all daily double wheel bets the 1-horse in the first race with every horse in the second.

People making straight bets commonly employ the strategy of an ‘each way’ bet. Here the bettor picks a horse and bets it will win, and makes an additional bet that it will show, so that theoretically if the horse runs third it will at least pay back the two bets. The Canadian and American equivalent is the bet across (short for across the board): the bettor bets equal sums on the horse to win, place, and show.
In Canada and the United States bettors make exotic wagers on horses running at the same track on the same program. In the United Kingdom bookmakers offer exotic wagers on horses at different tracks. Probably the Yankee occurs most commonly: in this the bettor tries to pick the winner of four races. This bet also includes subsidiary wagers on smaller combinations of the chosen horses; for example, if only two of the four horses win, the bettor still collects for their double. A Trixie requires trying to pick three winners, and a Canadian or Super Yankee trying to pick five; these also include subsidiary bets. The term nap identifies the best bet of the day, derived from the Napoleon which was the most valuable French coin at the time the phrase was first used.

A parlay or accumulator consists of a series of bets in which bettors stake the winnings from one race on the next in order until either the bettor loses or the series completes successfully.

Parimutuel Gaming relates to all parimutuel wagering on events, contests, competitive tournaments, or activities across all land based and electronic formats (and devices).