The First Horse Out of the Gate
SunOnline and the Internet Casino Licensing Game
by Stuart Kernaghan
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aming licenses have become the key to legitimacy for online casino operators in the new millennium, and major players don’t think in terms of whether they should get a license so much as where they should get one. Kahnawake, Costa Rica, Antigua, and even Vanuatu are all options, but these days most people are talking about the Isle of Man. Nine of the biggest names in the gambling industry lined up last summer to get an Internet casino license from this tiny island off the coast of England, with three eventual winners announced that September. The successful candidates were U.K. betting house Littlewoods Leisure, Las Vegas hotel and casino giant MGM Mirage, and SunOnline, the Internet division of Sun International Hotels. All three licensees got the green light at the same time but since then only SunOnline has managed to go live with its casino, and that’s a good indicator of just how much work Sun has put into creating one of the best online gaming experiences in the world. Sun International has operated successful hotels and casinos around the world for decades and the growing online casino market was the next logical step to take in the late 1990s, but the company was reluctant to move into this space because of licensing concerns. Sun was worried that a new Internet gambling site might not meet the regulatory guidelines in one of its land-based casino jurisdictions. The company theoretically stood to lose its gaming license(s) if it went ahead, so Sun decided to wait until the regulatory climate was sufficiently rigorous. That happened in June 2001 when the Isle of Man announced it would be offering a new type of Internet wagering license. The Isle of Man licenses are significantly different than those from other jurisdictions because they implement and enforce rigorous regulatory guidelines. Licensees have to meet strict financial and software standards, block underage players and gamblers from prohibited jurisdictions, and set aside a £2 million bond to ensure all winners are paid. The net result is a license that’s on par with those offered by land-based casino regulators. Even though Sun was waiting for the right time to go online, it didn’t exactly sit around playing cards and trying to keep busy. SunOnline was launched in 1999 with the task of building a site that would go online as soon as the opportunity arose. Sun chose its flagship Atlantis resort in the Bahamas as the name and the face for the site, sourced casino software from Boss Media, and began work on the site more than a year before it actually went live on December 31, 2001. During that time SunOnline worked closely with gaming regulators in New Jersey, where it was licensed, to create a set of processes and procedures that addressed land-based regulatory concerns and would allow the
Sun International’s Atlantis Casino, Bahamas. The lobby of SunOnline’s Casino Atlantis.
of the local casino market in Las Vegas. Station was smart enough to realize when it was looking at getting into the online gaming industry that paying $5 million for a 50 percent stake in an existing business like Casino Atlantis would be easier than starting from scratch—especially when that business came with an Isle of Man casino license. Prior is pleased with his new partner and is sincere when he says that “both parties would like to genuinely establish leadership positions in the marketplace.” But what about that marketplace? Is it going to change with the advent of the Isle of Man casino license? Not any time soon, according to Prior. Prior sees regulated and non-regulated casinos continuing to evolve alongside one another, with unlicensed casinos having as advantage. As he observes, it is “much tougher to operate under a heavily regulated environment with a very narrow commercial opportunity than it is to operate in the gray space.” Although the Isle of Man licenses introduce an enhanced level of trust for players and raise the legislative bar for other jurisdictions, it will be a while before people chose a casino based on where it is licensed. SunOnline’s earlier work on regulatory compliance processes enabled it to go live before MGM and Littlewoods, but that hasn’t changed a lot for Casino Atlantis. “Everyone is competition because the next casino is a click away,” as Prior puts it. The site has done fairly well so far and Prior has plans to expand the customer base over the next two years, which speaks volumes about SunOnline’s intentions in an industry where many players only look six months down the road. Prior’s scenario of legitimate and nonlegitimate casinos will likely play out if the industry continues along its current path. What that means for these—and future—Isle of Man licensees remains to be seen, but being the first horse out of the gate has undoubtedly put SunOnline in a good position to lead the legitimate field.
company to launch a site without jeopardizing Sun’s existing licenses. That work allowed SunOnline to immediately recognize the Isle of Man as a jurisdiction that land-based regulators would believe was credible, and take this process to the next level. The man responsible for bringing Sun onto the Net is Tobin Prior, CEO of SunOnline. When you listen to Prior talk about the company’s objectives, it becomes quite clear the Isle of Man was the only option for Sun.
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players from jurisdictions where online wagering is prohibited, and as far as SunOnline is concerned that includes the U.S. Some casino operators might argue the jury is still out on that one, but Prior believes it’s a moot point because U.S. gaming regulators have given Internet casinos the thumbs down.
a level of regulation that no one has ever been to in this space
The Isle of Man had “gone to a level of regulation that no one has ever been to in this space” by implementing new standards for player protection. More importantly, perhaps, full-time regulators are on hand to ensure that casinos are living up to the provisions of their license. “It’s one thing having a piece of paper that says these are the regulations and then nobody actually worries about policing or implementing them,” notes Prior. Casino Atlantis has undergone a battery of independent tests to verify that it complies with Isle of Man gaming regulations, including externally audited payouts, certification of the random number generator and gaming software, and probity checks to guarantee employees are fit to work in the gaming industry. To put all that in perspective, most other online casinos draw the line at audited payouts. Compliance is no small matter in the Isle of Man but that’s quite all right with SunOnline. One of the central components of the Isle of Man license is a requirement to block Prior is the first to acknowledge that shutting out 75 percent of the online gamblers in the world is going to affect his revenue stream, but he’s emphatic that Sun is “not going to jeopardize [its] land-based businesses and the business that goes with them for the sake of a bit of opportunism on the Internet.” On the bright side, SunOnline doesn’t have to deal with the credit card rejections plaguing many sites that accept wagers from the U.S. Because of that provision, SunOnline has had to look elsewhere for customers and revenue. The result has been several partnership agreements, partnerships that Prior notes with some chagrin are “one of the benefits of having a position of compliance leadership.” UKBetting.com will be providing fixed-odds sportsbetting and the online division of Dennis Publications, which publishes Maxim magazine, will provide traffic for the casino. The most significant deal to date, however, has been with Station Casino, the king
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Tobin Prior, SunOnline CEO
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