by Jana Sedlakova
Nevada’s online gambling regulatory developments have been well publicised over recent weeks, as have changes in the Delaware regime. This was also highlighted in Bwin.Party Digital Entertainment’s trading update of 10 July. “Nevada is expected to issue its first licences for online poker shortly and Delaware has recently passed intra-state online gambling legislation.” As Bwin.Party state in their press release they are encouraged by the developments and “continue to believe that federal online gaming regulation remains the preferred solution, a view supported by leading land-based gaming operators in the US as well as a number of members of the US Congress.”
Whilst it is known that two companies (IGT and Bally Technologies) have now been granted a licence to deliver software solutions in Nevada, this is yet to be finalised in Delaware, who are said to be speaking to a ‘few contractors’. IGT and Bally Technologies are undoubtedly enjoying this historic moment in the US markets.
In New Jersey, Atlantic City casino customers will be allowed to enjoy remote gambling on their ‘hand-held devices’.
The technology challenge will be to ensure that it is not possible to place bets outside the casino premises as this would be out of the legal authorisation allowed by the New Jersey Assembly.
Lisa Spengler at the New Jersey Division of Gaming Enforcement stated that “the Governor has not yet signed the mobile gaming bill. The Division is drafting regulations which are anticipated for final adoption by the end of 2012. Upon final adoption, we believe some casinos will take advantage of mobile gaming.”
According to some sources New Jersey is also moving towards offering Internet gambling and sports betting. Lisa Spengler confirmed that “Internet gambling legislation is pending in the Assembly and Senate. The Sports Betting regulations are posted on the Division’s website. The 60 day public comment period for these proposed sports betting rules ends August 31.”
When asked to clarify the scope of the developments Lisa Spengler elaborated “that the bill is not “interstate online gambling.” The bill awaiting the Governor’s signature is for “Interstate Slot Machines.” (I.e. like a powerball lottery for slot machines). Upon signature, the gaming manufacturers who run wide area progressive systems would then have to be willing to implement these interstate systems. Interstate online gaming would require additional legislation.”
So online gambling seems out for now.
International/interstate networks are crucial for online poker to increase liquidity. Some explore the possibility of state cooperation between Nevada, New York or California but this remains speculative and there might be a requirement for a federal set of rules to establish minimum standards, not dissimilar to the ongoing debate in the EU.
Lisa Spengler expressed the view that “if we received a proposal for a compact [interstate agreement] with another state allowing NJ citizens to wager at virtual casinos in that state, and citizens of the other state to do online gaming through an Atlantic City casino, a determination of the legality of such an arrangement under State and Federal Law would need to be undertaken. At this time, no such proposal has been made to the Division.”
Nevada has some relatively low licence fees and tax rates (from 15 June 2012 it will be $500,000 for a year’s licence then to renew for $250,000 whilst the tax rate will be at 6.75%). Regarding tax issues in New Jersey, Lisa Spengler explained that “mobile gaming is simply electronic versions of authorized games played on mobile devices, thus the casinos will have no additional fee or tax rate for mobile gaming beyond their regular license fee and applicable gaming taxes.” She added that in New Jersey, as elsewhere, online gaming software that has effect on wagers or revenues will also be subject to relevant gambling licence.
Frank Fahrenkopf, President and CEO of the American Gaming Association (‘AGA’) in his speech ‘The State of the Modern Casino Industry: Speech to the Massachusetts Gaming Commission’ in May 2012 said “as the industry has evolved and grown during the past few decades, so too has the technology that drives our operations. For example, many games are now networked and designed to accommodate multiple players, or allow for a single machine to host a variety of games. Technological changes present a host of new challenges for regulators. However, technology also offers regulators the tools to even more closely monitor these games, casino management and financial activities.”
The changes in the US attitudes are also clear from his testimony ‘Internet Gaming: Regulating in an Online World’ from November 2011 in which Frank Fahrenkopf said that whilst “AGA members were not convinced that online poker could be regulated to protect Americans against fraud, money laundering and other illegal activities, or to prevent minors from gambling online and protect problem gamblers. New technology and new processes have changed that.”
In the testimony Frank Fahrenkopf stated that AGA supports the “federal legislation that will allow states to license and regulate online poker” and suggested the best way would be “modernising and strengthening the Wire Act 1961 with conforming amendments to the Unlawful Internet Gambling Enforcement Act (‘UIEGA’) that would unambiguously eliminate illegal internet gambling”.
US liberalisation may pose the authorities a different problem. This is the question whether legalisation in fact supports the allegations in the Antigua case. This could be the case particularly in light of the opinion from last year that should intrastate online gambling be allowed for state citizens only, that could also be understood as cross frontier prohibition.
Mark Mendel, Antigua’s leading attorney said “it is even worse than that. The US case at the WTO was wholly dependent upon their assertion that internet (or “remote”) gaming was so bad that it could not be regulated at all, and therefore the US was entitled to prohibit all remote gambling. It had nothing to do with crossing state lines—which of course is irrelevant—they expressly argued to the WTO that no remote gaming at all was permitted in America.”
Mendel has emphasised that from the legal and factual perspectives this was false and that there “was nothing in US law to prohibit wholly intrastate remote gaming. The US, amazingly to us, denied that this was true. We demonstrated how the IHA not only allows intrastate (and interstate) remote gaming, but that a number of states had active regulated and in some cases unregulated remote gaming on horse racing. We demonstrated how some states had remote lottery sales, some even interstate but a number wholly intrastate. The US denied all of this…”
Mark Mendel has in his summary said that after the latest developments there is “no longer even an argument for the US government to ban these services from Antigua. If we had the time, money and wherewithal to bring a new case at the WTO, they would lose on an almost summary basis. Yet, they continue to subject offshore remote gaming operators to criminal prosecutions … pretty incredible.”
The Antigua case in itself may not have any material effect on US legislation. The outcome of this year’s closely contested presidential election may have wider implications, with Mitt Romney coming out against online poker earlier this year, and Barrack Obama’s stance on the matter still requiring clarification.