With three states embracing legal Internet gambling and possibly as many as a dozen more ready to consider it, lawmakers at the state level are pulling together to bypass Washington and push for a uniform approach to regulatory policy.
The non-partisan National Council of Legislators from Gaming States, whose members hail from all 50 states and the District of Columbia, hopes by May to reach a consensus on “minimum benchmark requirements for states that wish to adopt Internet gaming” and to have a set of standards drafted to take them forward. The group currently is working with the International Gaming Institute at the University of Nevada, Las Vegas, to solicit public comment on issues ranging from consumer protection and responsible and underage gambling to licensing, taxation, advertising and strategies for states interested in banding together to pool players, revenues, technologies and marketing and other resources.
“Developing effective public policy across states, for those states wishing to participate in online gaming, is crucial,” says Jim Waldman, a member of the Florida House of Representatives and NCLGS president.
Momentum has been building toward legalization on a state-by-state basis since the Obama administration signaled that it would depart from its predecessor to take a more or less neutral stance on Internet gambling. This was given substance in December 2011 in the form of landmark ruling issued through the Department of Justice that reinterprets the U.S. Wire Act, the prevailing criminal statute, to state that it applies to sports betting only. This was seen as clearing the way for states to allow online gambling within their borders and, significantly, to compact if they choose with other states, and its effect was to center the regulatory ball firmly in the court of the states, according to the NCLGS, the various state lotteries and others of like mind in the public sector who favor the primacy of local prerogative when it comes to gambling policy.
Momentum has been building toward legalization on a state-by-state basis since the Obama administration signaled that it would depart from its predecessor to take a more or less neutral stance on Internet gambling. This was given substance in December 2011 in the form of landmark ruling issued through the Department of Justice that reinterprets the U.S. Wire Act, the prevailing criminal statute, to state that it applies to sports betting only. This was seen as clearing the way for states to allow online gambling within their borders and, significantly, to compact if they choose with other states, and its effect was to center the regulatory ball firmly in the court of the states, according to the NCLGS, the various state lotteries and others of like mind in the public sector who favor the primacy of local prerogative when it comes to gambling policy.
Armed with this ruling, the Illinois Lottery began selling tickets online in March 2012, the first state to enter gaming’s “Internet Age”. Michigan’s lottery gained regulatory approval just this month to become the third. In between, Nevada has begun licensing intrastate online poker and Delaware and New Jersey have enacted legislation to allow their casinos to market their games intrastate. Delaware’s three casinos went live in October. Atlantic City followed with six casino-affiliated sites at the end of November.
Fred Gushin, a managing director of industry consultants Spectrum Gaming Group, expects the Northeast and Mid-Atlantic regions, where land-based casinos have proliferated in recent years, to quickly follow New Jersey and Delaware down the road to legalization.
Fred Gushin, a managing director of industry consultants Spectrum Gaming Group, expects the Northeast and Mid-Atlantic regions, where land-based casinos have proliferated in recent years, to quickly follow New Jersey and Delaware down the road to legalization.
“There’s intense competition in that part of the country,” he says.
Massachusetts lawmakers already have flirted with it, and in Pennsylvania the Senate has commissioned a study of the issues that is due out in May.
If Gushin is correct about dominos falling in the populous Northeast, Pennsylvania might be the state to tip them over. Its population of nearly 13 million is the sixth-largest in the nation, and analysts suggest the market could generate $450 million in revenue its first full year, climbing to $800 million in five years.
Massachusetts lawmakers already have flirted with it, and in Pennsylvania the Senate has commissioned a study of the issues that is due out in May.
If Gushin is correct about dominos falling in the populous Northeast, Pennsylvania might be the state to tip them over. Its population of nearly 13 million is the sixth-largest in the nation, and analysts suggest the market could generate $450 million in revenue its first full year, climbing to $800 million in five years.
A Philadelphia-area Democrat has introduced a bill in the state House of Representatives authorizing house-banked casino games and poker. But opposition is intense, particularly among legislators from Republican-dominated rural areas. Public opinion appears to be mixed, according to a recent poll.
Land-based saturation is a fact in the Midwest as well, and online legislation is expected to be reintroduced this year in Illinois and Iowa.
In the South, Louisiana’s Legislature has commissioned a study similar in scope to Pennsylvania’s, and online gambling has emerged as a frequent topic of discussion in the statehouses of Mississippi and Florida.
Colorado, one of the few Western states outside Nevada with a sizable commercial industry, saw its first legalization bill stall in 2013.
Land-based saturation is a fact in the Midwest as well, and online legislation is expected to be reintroduced this year in Illinois and Iowa.
In the South, Louisiana’s Legislature has commissioned a study similar in scope to Pennsylvania’s, and online gambling has emerged as a frequent topic of discussion in the statehouses of Mississippi and Florida.
Colorado, one of the few Western states outside Nevada with a sizable commercial industry, saw its first legalization bill stall in 2013.
But its land-based sector is not averse to exploring the possibilities, and reports are that a renewed push is possible this year. It will have to contend, however, with an opinion recently issued by the state Attorney General’s Office that any expansion of the existing industry will require an amendment to the constitution.
Then there’s the big prize, California, and its 38 million inhabitants, where two poker-only bills have languished for a year or more and will die this month but an agreement in principle is said to be close on a poker-only legislative scheme the state’s powerful Indian tribes can buy into. This means regulation is no longer a question of if but of when. California academic and gambling law specialist I. Nelson Rose believes it will happen at some point soon after the 2014 election cycle.
“The tribes have done a tremendous job of using the wealth generated from gaming to gain political power,” he has said. “Only politics is preventing it.”
Then there’s the big prize, California, and its 38 million inhabitants, where two poker-only bills have languished for a year or more and will die this month but an agreement in principle is said to be close on a poker-only legislative scheme the state’s powerful Indian tribes can buy into. This means regulation is no longer a question of if but of when. California academic and gambling law specialist I. Nelson Rose believes it will happen at some point soon after the 2014 election cycle.
“The tribes have done a tremendous job of using the wealth generated from gaming to gain political power,” he has said. “Only politics is preventing it.”
A new report by market researchers Academicon and PokerScout values intrastate poker in the Golden State at $217 million in Year 1, growing to $384 million by Year 10. That’s just for starters. Where it goes from there, says Ingo Fiedler, one of the authors of the report, “depends strongly on the decision to either limit the player pool to in-state residents or participate in a federal or international network of players.”
Which is why the NCLGS initiative is so important. With no consensus in Congress on the wisdom of national regulation, much to the frustration of the big Las Vegas-based casino corporations—or most of them—Sheldon Adelson, the powerful, politically influential chairman of Las Vegas Sands, has broken ranks and is lobbying hard for prohibition—the best chance the U.S. market has to realize its massive potential may depend on some form of broad agreement among states along the lines the NCLGS is advocating, particularly with regard to licensing, taxation and revenue-sharing—the issues that will govern the cross-jurisdictional agreements that will arise inevitably.
Which is why the NCLGS initiative is so important. With no consensus in Congress on the wisdom of national regulation, much to the frustration of the big Las Vegas-based casino corporations—or most of them—Sheldon Adelson, the powerful, politically influential chairman of Las Vegas Sands, has broken ranks and is lobbying hard for prohibition—the best chance the U.S. market has to realize its massive potential may depend on some form of broad agreement among states along the lines the NCLGS is advocating, particularly with regard to licensing, taxation and revenue-sharing—the issues that will govern the cross-jurisdictional agreements that will arise inevitably.
Academicon and PokerScout figure the United States accounted for almost one-third of the world’s online poker revenue prior to the DOJ’s April 2011 crackdown on three of the largest unlicensed offshore operators. Their report says a nationally regulated market could be worth $2.2 billion in its first year. Investment bankers Morgan Stanley believe online gambling in all forms could produce as much revenue by 2020 as the Las Vegas and Atlantic City land-based markets combined, or more than $9 billion.
Waldman is careful to note that the NCLGS is neither pro- nor anti-gambling. The goal is “sound regulation,” he says. And unlike the commercial sector, it opposes federal intervention, a position that aligns it with the lotteries.
“What it really comes down to is that it ought to be state’s rights,” he says. “Decisions related to gaming should be made by the citizens of the individual states and their elected officials.”
A hearing in December before a subcommittee of the U.S. House of Representatives, the first on Internet gambling in the lower chamber in two years, ended with nothing more definitive than its precursors. What it did, though, was highlight the divisions that persist within the industry on the best way forward and the problems the 50-year-old Wire Act continues to pose both for advocates and opponents.
“What it really comes down to is that it ought to be state’s rights,” he says. “Decisions related to gaming should be made by the citizens of the individual states and their elected officials.”
A hearing in December before a subcommittee of the U.S. House of Representatives, the first on Internet gambling in the lower chamber in two years, ended with nothing more definitive than its precursors. What it did, though, was highlight the divisions that persist within the industry on the best way forward and the problems the 50-year-old Wire Act continues to pose both for advocates and opponents.
As Terry Lee, the Nebraska Republican who chaired the hearing, pointed out, interpretations of the Wire Act are not law. The Justice Department’s December 2011 opinion, absent positive action by Congress, reflects nothing more than the current policy of an administration that will relinquish power come 2016.
“The Wire Act can be overturned at any moment,” noted Andrew Abboud, who as senior vice president of Government Affairs for Las Vegas Sands appeared before the subcommittee to make Adelson’s case for prohibition. “The states going forward are doing so at great risk.”
Which is as much as saying that for all the talk of a bandwagon effect this is still very much frontier territory. Regulated online gambling currently is available to less than 5 percent of the U.S. population, and Waldman says, “I don’t expect that you’ll see all of a sudden that every state will do it. Every state legislature is very different, and no one wants to be the one who risks any sort of negative results for their state.”
“The Wire Act can be overturned at any moment,” noted Andrew Abboud, who as senior vice president of Government Affairs for Las Vegas Sands appeared before the subcommittee to make Adelson’s case for prohibition. “The states going forward are doing so at great risk.”
Which is as much as saying that for all the talk of a bandwagon effect this is still very much frontier territory. Regulated online gambling currently is available to less than 5 percent of the U.S. population, and Waldman says, “I don’t expect that you’ll see all of a sudden that every state will do it. Every state legislature is very different, and no one wants to be the one who risks any sort of negative results for their state.”
Instead, he expects a “gradual rollout,” as he puts it. “But,” he adds, “I think you’ll see the states watching very carefully what happens.”
The reason they will is simple. As Gushin says, “Every state needs money.”
The reason they will is simple. As Gushin says, “Every state needs money.”