Online Gambling An Appreciation Of Legal Issues

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If you’re optimistic, you consider the legalization of online gaming in Pennsylvania a pivotal moment in US online gaming history. The state is a linchpin that will lead to a domino effect in other states.

If you’re a pessimist, Pennsylvania is simply the first state since 2013 to legalize online gambling. Plus, it only did so to plug a sizable hole in its budget.

The reality is somewhere in between.

In the end, it’s all about the money

For all the talk about consumer protections, there are really only two reasons states are turning to online gaming:

  1. As a source of revenue for the state.
  2. To strengthen their existing gaming establishments and/or lottery.

Everything else is pretty much window dressing. Unless a state needs revenue, or its current gaming is on the decline, it’s unlikely to turn to online gaming expansion. That is, unless lawmakers can sneak it through under the radar, which will be a common refrain in the analysis below.

How Pennsylvania helps other states move the needle

Multiple states were already considering online gaming bills. The incremental progress made in 2017 should entice some new states to take a look at online gaming. Hopefully is pushes some of the current candidates across the finish line.

Here’s why:

  1. Pennsylvania is the first state since 2013, and the first significant “non-gaming” state to legalize online gaming.
  2. Online gambling is becoming normalized. In addition to four states with legal online gambling, this year New Hampshire and Pennsylvania legalized online lottery, and eight states legalized daily fantasy sport (DFS), bringing the total up to six and 18, respectively.
  3. The recently signed agreement between New Jersey, Nevada, and Delaware to pool online poker players increases the appeal of online poker, and opens the door for smaller states that may have been concerned about a lack of liquidity.

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Ranking the top five contenders

All five of these states have at least a puncher’s chance to legalize online gaming in 2018.

#5: New Hampshire

The little state of New Hampshire snuck into the online gaming conversation in 2017, and it did so in a big way.

The Granite State introduced separate legislation to legalize both online lottery and online gambling in 2017. Despite being its first crack at either, online lottery was authorized, but the state came up short on the online gaming front.

Expect New Hampshire to take another crack at online gaming in 2018, but also expect more roadblocks and pitfalls next year.

  • Lawmakers will have the convenient excuse of, “we just expanded online lottery and keno games last year.”
  • 2018 is an election year.
  • One of the bill’s sponsors is facing criminal charges.
  • The bill won’t “sneak up” on the legislature next year, as online lottery did this year.

#4: Connecticut

Connecticut’s two tribal casinos (Foxwoods and Mohegan Sun) are dealing with casino expansion in neighboring states. Moreover, the eye of the storm has yet to make landfall.

The billion-dollar MGM Springfield will open its doors in less than a year. Nine months later, the $2.4 billion Wynn Boston Harbor will follow suit.

Both properties are expected to take a big chunk out of Foxwoods and Mohegan Sun.

Foxwoods and Mohegan Sun are trying to counteract their new competition in several different ways:

  • Connecticut preauthorized sports betting.
  • The state approved a joint satellite casino by the two tribes.
  • Both properties are adding to their non-gaming offerings.

But at some point the two casinos are going to have to turn to online gaming; a proven source of incremental revenue.

One thing holding Connecticut back has been the size of the state. With just 3.5 million residents, Connecticut doesn’t have the population base for online poker… unless there is a thriving interstate market it can join.

With New Jersey joining Nevada and Delaware, and Pennsylvania likely to follow, both online casino and online poker are suddenly on the table in Connecticut.

Working against the state is the significant gaming expansions the legislature approved this year.

Online

After legalizing DFS, sports betting, and approving a satellite casino, lawmakers may want a break from gaming in 2018, which also happens to be the dreaded election year.

#3: West Virginia

Like Connecticut, West Virginia’s racinos have been feeling the squeeze from new casinos in neighboring states for a number of years.

Now that it’s northern neighbor has joined two other states in the region as online gaming states, West Virginia has even more pressure to throw a lifeline to its land-based gaming operators.

West Virginia introduced an online gaming bill in 2017. Additionally, it has been looking into online lottery and gaming dating back to 2014.

With the developments in Pennsylvania and the opportunity to enter into an interstate agreements (offsetting the state’s small population of 1.8 million), West Virginia’s chances of passing online gaming legislation in 2018 just went up.

#2: Illinois

Legal

Despite a solid late effort, Illinois’ online gaming hopes were officially dashed this week, but the state should be one of the top contenders in 2018, as the bills will carry over to next year’s session.

Like Pennsylvania, Illinois needs revenue; the kind of revenue that hefty online gaming licensing fees could provide.

The state is also trying to legalize DFS. In fact, he two issues merged into one this year in an effort to increase overall support. If DFS and online gambling remain joined at the hip, Illinois has a reasonable chance of getting a bill passed next year.

#1: New York

New York wants to legalize online poker (not casino). On paper, the Empire State is a really strong candidate.

  • New York could partner with Nevada, Delaware, New Jersey, and now Pennsylvania, creating an online poker player pool of 45 million.
  • Legal online poker would bring in incremental revenue to the state’s casinos, which have produced disappointing revenue results thus far.
  • Online poker bills have breezed through the NY State Senate in both 2016 and 2017.

However, because it’s legislation is poker-only, the legislation lacks the money angle that helps drives gaming expansions across the finish line.

Other issues include:

  • A flip-flopping Assemblyman who is the gatekeeper of gaming legislation
  • A dispute between the state and one of its tribal gaming operators; and of course
  • Next year is an election year

Five problematic contenders

The following five states have all introduced legislation seeking to legalize online gaming:

Massachusetts

Massachusetts’ online ambitions took a step backwards in 2017.

The Bay State was seen as a solid candidate, and was expected to grow even stronger when a special commission submitted its findings. Unfortunately, the Commission threw everyone a curveball, and recommended the state not pursue online gambling until the Massachusetts were up and running.

If the legislature agrees with the commission’s findings, online gaming is likely off the table in Massachusetts until mid-2019.

That being said, there’s always a chance it could be revisited.

California

Once upon a time California was a serious contender to legalize online poker.

Growing tensions between the state’s numerous stakeholders (tribal, commercial, and racing) have soured the mood in the Golden State, and unless there is a seismic shift and massive concessions made by one of the two entrenched sides, online poker is going to remain out of reach.

Michigan

It’s not as bad as California, but it’s difficult to see a path forward for Michigan until it can work out its tribal vs. commercial casinos conundrum.

The state’s approach has raised a number of legal questions, and has hasn’t brought either the tribal casinos or the commercial casinos on board. Somehow Michigan has crafted an online gambling bill that none of the stakeholders are very fond of.

Washington

Passing legislation legalizing online gambling would erase one of the most archaic anti-gambling laws in the US, but Washington State hasn’t shown any indication it’s taking online gambling legalization seriously.

Gambling

Grassroots efforts have produced bills, but those bills have gained little traction in the state legislature.

Mississippi

One Mississippi lawmaker, Rep. Bobby Moak, has been trying to legalize online gambling since 2012, but so far none of his bills have gotten out of committee.

One bright spot: Mississippi is one of four states poised to offer sports betting should New Jersey win its Supreme Court case.

At G2E, Larry Gregory, the executive director of the Mississippi Gaming and Hospitality Association, said the sports betting bill his state passed earlier this year had to be “snuck” through, which along with a state needing money seems to be the only other way for gaming legislation to pass a state legislature.

Five dark horse states

None of these states are presently active in the online gaming debate, but any of the five could be this year’s Michigan or New Hampshire and jump into the online gaming conversation.

Rhode Island

Rhode Island is the smallest state in the union, but it does have a casino industry, and that casino industry is going to suffer when Massachusetts casino are open for business.

Maryland

Maryland is the perfect candidate on paper, but the state has shown little interest in online gambling.

Ohio

Ohio is another good candidate on paper, but even with neighboring Pennsylvania taking its gambling industry online, Ohio hasn’t shown any interest in following suit.

Florida

Grassroots efforts have produced draft legislation, but Florida’s Governor, Rick Scott, is ardently opposed to online gambling.

Indiana

Before Mike Pence became the Vice President of the United States he was the Governor of Indiana. Like Governor Scott of Florida, Governor Pence abhors online gambling.

With Pence out of the picture, Indiana is the best dark horse candidate for online gambling, as the state’s casinos have seen revenues decline over the past five years. From 2005 to 2013, the state’s casinos generated between $2.4 billion and $2.8 billion annually. In 2015, Indiana casinos generated just $2.1 billion.

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