The Prospects for Regulated Online Poker in the US

With it being three years since the last state passed legislation to regulate online poker, we look at the prospects for regulation in the next three years.

In February 2013, Governor Chris Christie signed into law an amendment to the Casino Control Act that authorised online gambling in New Jersey. When the first online gambling sites went live nine months later, New Jersey had become the third US state to regulate online poker within a year following Nevada and Delaware.

Many industry observers believed the floodgates for regulated online poker in the US would open and a domino effect would ensue. However, three years later, the wheels appear to have fallen off the regulation bus. Not only has there been no progress towards regulating online poker in the US for the past three years, but many states expected to pass legislation have taken backward steps.

Seemingly Irreparable Damage in California

Seemingly irreparable damage has been done to the prospects for regulated online poker in California, and even the most optimistic advocates of regulation cannot see a way forward in the short term. Dangerous precedents introduced into Adam Gray´s “Internet Consumer Protection Act” wiped out most of the financial benefit for the state – 85% of tax revenues going to the horseracing industry – and an about-turn on “bad actors” resulted in PokerStars withdrawing its support for the bill.

Undoubtedly legislators will attempt some form of regulation again next year, but it was significant that the “Internet Consumer Protection Act” was pulled several times from the Assembly floor through a lack of support. Any bill introduced next year will not only have to appease all the stakeholders, but also justify its existence to a sceptical legislature who will want to know who – other than the horseracing industry – will benefit from regulation. Prospects for online poker in California within three years? Zero.

Pennsylvania Bill not Guaranteed to Pass Senate

A somewhat complex situation exists in Pennsylvania. The House of Representatives passed an omnibus gambling bill prior to the summer recess which seeks to regulate Daily Fantasy Sports and online gambling, and introduce slot machines into the state´s primary airports. However, that bill was passed at the fourth attempt as a means to balance the state budget and, as it stands, offers online gamblers nothing in the way of player protection.

The bill still has to pass the Senate in order to be enacted and opposition to the bill has already been voiced. Several senators have indicated they would like to see a higher tax rate than the 16% proposed, while Sheldon Adelson´s “Coalition to Stop Internet Gambling” has some powerful lobbyists in Harrisburg. If the regulation of online gambling becomes too problematic, it is likely to be decoupled from the omnibus bill and left on the shelf for another year or two. Prospects for online poker in Pennsylvania with three years? 6/10.

Has Anybody Talked about Online Poker Regulation in New York Yet?

If the situation regarding online poker legislation in Pennsylvania is complex, in New York it is plain weird. Companion bills were introduced into the Assembly and Senate this year, and revenues from the regulation of online poker were included in state´s 2016/17 budget. Despite all these positive signs, nobody seems to be discussing online poker regulation. Indeed, the Senate Racing, Gaming and Wagering Committee unanimously passed the proposals without one question being asked.

The problem with the proposals to regulate online poker in New York is they have been introduced immediately after legislators approved three brick-and-mortar casinos in the Big Apple. Many politicians are reluctant to see a further expansion of gambling until after the brick and mortar casinos are up and running. There is also an issue with regard to the bill being poker-only. As has been seen in New Jersey, online poker by itself is hardly a cash cow. Even if somebody starts talking seriously about regulation, the prospects for online poker in New York within three years are no better than 3/10.

Promised Regulation in Michigan Just a Flash in the Pan

At the beginning of the summer, hopes were raised that Michigan might be the next state to regulate online poker. Within the space of six weeks, a bill was introduced, a hearing of the Senate´s Regulatory Reform Committee was scheduled, and the “Lawful Internet Gambling Act” was passed during a second hearing of the committee in less than four minutes. Nothing further is going to happen with the bill this year because of the legislative recess, and several issues might prevent the bill moving forward in 2017.

Potentially, the most complicated issue is that of tribal sovereignty. The language of the bill currently violates existing gaming compacts with the Nottawaseppi Huron Band of Potawatomi Indians and the Saginaw Chippewa Indian Tribe. Furthermore, legal opinion is that the expansion of gambling in Michigan would have to be approved by voters in order to be in compliance with the state constitution. The best possible scenario for regulated online poker in Michigan within three years is 3/10.

Massachusetts the Latest New Kid on the Block

Massachusetts is one of a number of states that has been looking at the regulation of Daily Fantasy Sports for a while, and appears to be one of the more pro-active in using the opportunity to integrate other forms of online gambling into its proposals. In December last year, Stephen Crosby – Chairman of the Massachusetts Gaming Commission – suggested that the legislature should “craft an omnibus regulatory bill for all of these new electronic gaming technologies”.

It appears that Crosby´s suggestion was listened to, as a panel has now been set up to explore the ramifications and consequences of regulating different formats of online gambling. The panel is due to report back on its findings and make its recommendations by the end of July 2017. How quickly action will be taken on the panel´s recommendations thereafter is likely to be influenced by what happens in neighbouring states such as New York and Pennsylvania. Consequently, the prospects for regulated online poker in Massachusetts within three years are the same as NY – 3/10.

Is There Anybody Else on the Horizon?

Seeing how quickly Michigan rose from obscurity to be a temporary front-runner in the race to regulate online poker, you should not discount anything from happening in the next three years (except regulation in Utah). The problem is that many smaller states do not have the populations to support regulated online poker by themselves, and there would need to be an established and substantial network in place (NJ, PA, NY, NV, etc.) to make the prospect of regulation attractive to operators.

Consequently, the place to look for future candidates is along the Eastern seaboard and either side of Michigan. States such as Connecticut, Maine and Rhode Island could be considered as prospects to regulate online poker, as could Illinois and Ohio. Much will depend on how regulation progresses in the larger states and compacts being formed between them. Considering the level of complacency shown to date by regulators in Pennsylvania and New York, it could take a lot longer than three years before any of the smaller states jump on the regulation bus.