New Jersey reported a 30.4 percent gain in online poker gaming revenues in April, and Sandoval suggested the two states create an online poker pool.
During a Nevada Gaming Policy Committee meeting May 13, Sandoval posed the idea of the two states pooling their online poker liquidity.
He suggested such a partnership would be very lucrative for both states. New Jersey currently controls 92 percent of the online gaming market in the U.S.
PokerStars completed its first full month of operation in April, which accounted for much of the 30.4 percent increase in New Jersey’s online poker revenues. Caesars and the Borgata casinos also operate online poker in the Garden State.
With Nevada casinos also offering and continually developing their online poker and gaming operations, Sandoval suggested both states would benefit greatly from a gaming compact.
Nevada has a similar agreement in place with Delaware, but that state has a smaller market than even Nevada, and the compact hasn’t produced significant results.
It does, however, serve as model for a potentially more successful compact with New Jersey, and Sandoval said he wants to pursue one.
Sandoval also expressed interest in expanding online gaming in Nevada to include all casino games, but he is concerned about keeping it away from kids and out-of-state bettors.
Caesars Interactive Senior Vice President Michael Cohen told the panel geo-targeting technology and other advancements in recent years have improved greatly.
The technology has existed for four years and is used by online and mobile-gaming poker, race, and sports book operators in Nevada. The locations of mobile users are pinpointed by cell tower locations, while IP addresses ensure online users are within Nevada.
Bettors also have to open accounts and deposit funds in person by filling out applications and providing their state-issued IDs. Money only can be deposited or withdrawn in person and by showing ID.
Cohen said the combination of online gaming and bricks-and-mortar casinos is a winner and has boosted revenues at Caesars’ properties in New Jersey.
It also has accounted for more than three-fourths of the new customers signing up for the casino’s Total Rewards program, and online clients generally are younger than those coming into casinos, Cohen said.
Enthusiasm across the country for iGaming has increased because New Jersey’s online gambling sites are on a roll, setting consecutive revenue records for the first four months of 2016.
Through the first four months of this year, Internet gaming win in the state is up 29.3 percent over 2015 to $61.9 million.
That roll started before PokerStarsNJ went live in the state, but the online poker giant has clearly reinvigorated online poker play in its first full month in a market that is dominated by online casino games.
Revenue figures released by the state Division of Gaming enforcement show that online play took in more than $17 million in April, another new record. That’s up about 34 percent over April 2015 and $1.5 million more than online gaming revenue for March of this year.
Online casino games make up the bulk of the state’s market, taking in $14.4 million of the total for the month, a 34.4 percent increase over April 2015. Online poker play has lagged far behind, but the April figures also show the impact the launch of PokerStars in March (for 10 days of the month) has had on the market.
Online poker revenue rose better than 30 percent over 2015 to $2.6 million in April, the first full month for PokerStarsNJ. That’s up $150,000 from March.
So far in 2016 online poker has generated $9.2 million, up 7.4 percent from the $8.6 million raked during the first four months of 2015.
PokerStars is partnered with Atlantic City’s Resorts casino—all online gambling sites in the state must partner with an Atlantic City casino—and combined, including resorts online site, the two brought in $3.5 million for the month, almost double their March revenue. Resorts’ casino revenue was $2.3 million, around $1 million more than in March, while poker revenue doubled to $1.18 million.
PokerStars has also quickly passed BorgataPoker.com as the leader in the market. The Borgata sites—which include Borgatacasino.com and are partnered with Palacasino.com and PartyPoker—brought in about $4 million with casino games claiming around $3.2 million and poker adding $745k, down 25 percent.
Caesars Interactive Entertainment’s poker sites, which include WSOP.com and 888.com, saw online poker revenue fall about 20 percent from March’s total to $664,000, while its casino game revenue improved nearly 9 percent to $2.5 million.
For the remainder of the market, the Golden Nugget reported revenue of $3.3 million, up 10 percent from March and Tropicana earned $3.05 million, down four percent. Tropicana is partnered with VirginCasino. The three sites only offer online casino games.
In a joint promotion, PokerStars and Resorts scheduled a live “online” poker tournament designed to bring players from PokerStars wide international base to Atlantic City. New Jersey law requires players to be physically located in the state when playing—which is verified through geolocation technology—but they do not have to be state residents.
Pennsylvania Power
Meanwhile in Pennsylvania, the state is facing a $1 billion budget gap as it rushes to adopt a budget by June 30, and that has led to interest in an already introduced bill to allow online gambling in the state.
Though the measure isn’t expected to generate anywhere near that level of revenue, lawmakers now expect the bill—which has not seen movement since the fall—to be considered by the state’s full house in June.
The plan would allow Pennsylvanians to play casino games such as slots and video poker online.
The plan’s sponsor, state Rep. John Payne, said the bill isn’t designed to solve the state’s budget problems, but rather to bring state oversight to online gambling, now being played at illegal offshore sites.
“Is that the savior for the budget problem? No,” he told the Reading Eagle. “But isn’t it the right thing to do to protect our children and compulsive gamblers?”
Payne has said the plan could raise more than $100 million through licensing fees and taxes. Payne chairs the state’s House Gaming Oversight Committee, which has already approved the bill.
The bill would limit online casino licenses—which would cost $5 million apiece—to the state’s existing casinos. The websites would be required to have security measures to verify users’ identities and prohibit underage gambling. The state would tax gross revenue at 14 percent, according to the Eagle.
But this could be the last hurrah for iGaming in Pennsylvania if not enacted this session. Payne and the chairman of the legislature’s Gaming Oversight Committee Nick Kotik have been the most vociferous supporters of iGaming in the state, and neither are standing for re-election.
California Gray
In California, the state Assembly Appropriations Committee held a hearing on a proposed online poker bill, Rep. Adam Gray’s Internet Poker Consumer Protection Act.
This followed a hearing on April 27 on AB 2863, which included a section that would pay the horseracing industry up to $60 million annually, in return for licensing of online poker being limited to Indian casinos and card rooms. At that time the Assembly Governmental Organization Committee, which Gray chairs, approved of the bill by a vote of 18-0.
At that time Gray’s bill did not include a proposed tax rate. It also did not address the so-called “bad actor” provisions that some gaming tribes insist on that would address the suitability of online providers that might partner with licensees. That now has changed.
Gray has now proposed a 10 percent tax rate. Most experts don’t expect revenues in excess of $300 million annually, so a 10 percent rate would be the highest the state could ask and still produce a robust iPoker business. But some proponents may want more.
And the “bad actor” clause may be a high hurdle, as well. A coalition of six tribes wants to put PokerStars owner Amaya in a penalty box for some period of time. But two tribes have already reached a business arrangement with PokerStars and will resist.
“Gray needs to craft a bill that somehow restricts PokerStars and Amaya but at the same time allows them to apply for a license,” Steve Stallings, councilman for the Rincon Band of Luiseño Indians and chairman of the California Nations Indian Gaming Association (CNIGA), told Online Poker Report.
Stallings expects a fully formed bill, including a tax rate, the resolution for racetracks ($50 million annual payment) and suitability language to be drawn up soon, and go before the Assembly committee on June 15.
Gray’s bill attempts to maintain a balance between horseracing, gaming, agriculture and state fairs.
Stephen Chambers, executive director of the Western Fairs Association, which represents the U.S. fair industry, wrote last week in the Modesto Bee, “We appreciate the assemblyman’s leadership in this complex and contentious subject area. Like several other legislative leaders sent to Sacramento from the San Joaquin Valley, including the late senators Rose Ann Vuich and Ken Maddy, Gray sees the intricate and multiform relationship between horse racing, gaming, agriculture and fairs. The Internet Poker Consumer Protection Act, introduced by Gray, as currently written, would ensure that a set portion of funds generated by internet poker benefit both fairgrounds that host horse racing and smaller non-racing fairs.”
Proponents of the bill make the point that “gambling” on smart phones already exists. They insist that fantasy sports betting meets that definition.
They note that the growth of tribal gaming has contributed directly to the decline of horseracing and hurt funding of the 76 fairgrounds in the Golden State that depend on parimutuel betting.
Chambers wrote, “If you drive down Highway 99 from Sacramento to Bakersfield, you will pass dozens of fairs (some with off-track betting), card rooms, tribal casinos and farms reliant on a struggling horse racing industry. Finding solutions that work for these varied interests is important and a true test of leadership—a test that Assemblyman Gray is passing with flying colors.”
This is the farthest that an online poker bill has gotten in the California legislature. The GO committee approved of a bill in 2015 but that bill never went beyond that.
Morongo Chairman Robert Martin says lawmakers must craft a bill that will avoid litigation.
“We want to make sure that if we’re going to pass legislation regulating iPoker that it’s done in a way that can withstand legal or constitutional challenges,” Martin said, “because then this effort becomes nothing more than a futile exercise.”
Michigan Moves
In Michigan, state Senator Mike Kowall has sponsored Senate Bill 889, which would legalize and regulate online casino games. The Senate Regulatory Reform Committee will hold a hearing on the bill before it moves to the full Senate, said Kowall’s chief of staff and legislative director, Dave Biswas.
He said the measure would establish consumer protection, generate tax revenue and create about 22,000 new jobs. He noted internet gaming operators would pay a 10 percent tax on internet gaming revenue.
In addition, Biswas said tribes that operate casinos complained about Michigan’s online lottery, so the internet casino games bill will create a level playing field. Only tribal and commercial casino operators could run online casinos, he said.
Biswas said the bill requires “a couple of technical changes. I don’t see why the bill wouldn’t go through this year.”
But that’s not a sure thing. Groups working to strengthen Michigan’s ethics laws, the weakest in the nation, have raised concerns that Kowall’s wife is employed by a public relations firm promoting the legislation. Kowall said there is no conflict of interest since his wife, lobbyist Eileen Kowall, is not working directly on the project. “She’s got nothing to do with it. It’s not one of her clients,” Kowall said.
Mrs. Kowall is one of the five lobbyists working for MGS lobbyists in Lansing. MGS’s client is Amaya, a multinational company that owns the online gaming sites PokerStars and Full Tilt among others. She registered as a lobbyist less than two months after leaving the state House at the end of 2014 due to term limits.
Executive Director of Common Cause in Michigan Melanie McElroy commented, “It seems like a pretty troubling set of circumstances. It’s troubling Senator Kowall would sponsor legislation that would enrich MGS, a consulting firm that employs his wife. This reinforces in the public’s mind the idea that lawmakers aren’t there to represent the people, but they’re doing the bidding of special interests.”
Craig Mauger, executive director of the Michigan Campaign Finance Network, said the case illustrates issues in Michigan’s ethics laws, including conflict of interest laws for lawmakers; no “cooling off” period before term-limited lawmakers can lobby; and required financial disclosures for elected officials and their spouses. “We often don’t know when things like this are happening. On its face, a lawmaker’s spouse lobbying for an entity that is working with a lawmaker, that does seem to be a conflict. This is probably an issue that he should have kept his hands off,” Mauger said.
MGS Managing Partner Jeremiah Mankopf said Eileen Kowall works primarily on education issues. “I don’t see there being any conflict,” he said, adding, “I’m the lead on this. Everybody in the firm has their own clients.” He stated MGS has been lobbying for Amaya since 2007.
If the legislation passes, it would be the first online gambling measure to be approved since 2013, when Delaware, Nevada and New Jersey allowed it.
Nevada eSports Flirtation
Nevada gaming regulators, meanwhile, are also eyeing eSports as a potentially untapped revenue source.
They also are very popular among younger bettors, and Nevada wants to become a Mecca for eSports gaming. The Mandalay Bay Events Center in recently hosted a sold-out eSports competition, which packed the arena with more than 10,000 fans under age 34 as they watched teams vie for a chance to win a world title.
The Nevada Gaming Policy Committee met on May 13 conducted a 3.5-hour hearing on the potential for eSports and expanded online gaming in Nevada. Governor Brian Sandoval chaired the hearing, during which many experts provided insight into the current and likely future state of eSports and online gaming.
Fifth Street Gaming CEO Seth Schorr informed the panel of the popularity of an eSports competition arena built at the Downtown Grand in Las Vegas.
The casino sponsors a professional eSports team from Australia, which prepares for major competitions by staying at the casino and practicing while patrons watch.
The Grand also hosts eSports tournaments on Friday and Saturday nights, which attract dozens of viewers. Schorr estimated about 25 percent of visitors to the casino will wander over to check out the eSports gaming arena and events when they occur.
Schorr likened eSports to an athletic competition and said the Downtown Grand already has applied for a license to offer wagering on eSports events through its sports book.
Schorr said the sports betting model and poker models are the two most viable forms of wagering on eSports events.
The sports book model simply places odds and potential prop bets on eSports events. The poker model enables two or more players to place money into a pot, from which the casino takes a cut, and the winner takes the rest.
Another potential wagering model would be a pari-mutuel system, which would mitigate risk among more parties.
Schorr said if the Nevada gaming regulators were to determine eSports to be an athletic competition, he said his sports book immediately could begin taking wagers on eSports events.
Sandoval expressed strong interest in doing just that and said the committee likely will take up the matter during its next hearing in October.
The Gaming Policy Committee also heard from ESL North America CEO Craig Levine, who told the committee the eSports industry is forming regulatory bodies to ensure integrity in eSporting events.
As with any competition, match fixing and point shaving are primary concerns, but Levine says regulations are in place and the new international regulatory body, the eSports Integrity Coalition, of which ESL is a founding member, is working to ensure compliance and conformity to ensure gaming integrity.
Without integrity, eSports can’t work and Levine said it is possible to protect eSports against unique forms of cheating, such as software cheats, and ensure a reliable level of integrity. He said game-interruption and doping also are primary concerns, and eSports competitors are subject to drug testing.
The eSports Integrity Coalition estimates the potential global eSports betting market at between $50 billion and $70 billion, annually, but that includes illegal wagering.
The panel also heard from a professional eSports competitor, who likened his training to that of a professional boxer, and helped impress upon the panel and Sandoval the amount of preparation and dedication needed to be a professional eSports competitor.
That includes maintaining a balanced diet and staying in good physical condition to remain alert, have greater stamina, and wear down opponents over time.
Major competitions for eSports sell out NBA arenas, and the eSports community generally assured the Gaming Policy Committee that it is a fully regulated and genuine competition with a great deal of growth potential. Its representatives also say Las Vegas is an ideal location to become the North American leader in eSports competitions.
Sandoval and committee members were very receptive to enabling eSports and hosting more large events. They also expressed a strong interest in joining forces with New Jersey to boost online gaming in the respective states and grow the industry in general.
