Perhaps considering the comments of U.S. Attorney General Sessions during his confirmation hearings, when he said he would examine the 2011 Department of Justice memo that exempted online gaming from the Wire Act, four states are examining the legalization of iGaming or iPoker. Sessions has not mentioned the issue again since the hearings, but the widest consideration for legalization is currently under way.
In Pennsylvania, the General Assembly began debate on an omnibus gaming expansion package last week with a three-hour joint hearing of the state House and Senate committees overseeing gaming.
The House Gaming Oversight Committee and Senate Community, Economic & Recreational Development Committee hearing featured 15 witnesses discussing issues surrounding online gaming. Both chambers debated online gaming bills last year, with the House passing a measure the Senate ultimately killed due to extraneous expansion measures added as amendments.
Bills introduced this session generally mirror those debated last year. Both House and Senate bills would create a full range of online poker and casino games, with the largest difference being lower taxes and fees in the House measure. Both bills also provide for regulation of daily fantasy sports, and include expansion measures such as tablet gaming at airports. Also included in the package under debate are measures that would replace the local casino host fee declared unconstitutional last September by the state Supreme Court.
Among those testifying in opposition to iGaming was Anthony Ricci, CEO of Parx Casino, the most profitable casino in the state. Ricci cited the casino’s healthy revenue stream, alleging that iGaming would cannibalize profits. Senators Lisa Boscola and Robert Tomlinson also aired concerns that online gaming could cannibalize land-based casino revenue—a claim refuted at the hearing by Kevin O’Toole, executive director, and Doug Sherman, chief counsel of the Pennsylvania Gaming Control Board, both of whom noted that no such cannibalization has occurred in New Jersey, Delaware or Nevada (which has only online poker).
Caesars Entertainment Senior VP David Satz called such claims “scaremongering” in his testimony, adding that regulated online gaming provides consumer protection that unregulated offshore sites do not have. “The regulations do work,” he said.
Supporting him in this issue was John Pappas, executive director of the Poker Players Alliance. “As a player organization, the Poker Players Alliance takes consumer protections very seriously,” Pappas testified. “I would argue that states like Nevada, New Jersey and Delaware have created a far more reasonable and effective approach to consumer protections than those who would simply stick their heads in the sand.
“Will you support legislation to provide Pennsylvania players and taxpayers with a safe and well-regulated place to play poker and other games on the internet, or will you leave them with an unprotected market vulnerable to fraud?”
SugarHouse Casino, which already operates an online casino in New Jersey, was among those promoting iGaming. General Manager Wendy Hamilton testified that online casinos help the business of brick-and-mortar facilities. “These are the facts,” she said. “Multi-channel engagement empowered the brand.”
Last week’s hearing occurred the day after the state Senate officially introduced its gaming reform package. The new Senate bill, SB 477, is a carbon copy of the nearly 200-page HB 392 introduced last year. It would legalize and regulate online gaming and daily fantasy sports, replace the local host fee, and implement expansion measures including multi-state progressive slots, skill-based and hybrid slots and tablet gaming at airports.
The bill also would eliminate the requirement that patrons at Category 3 resort casinos spend at least $10 at the resorts as an entry fee for the casinos.
The measure contains a lower iGaming tax than last year’s Senate bill—14 percent tax on gross gaming revenue that goes to the state, and a further 2 percent tax on gross gaming revenue sent to local communities. Licensing fees are higher than House measures—$8 million up-front for an interactive gaming license, with a one-time $2 million licensing fee for platform providers, with annual renewal fees of $250,000 for the iGaming license and $100,000 for interactive gaming operators such as platform providers.
The next joint hearing on the gaming package is scheduled for March 20.
In Michigan, a hearing before the Senate Committee on Regulatory Reform turned last week to SB 203, a bill to legalize and regulate online gaming with strong consumer protections. Providing the main testimony at the hearing was John Pappas, executive director of the Poker Players Alliance.
“For more than a decade, the PPA has been at the forefront of advocating for sensible public policy that authorizes and regulates internet gaming,” Pappas testified. “We know a good bill when we see it, and that is why I would like to thank Senator Mike Kowall for his leadership on this issue.”
Pappas testified to the dangers of the status quo, which he described as access by Michigan residents to illegal, unregulated online gaming sites that offer no consumer protection.
“Each and every day that the state goes without regulation is another day that consumers are left unprotected,” Pappas said. “Doing nothing is simply not an option. Michigan consumers and taxpayers should not have to wait for common-sense protections.”
Pappas described the success of current best-of-breed technologies in preventing fraud, underage access and nonpayment by unregulated sites.
“Moving a poker game from the kitchen table to the computer table is just another part of the way the internet has transformed our lives—extending oversight into internet gaming is simply a reflection of our modern-day society,” Pappas testified. “Michigan can choose to ignore the internet, or it can embrace it for the benefit of its citizens and its economy.”
The bill is called the “Lawful Internet Gaming Act,” and has been re-introduced Kowall, who sponsored a similar bill in 2016. The bill would require online sites in the state to offer online poker as well as slots and casino games.
If passed, only Michigan’s brick-and -mortar casino operators and federally recognized tribes with ongoing gaming operations would be eligible to apply for licenses.
However, it’s unclear if the state’s tribal gaming entities will support the bill, which could bring about tribes having to waive their immunity under federal law against being taxed on gaming by the states.
One of the pitfalls of the Michigan bills, however, is the support of Amaya, whose PokerStars website was banned for several years after it continued to operated following the 2006 Unlawful Internet Gambling Enforcement Act. Although Amaya bought the company from the owners during those years and is currently licensed in New Jersey, that time of illegal operations continues to haunt the website. And any support by Amaya taints the legalization effort.
In Massachusetts, the operators of the state’s operating and proposed casinos communicated through the state’s gaming commission chairman, Stephen Crosby, that they won’t oppose the legislature if it looks at legalizing online gaming in the Bay State. Such a bill could be introduced as early as this summer.
Although currently the only online gaming allowed in the state is fantasy sports, a special committee appointed by the legislature to look at a possible omnibus bill that would embrace everything online except the lottery may be ready to give a report in a few months.
The Massachusetts State Lottery is in favor of online lottery sales and has been lobbying the legislature to authorize it for two years now under State Treasurer Deborah Goldberg and Lottery Executive Director Michael Sweeney. Last August a bill that included regulation of daily fantasy sports and the lottery was considered, but the provision dealing with the lottery was later dropped.
Crosby, who serves on that commission, said “I would say by the middle of this year there might be something for the legislature to look at.”
The support, or at least the neutrality of the operators of the MGM Springfield, Plainridge Park Casino and the Wynn Boston Harbor on the issue of online gaming means that lawmakers won’t be facing sniping from that quarter as they try to fashion a bill that would include most forms of online gaming. This is surprising to some since Steve Wynn has been vocal about his opposition to online gaming.
A recent report presented to the Massachusetts Gaming Commission showed that when Plainridge Park opened in 2015 that it did not have a significant effect on state lottery sales either statewide, or near the casino itself.
It’s not known whether Goldberg supports merely online sales of lottery tickets or virtual lottery terminal machines that mimic slot machines. Goldberg asserts that, although the lottery made record sales of $989.4 million it has peaked and will go into a decline unless it reaches out to attract millennials who do many of their activities using Smartphones. Sweeney agrees.
And in New York, Assemblyman J. Gary Pretlow, who pushed an iPoker bill to the brink of success in 2016, is confident he can get it over the finish line in 2017. After an examination of the issues related to iPoker, including geolocation and processes to prevent cheating, Pretlow says he is satisfied, and believes that will be good enough for his colleagues.
“When I do sign off on something,” he told a New York television station, “my colleagues feel that it is a good deal and they don’t question why I made a certain decision. They know that if that decision was made, it’s for good reason. So I don’t really see there’s going to be much opposition to moving this along.”
Last year, the bill sailed through the Assembly but was never taken up by the Senate. This year, starting in the Senate, the bill was unanimously released for the Committee on Racing, Gaming and Wagering and now heads to the Finance Committee, where Pretlow predicts a similar passage.
The bill allows 10 iPoker licenses presumably limited to casinos, racetracks and tribes with a fee of $10 million each. Players must be 21 years of age and be within the state borders, although it does permit for interstate compacts that would pool players from those states.
