The legalization of iGaming has been stalled since New Jersey opened its first online casinos in 2013. Along with Delaware and Nevada, iGaming in New Jersey has thus far been limited to small markets with little room for growth. But that could change in 2017 as several states are considering bills that would legalize online wagering for many different reasons.
With U.S. Attorney General-designate Jeff Sessions declaring himself “shocked” at the interpretation of the Wire Act by the Obama Justice Department that allowed the introduction of iGaming in those three states, as well as the online sale of lottery tickets, states may have more urgency to legalize the new industry.
PENNSYLVANIA
Perhaps the first domino to fall will be Pennsylvania. The new chairman of the state Senate committee in charge of gaming issues has estimated that there is enough support among lawmakers to pass a bill legalizing online gaming, daily fantasy sports and other gaming expansion measures by March.
“Sometime in March, we’ll have something done and passed in the House and Senate,” state Senator Mario Scavello told CDC Gaming Reports. “It looks like online gaming has the support to pass. We can look at other expansions.”
Pennsylvania lawmakers formally begin their new session today.
The legislative package currently being examined by the state Senate would regulate online gaming sites owned by the land-based licensees, and includes expansion measures beyond iGaming and DFS such as slot machines or tablet gaming at airports and off-track betting parlors, as well as a new provision for a revenue tax to benefit local host communities to replace the original provision declared unconstitutional by the state Supreme Court in September.
Lawmakers have asked the Supreme Court for a 120-day extension of the deadline given to replace the host community tax, which the high court ruled was in violation of the uniformity clause of the state constitution. The court gave the legislature a January 26 deadline to replace the fee, struck down because the provision—2 percent of revenues or a minimum of $10 million—imposed a disproportionate tax on smaller casinos.
Changes are likely to be made in the current Senate legislation, sponsored by minority leader Jay Costa. Many lawmakers view the tax rate envisioned by the bill—25 percent on iGaming and DFS revenue, plus a licensing fees of $10 million for iGaming and $2.5 million for DFS—as excessive, even for the big DFS companies. Moreover, the expansion measures such as slots at airports are still opposed by many, and the fact they were attached to an emergency bill replacing the host fee was the main reason that bill never came to a vote during the November lame-duck session of the State Assembly.
However, it appears the iGaming and DFS portions of the bill have enough support, notwithstanding the taxes and fees, which are likely to be amended. “I think it’ a natural progression of gaming in Pennsylvania,” said Costa, according to the CDC report. “To some degree, both (iGaming and DFS) are already present, particularly fantasy sports. What we’re doing is regulating it. I think the people of Pennsylvania believe this is something that’s appropriate right now.”
The state budget passed for the 2016-17 fiscal year, which began July 1, counts on $100 million in projected revenue from online gaming. Costa has estimated his bill would generate $137 million this fiscal year in licensing fees alone.
Those rates would need to be reconciled with whatever new bill is passed by the state House. The House passed a bill last year that included much lower taxes and fees—16 percent for iGaming and 12 percent for DFS. Senators also are expected to revisit provisions of a separate Senate bill sponsored last year by Senator Kim Ward, which would remove the $10 access fee charged to patrons of the state’s two small resort casinos and target casino revenue for economic development in counties without casinos.
NEW YORK
At one point in 2016, there was hope that an online poker bill would be passed in New York. A bill sponsored by Senator John Bonacic was passed by the state Senate by a 53-5 margin, but Rep. J. Gary Pretlow declared it dead in the state Assembly. A fantasy sports bill did succeed however and when Governor Andrew Cuomo signed it, DFS was legalized.
According to GamblingCompliance, Pretlow recently met with the New Jersey Division of Gaming Enforcement and declared himself impressed with the security and integrity of the state’s regulatory system for iGaming, a system he previously doubted. With Bonacic still on board and strong support in the Senate, Pretlow’s Assembly committee that oversees gaming will be the most important hurdle to cross.
No bill has yet been introduced, but sources tell GGBNews it will likely be similar if not identical to the 2016 measure.
Pretlow is also reportedly eyeing sports betting.
“The fact of the matter it is happening now,” he told Law360. “The fact of the matter is that billions of dollars are being wagered. A majority of those dollars are going to entities that we don’t associate ourselves with. I think that if people are doing it that it should be controlled. It should be taxed. It should be regulated. And it should be allowed.”
MICHIGAN
Low-key efforts to legalize iGaming in Michigan quickly gained steam in Michigan last year. In April, Senator Mike Kowell introduced a bill that he believed merged state law governing the commercial gaming industry and federal law overseeing tribal gaming. The bill ran into objections from tribal gaming law experts who said it violated the Indian Gaming Regulatory Act, presented complicated tax issues and conflicted with federal court decisions on tribal iGaming.
According to OnlinePokerReport, Kowell plans to re-introduce a heavily edited bill this year, aimed at mollifying both commercial and tribal gaming interests and creating a level regulatory and tax rate playing field. In addition, it’s likely to respect more deeply tribal sovereignty.
“We’re working on trying to do something this year,” Dave Biswas, Kowell’s legislative director. Biswas says Kowell’s staff is meeting with all the interested parties—commercial casinos, gaming tribes, international operators, as well as Amaya, the owner of the popular PokerStars website.
“We’ve been able to work with the casinos, the tribes, Amaya and the different companies,” Biswas said. “Once we have everyone on the same page—and we’re pretty close to that—I’m sure the bill will make its way around again.
“At the end of the day they will all be supportive.”
Indian law attorney Scott Crowell believes it will be difficult to craft a bill that will satisfy all parties.
“You’re not going to be able to impose a tax on the tribes,” he says. “You’re not going to be able to impose regulatory restrictions as it relates to the on-reservation gaming. True parity may be a theoretical possibility, but practically it’s impossible.”
Nonetheless, Crowell thinks there is an opportunity.
“I believe the right answer is it can be done, if it is done correctly,” he said. “That being said, there are some disturbing decisions out there regarding how IGRA would work with gaming off Indian lands. I think it will be difficult. It’s probably like kissing a porcupine.”
