GPWA Times Magazine - Issue 19 - February 2012

Two states that had been on the periphery of the online gaming discussion may now take up the issue in 2012. In Massachusetts, State Treasurer Steve Grossman is planning on creating an on- line gaming task force to evaluate online lottery products and possibly online pok- er, according to the Boston Herald . And in Connecticut, Gov. Daniel Malloy told the Hartford Courant he’d now be willing to consider online gaming legislation. But the most likely early entrants into the online gaming market are Nevada, which has already passed online poker legisla- tion, California, Iowa and New Jersey. Nevada’s big opportunity In June, Gov. Brian Sandoval signed into law a bill requiring the Nevada Gaming Commission to develop and adopt online poker regulations by January 31, 2012, so licenses could be granted if the federal government approved it. On December 22, Nevada gaming regulators unani- mously approved the regulations that had been crafted. And one day later, the DOJ released its opinion that states are within their legal rights to offer intrastate gam- bling as long as it excludes sports betting. As of press time, only seven companies have applied for licenses. Six have applied for service provider licenses, while only South Point Casino has applied for an op- erator license. If South Point is granted an operator li- cense, it could become the first real-mon- ey poker room licensed and regulated in the U.S. Caesars Entertainment, which owns and operates the World Series of Poker, and MGM Resorts have not applied for Nevada online poker operator licenses as of press time. South Point’s presence in the Nevada online gamingmarket creates a serious dilemma for the two Nevada-based casino behemoths. Both companies are in a position to offer intrastate online poker in Nevada quickly – Caesars has partnered with 888 Holdings and MGM is working with bwin.party. But Caesars has been lobbying hard in oth- er states – most notably New Jersey – to squash state-level online gambling efforts as it pursued a federal solution. MGM has also been pursuing a federal strategy. The goal behind a federal solution is to give operators a single set of compliance standards, rather than 50 different sets – and hopefully interstate online poker (one national or almost national market). And if Caesars and MGM choose to offer online poker in Nevada only, the compa- nies will undermine their lobbying posi- tions. They’ll simply have no credibility to tell other states not to offer online gaming if they’re offering it in Nevada. The Iowa factor The Iowa Racing and Gaming Commission published a report in December designed to give Iowa’s part-time legislature a framework for discussing the issue. And State Sen. Jeff Danielson told delegates at the Digital Gaming and Lottery Policy Summit in Washington last month that he is hopeful his fellow Iowa legislators will pass online poker legislation in 2012. From a budget standpoint, Iowa is in the black, so they’re not looking to online pok- er for revenue reasons. “This is a matter of regulating gambling in Iowa,” Danielson told the conference. But Caesars has yet to weigh in on the debate, and they could kill it. Caesars is a big operator in Iowa, and they’ve lobbied hard to kill online gaming legislation at the state level. Danielson says he hasn’t heard from Caesars so far in Iowa. Apparently, they’re more concerned with a regulation that re- quires them to offer dog racing in order to have a gaming license. Maybe there’s room to nix the dog-racing requirement in return for not opposing online poker. Or it could be the case that the DOJ reversal on the Wire Act reduces Caesars’ leverage. Either way, the gaming industry should have an answer in Iowa by mid-April. Iowa’s leg- islature only meets for 100 days, and the 2012 session began in early January. California needs a compromise With almost 37 million people, California is the largest online poker market in the United States. And they are keenly aware that neighboring Nevada is racing to of- fer online poker as soon as possible. As a result, this could be the year California makes the move to offer online poker. The big problem in California is that the companies and people most vested in the gaming industry can’t agree on an approach to online poker – and they haven’t been able to broker a compromise for a few years. Some Indian tribes in California, most notably the Morongo Band of Mission Indians, want to pursue online poker ag- gressively. Other tribes in California want to take a much more cautious approach. Those tribes are not entirely sure online poker or any form of online gambling is good for their casino business. The California Tribal Business Alliance, which includes the Lytton Band of Pomo Indians, the Pala Band of Mission Indians and the Paskenta Band of Nomlaki Indians, has been the chief proponent of this position. California card rooms have also been pushing for online poker legislation, but with little success. The DOJ reversal on the Wire Act and pressure from Nevada (and New Jersey and Iowa), combined with a need for rev- enue, have created the most positive en- vironment for online poker this state has ever seen. But the inability of stakeholders in California to hash out the issue over the past few years makes this a less than cer- tain proposition. If the stakeholders are willing to compromise, this could be the year for California. New Jersey’s Atlantic City issue In March 2011, New Jersey Gov. Chris Christie vetoed legislation that would have made New Jersey the first American state to license and regulate online gambling. The legislation, which would have given Atlantic City casinos the ability to offer online gambling to New Jersey residents, passed the State Assembly by a 63-11-3 vote and the State Senate by a 35-2 vote in January of last year. In a message to the Legislature explaining his veto, Christie said the online gambling bill violated the New Jersey Constitution. “The State Constitution explicitly requires casino gambling to be restricted to the territorial limits of Atlantic City,” Christie wrote. “Senate Bill No. 490 seeks to avoid this requirement by deeming all Internet wagers as being placed in Atlantic City, even if the person placing the bet is out- side the boundaries of the city. In my view, COVER STORY The U.S. market: out of many, one — or every state for itself?