Massachusetts has long been flirting with the idea of tackling online gambling and/or poker.

So far, those flirtations haven’t gotten past the chatting stage. But things are ramping up with the first meeting of a new commission this week meant to take a closer look at online gambling and daily fantasy sports.

The latest from Massachusetts

Massachusetts formally legalized daily fantasy sports in the commonwealth in the context of an economic development law enacted earlier this year.

That same law created the Massachusetts Special Commission on Online Gaming, Fantasy Sports Gaming and Daily Fantasy Sports. That body got together for its initial meeting on Monday.

The impetus for the commission has to do more with DFS than online gambling, despite the latter’s prominence in the commission’s name. The legality and regulation of DFS in Massachusetts has been a point of focus there for more than a year.

The focus was made clear by comments from members of the commission, who were mostly eager to talk about the subject of fantasy sports. More from Rep. Joseph Wagner, a member of the commission, via  the State House News Service:

“We codified statutorily the standing of daily fantasy sports operations as legal entities but with a sunset provision,” Wagner said. “It’s the hope that the work of this commission and whatever product, and perhaps legislative product, may come from it will provide guidance going forward.

But still, online gambling is going to be considered in tandem with DFS, even though they come from the vastly different starting points of being illegal and legal, respectively, in Massachusetts.

Massachusetts’ history with online gambling

This is far from the first time that the Bay State will consider online gambling:

• In 2013, lawmakers attempted to attach online poker to budget and expenditure measures.
• The state hosted an internet gambling forum in 2014.
• Throughout 2016, the Massachusetts Gaming Commission studied online gambling and suggested an “omnibus” approach to regulate forms of internet gaming, including DFS.

What’s next in the state

The commission has until July to meet — which it plans to do regularly — and deliver its findings to the legislature.

We can expect to get an indication of what the commission will end up recommending to the statehouse over the course of those meetings. Will it focus on DFS, and punt on online gambling? Or will the rubber finally meet the road for Massachusetts and iGaming?

Given the time and effort being put into the commission — and the important government officials that are a part of it — the commission’s findings should be taken seriously.

So if online gambling is deemed viable and important to legalize and regulate by this panel, expect it to crop up in legislation.

Still, the window might stretch into the following year; the DFS law remains in effect until the summer of 2018, lessening the need for quick action. But 2017 could be the most interesting year yet in Massachusetts for proponents who would like to see online gambling progress — or perhaps even legalization.

Massachusetts Gaming Commission Chairman Stephen Crosby has been a staunch advocate of taking an omnibus approach to online gambling in the Bay State.

Crosby’s ideal online gambling scenario is for Massachusetts to legalize most forms of gambling, and install a comprehensive set of regulations that cover all of the current products that exist. Those regulations would be flexible enough to deal with any new products that emerge.

The omnibus approach being proposed in Massachusetts has been lauded — New Jersey Division of Gaming Enforcement Director David Rebuck called it “a good step for us [regulators] to look at.”

But it’s not without its issues, and how it would be implemented is still unclear.

Omnibus approach explained

The omnibus approach — which has been floated elsewhere, too — goes well beyond legalizing multiple forms of online gambling at the same time.

The omnibus model that Crosby would like to see in place would also fundamentally change how Massachusetts deals with new products that emerge, both legislatively and from a regulatory standpoint.

The basic goal is to create a broader definition of what constitutes gambling, and to create an adaptive framework of regulations that provide the proper oversight to current and future products. Such a framework would create a bit of wiggle room that allows regulators to tailor regulations to each product, as needed.

The omnibus approach would exponentially increase the number of games and contests that fit inside the gambling box. (At the same time it would make most of these games expressly legal.) It would also allow regulators to deal with any new products that fall into this larger box in a more timely and efficient manner.

Crosby laid out the three principles an omnibus approach would be based on during a panel discussion at Global Gaming Expo (G2E) 2016.

They are:

1. Don’t prohibit something people want to do.
2. The need for gaming regulations to be malleable because the industry changes so rapidly.
3. The creation of a clear definition gambling.

The benefits of the omnibus model

If Massachusetts ends up taking the extraordinary step of implementing an omnibus approach with nimble regulations, it would have a number of benefits.

First, by empowering regulators to deal with new products as they appear(Crosby noted reporting and monitoring protocols would be put in place), it would eliminate the current cycle where each new product is discussed by the legislature in a vacuum. They could avoid debating the same concepts over and over while lobbyists on both sides make their case.

The omnibus model would bypass this step, as it would largely be up to regulators to determine if a game is or isn’t legal, and if it’s capable of being regulated under the baseline model in place.

According to Crosby, this base regulatory model would include:

• Know your customer and geolocation checks;
• Financial regulations – player funds are segregated and anti-money laundering procedures;
• Game integrity policies.

It would also put an end to the ongoing and costly debate over what is and isn’t gambling. As Crosby has said on several occasions, “Let’s just call it all gambling and be done with it.”

“What difference does it make as a matter of public policy whether you gamble on the throw of dice or the throw of a darts?,” Crosby rhetorically asked. Both have the same core elements: some amount of chance and a wager on a future event.

The omnibus approach Crosby would like to see in place would make the skillfulness argument disappear by legalizing and regulating all contests and games of this sort. If there is a wager, and even a minute amount of chance or randomness, it’s gambling.

Crosby’s point of view is gambling shouldn’t need to cross a chance vs. skill threshold. If the stigma of gambling was ignored in favor of public policy, we would choose regulation and consumer protections over prohibition.

If this argument over when a game crosses some arbitrary line and ceases to be gambling were put to bed once and for all it would end a lot of legislative gridlock, and keep the industry and the state from racking up completely unnecessary legal costs as each side bickers over the gambling and skill elements of a specific game; a debate that often ends up in the courts.

Potential problems with the omnibus model

The omnibus approach Massachusetts is considering would solve a number of problems, but it’s not without issues.

Power struggle with the legislature

As nice as it would be to have consistent gaming laws and a streamlined approach to regulation, one has to wonder if  an omnibus model with nimble regulations put too much power in the hands of regulators.

As Crosby said at G2E, “we could have a whole conference on how much regulation is too much.”

This raises the question, would a legislature be okay with ceding control of crafting regulations for new “gambling” products to regulators?

Legalization, regulation, and… taxation

The regulations governing most of the products that would fall under the now-wider umbrella of gambling would possess a significant amount of overlap. On the other hand, the business structure and potential revenue and profits vary tremendously.

On this front, can the tax rates and licensing fees be crafted so to be fair for everyone? Will they be reasonable and apropos to both a small upstart daily fantasy sports company and a casino corporation interested in launching an online gambling site?

The regulations may be very similar, but the way these different industries are taxed and licensed need to be looked at individually.

Crosby offered one potential solution to this dilemma: Tax rates and licensing fees could be based on some predetermined table of revenue/profits.

Another way to resolve this issue would be to keep taxation and licensing fees in the hands of the legislature. The problem with this is it would lead to a situation of putting the cart before the horse, with the licensing process occurring after the product has been deemed legal and regulations have already been applied.

How licensing and taxation fits into the omnibus approach will be the most difficult logistical hurdle to overcome if Massachusetts, or another state, moves forward with some form of an omnibus model.

With the 2016 session coming to a close, the Massachusetts legislature managed to pass a bill that ostensibly legalizes daily fantasy sports and calls for the creation of a commission to study DFS and online lottery.

A late push to authorize online lottery sales was removed from the bill in the House after passing the Senate.

H 4569 only ostensibly legalizes DFS  because the bill is more or less a two-year placeholder that allows DFS sites to continue operating in the Bay State until July 31, 2018. They can take users in the state as long as they abide by the regulations created by Attorney General Maura Healey.

The two-year window allows the yet-to-be created DFS commission to perform its due diligence and report on its findings. The expectation is the bill will have already been replaced when it sunsets in 2018.

You can find more information on the Massachusetts DFS bill at Legal Sports Report.

Of course, the bill needs to be signed into law by Gov. Charlie Baker.

Are DFS and iLottery legislation the key to online gambling?

With several nearby states all exploring online gambling (and Pennsylvania on the verge of passing an online gambling bill this year), Massachusetts was already a leading candidate for online gambling expansion.

This late-session progress on DFS and online lottery might further open the door for renewed online gambling discussions in the commonwealth.

Massachusetts has a history with online gambling

Massachusetts was among the first states to take a serious look at online gambling legalization beginning in 2013. The state even flirted with an online prohibition in early versions of the state’s casino expansion bill that passed in 2011.

Suffice it to say, online gambling is not a new topic in Massachusetts.

Following early prohibitive efforts, the legislature and other officials have explored online gambling and online lottery several times.

With the passage of online gambling bills in Delaware and New Jersey in early 2013, the Massachusetts legislature took three cracks at passing its own online gambling bill the same year.

The first two occurred during the annual budget talks, when the issue was given consideration, first in the House, and then in the Senate. Both efforts failed.

Later in the session, not dissimilar to how DFS just passed, State Senator Bruce Tarr tried to add online gambling legalization to a transportation bill. This attempt also failed.

The Internet Gambling Forum

These 2013 efforts were followed by even more activity in 2014. In February, the Massachusetts Gaming Commission announced it would hold a daylong Internet Gambling Forum in March. At the same time, the State Lottery Commission proposed legislation that would legalize online gambling.

However, at the same time, lawmakers and members of the MGC were making it clear that the state should get its land-based casino off the ground before moving on to online gambling.

Despite having taken place over two years ago, I still consider the Massachusetts Internet Gambling Forum the best example of educating lawmakers and making the case for legalized online gambling we’ve seen in the US.

You can read my recaps of the forum here:

• Massachusetts Internet Gambling Forum: Panels 1 & 2
• Massachusetts Internet Gambling Forum: Panel 3
• Massachusetts Internet Gambling Forum: Panel 4
• Massachusetts Internet Gambling Forum: Panel 5

Despite the optimism expressed during the forum, it seems as though the “let’s wait for land-based first” crowd won, as online gambling fell by the wayside in 2014 and 2015.

One reason for the state’s regression was because of a political change.

State Treasurer Steve Grossman had been one of the leading advocates for online gambling expansion (in Massachusetts the treasurer oversees the lottery). But he failed in his bid to become governor, and was replaced by what was thought to be an anti-online gambling treasurer, Deborah Goldberg.

But Goldberg has surprised everyone with her recent proclamations that Massachusetts needs to take its lottery online, telling the Boston Globe last month:

“The only way to reach the younger market is via online lottery games,” said state Treasurer Deb Goldberg, who oversees the Lottery Commission. “It’s the future and we need to face it.”

This is a good sign for the future.

What 2017 might hold for Massachusetts

With Goldberg ringing the bell for online lottery, coupled with the flurry of activity in 2016 on daily fantasy sports and online lottery, 2017 could be an interesting year in the Bay State on the online gambling front.

With DFS passing, and online lottery coming awfully close, we might see a renewed push for online gambling legalization in 2017, as it would help Plainridge Park Casino and the under-construction casinos build valuable databases:

• Penn National’s Plainridge Park Casino = Open
• Mashpee Wampanoag’s First Light Casino = Opening fall of 2017
• MGM Springfield = Opening fall of 2018
• Wynn Everett = Opening spring 2019

In June 2014, MGM received one of three coveted casino licenses from the Massachusetts Gaming Commission. But it wasn’t until May 12 of this year that the company officially broke ground on its billion-dollar casino project.

Delays for Mass. casinos

The opening of the slots parlor at Plainridge Park in Plainville, Massachusetts, was on time and went off without a hitch. But MGM and Wynn Resorts have been plagued by delays.

For Wynn, it’s local politics that have kept it from beginning construction on its proposed casino project, while MGM’s delays are more self-inflicted.

A failed ballot referendum in 2014 would have overturned the state’s 2011 casino law and delayed construction efforts across the board. Then MGM’s groundbreaking  in Springfield hit a snag when the project started running way over budget, necessitating a last-minute redesign.

According to MassLive.com:

“The redesign, which included the removal of a 26-story hotel tower in favor a low-rise six-story building and a reduction in the project’s overall footprint, sparked months of controversy and discussion over whether the company was maintaining its full investment in the city.”

The redesign was approved by the MGC on May 12, and the casino is now expected to open in late 2018.  The seven-year timeline is almost absurd, considering Massachusetts legalized casinos in 2011.

One casino’s loss is another casino’s gain

These delays have opened the door for a third casino, the First Light Casino currently being erected in Taunton by the Mashpee Wampanoag Tribe.

Because of the 1988 Indian Gaming Regulatory Act, the tribe can sidestep the regulatory restraints imposed on commercial casinos, eliminating many of the hurdles that have stalled the other casino projects in the Bay State.

The Wampanoag’s decision to break ground on the First Light Casino with or without the state’s blessing also torpedoed Rush Street Gaming’s proposed casino in nearby Brockton.

Instead of three commercial casinos, a slots parlor and a tribal casino all competing for business, the MGC has decided to limit the number of commercial casino licenses to two. That leaves the third in its back pocket for the time being.

Despite being the newest casino project in Massachusetts, the First Light Casino will be the first one (not including the Plainridge Racino) to open its doors. The casino portion of the project is expected to be completed sometime in 2017, with a hotel to follow in 2018.

Other problems brought on by casino delays

The delays could also prove detrimental to Massachusetts in another way. The construction delays are providing Connecticut’s two tribal casinos, Mohegan Sun and Foxwoods with a chance to limit the impact of the new casinos to the north.

The erection of the casinos in Massachusetts is expected to create a choke point, blocking off most of Foxwoods’ and Mohegan Sun’s northern customers , That is a historically important customer base for the Connecticut casinos, particularly the number of patrons from Massachusetts they attracted.

Had the Massachusetts casinos been erected in a timely fashion, it could have been a crushing blow for Foxwoods and Mohegan Sun. The respite caused by construction delays could give them enough time to implement contingency plans.