American Gaming Association Is On Wrong Side Of History Regarding Online Gambling

Steve Ruddock March 8, 2016 1539 Reads
American Gaming Association online gambling position

American Gaming Association CEO Geoff Freeman penned an op-ed column for the Monday edition of the Las Vegas Review-Journal in which he called on regulators around the country to follow in the footsteps of Nevada and provide legal clarity and a roadmap for the daily fantasy sports industry’s continued success.

Freeman rightly notes that, “DFS is a compelling upstart business caught in a legal gray area between state and federal laws.” He went on to say,  “With billions of dollars changing hands and thousands of participants, DFS is also an industry in need of consumer protections and other regulations that ensure the integrity of its product.”

But where Freeman loses me is in the very next sentence where he states:

“But DFS is not the only one caught in a legal gray area — so too are the casinos that might wish to do business, such as hosting events or sponsoring activities with these innovative new companies. Over the past year, gaming regulators across the country have warned casinos to steer clear of DFS, lest we risk our multibillion dollar privileged licenses. Yet how are gaming companies supposed to stay ahead of the curve of consumer demand — which DraftKings and FanDuel have clearly tapped into — by sitting on the sidelines?”

What’s concerning about this statement is what’s missing from it: Online gambling.

Sitting on the sidelines, to use Freeman’s own words, is precisely what the AGA is doing when it comes to online gambling expansion in the United States. And make no mistake about it, online gambling would provide land-based casinos a way — to use Freeman’s own words — to stay ahead of the curve and meet consumer demands.

Op-ed preceded Nevada hearing on DFS

In a hearing in front of the Nevada Gaming Policy Committee later in the day on Monday, Freeman did speak about online gambling. But his remarks focused on the continued existence of black-market operators, and why these sites continue to thrive alongside New Jersey’s licensed operators. Freeman put forth the suggestion that regulations might be to blame, and the lack of a legal deterrent to go after players who use these black-market sites.

It’s good to hear Freeman talking about online gambling, even in general terms, but again, the more important point is what wasn’t said. And while I’m critical of the AGA for their online gaming position, I want to make it clear that I think the AGA is extremely important to the gaming industry and a very positive force.

Ok, back to criticisms.

What Freeman didn’t say at the Nevada hearing was that the black-market sites that are thriving are sportsbooks; there’s no legal alternative in New Jersey. Offshore online poker sites continue to do well alongside New Jersey’s licensed online poker sites for several reasons, not least of which is a lack of liquidity, which is the lifeblood of online poker.

Notice that the licensed online casinos are having no trouble thriving in New Jersey, and there aren’t any major black-market competitors in New Jersey, because unlike online poker, online casinos don’t require liquidity to thrive. In fact, I would put Freeman’s suggestion that robust regulation is holding the industry down a distant fourth, behind liquidity, payment processing and consumer awareness.

Liquidity could be solved by further expansion and partnerships between states. And as more U.S. residents gained access to legal online gaming sites, it would put pressure on credit cards and banks to process these payments. And all of this in turn would raise consumer awareness.

What makes all of this so frustrating is the AGA is uniquely equipped to push these solutions forward. There are multiple states on the precipice of passing an online gaming expansion bill, and several others waiting in the wings. The support of the AGA could be a great boost and help push these bills across the finish line and keep momentum rolling to new states.

But, as I noted above, the AGA is sitting this one out.

Backstory of AGA and online gaming

So why is the AGA loath to talk about online gambling?

It stems back to a rift between AGA members — particularly Sheldon Adelson and his Las Vegas Sands Corp. — who have taken the negative point of view towards online gaming. Caesars Entertainment and MGM, on the other side, are pro online gaming. Several other AGA members have come down on both sides of this issue, predominantly in the Caesars and MGM camp.

Trying to avoid a rift between key members over what is (and let’s be honest with ourselves) a small potatoes issue in the grand scheme of gaming, the AGA decided to adopt a “neutral” stance toward online gaming in lieu of its previous stance that online gaming should be legalized and regulated.

More on this backstory, and how the AGA landed on a “no position” stance toward online gaming, can be found here.

The damage the “no position” stance will do

Yet every day that the AGA continues to acquiesce to these voices within its membership, it damages its reputation in the long-run, in my opinion. This inaction means black-market online gaming sites continue to operate in the United States with impunity, and in most of the country, they operate in markets where the consumer doesn’t have a legal, licensed alternative.

I also feel that the AGA is shirking its duty to their member casinos and companies, since the online gaming experiment in New Jersey has shown it brings in new, younger customers, and bolsters — not cannibalizes — land-based gaming.

This inaction also means the consumer is left to the mercy of these black-market sites. And since New Jersey, Nevada, and Delaware have shown they have the capability of regulating the industry — despite the saber-rattling by some opponents of online gambling — these calls that licensing online poker would leave kids and other vulnerable groups at the mercy of licensed online gambling sites were simply wildly exaggerated, if not patently false.

In fact, it’s the unregulated status quo that leaves the consumer at risk. Look no further than the now-defunct Lock Poker.

So where does this leave the AGA?

The fear of splintering its organization is obviously of great concern to the AGA. But what happens if in five years or ten years, we look back at this period of online gambling expansion, and try to determine who was trying to create a safe and regulated environment, and who was acting as a roadblock?

If the AGA continues its current position — based on placating some of its members who hold contrarian and unproven views — it will only serve to harm the trade group’s reputation when we look back at the role it played during this period.

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