Is ‘Omnibus’ Approach To Online Gambling Regulation Gaining Momentum?

January 25, 2016
Is ‘Omnibus’ Approach To Online Gambling Regulation Gaining Momentum?

The daily fantasy sports industry has sparked the creation of bills in state houses across the country, seeking to regulate the young industry in the wake of a data leak that occurred at one of the operators — DraftKings — in the fall.

Along with those efforts is the idea that creating regulations for just one type of online gaming — namely DFS — might not make much sense, when you consider the idea that similar regulations could be applied to other types of online gaming that already exist or might come in the future.

Floating the idea in California

There hasn’t been a tidal wave of support for the “omnibus” approach to online gaming, yet, but it does seem to have cropped up somewhat organically as an idea in at least a few places.

The latest example? A Los Angeles Times house editorial: “License and regulate all online gaming sites, not just fantasy sports.” From the story:

The smart approach is to regulate the leagues, ideally within the context of a comprehensive approach to online gaming. That way the state can protect consumers against fly-by-night sites while requiring companies to use sophisticated technology to block minors and problem gamblers, pay fees that can be used for oversight and enforcement, and guard consumers against insiders competing unfairly for jackpots, as both FanDuel and DraftKings were accused of allowing last year. None of those protections is assured online today.

And later:

The argument for setting up a safer environment for fantasy sports games applies in spades to online poker.

The editorial also comes in California, one of the flashpoints for dealing with both DFS and online poker. The former is seeing a bill fly through the legislative process — it is expected to pass the Assembly this week. Online poker, meanwhile, has been on the agenda of the legislature for years, with little progress to be shown for it.

Right now, the mechanics of how DFS would be regulated — at least in the bill proposed by Assemblymember Adam Gray — is far different from how online poker would be regulated. In DFS, the barrier to entry from taxes and fees would be much lower, and the amount of oversight provided to the DFS industry would pale in comparison to an online poker regulatory framework.

The L.A. Times is not the only place a comprehensive online gaming approach has been considered, however.

Idea gains traction in Massachusetts

The idea of an omnibus online gambling approach seems to have gained a foothold in Massachusetts, another hot zone for dealing with regulation of DFS.

The state’s gaming commission has been considering the topic of daily fantasy sports for several months, and it seems convinced that the omnibus approach — not segmenting out DFS — is the way to go. The commission indicated as much in a white paper that it released this month, and noted the following when it released the document:

The last section of this paper will suggest the possibility of the Legislature establishing a regulatory environment which is applicable to all online gaming technologies (not just DFS), assigning that regulatory structure to an agency for implementation, and leaving the daily work of drafting and adapting regulation of new gaming types to the regulatory agency that can be nimble and flexible in responding to technological gaming innovations.

Of course, that’s just a recommendation; the legislature would have to pass a bill creating such an approach. So far, there is no DFS bill introduced, and online poker and casino games have been floated but never considered seriously.

Can ‘omnibus’ approach pick up steam elsewhere?

The idea of treating all forms of online gaming with an overaching system — and dealing with them in one fell swoop — is intriguing. But seeing states starting to do this is another matter.

Why? DFS comes from a wholly different position than online poker. Daily fantasy sports are already going on across the United States. If legislatures don’t act, DFS will continue to exist and be offered to states’ citizens, whether legislation is enacted or not.

On the other hand, online poker in the U.S. is currently not being offered beyond the three states where it has been legalized — New Jersey, Nevada and Delaware — except by offshore poker sites.

Put simply, there is real momentum to do something about DFS, but not to deal with online poker.

However, state lawmakers are learning — or could soon learn — that regulating, licensing and taxing DFS might not be the financial windfall that some think. The industry creates a relatively small amount of revenue, as currently situated, and each state is going to realize little gain from taxing it (if it chooses to do so.)

Some states are also attempting to regulate the DFS industry with little or no revenue being generated by fees or taxes, and creating additional work for governmental bodies being put in charge of the industry. How popular those approaches will be remains to be seen.

By contrast, if states set up a framework for dealing with other forms of online gaming, there is potential for much greater revenue down the road. Will states take that bait and look at comprehensive approaches, or will they continue down the road of dealing with DFS only? The latter certainly seems far more likely in the short term.

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