The Next Six Months Could Determine The Future Of Online Gambling In The US

December 7, 2015
The Next Six Months Could Determine The Future Of Online Gambling In The US

Ask any industry analyst or pundit about online gambling expansion in the United States and the likely answer will be something along the lines of: As goes Pennsylvania, so goes online gambling legalization in the United States. And for good reason.

Pennsylvania is the only state that appears even remotely interested or prepared to pass an online gambling bill. Accordingly, the poker community and advocates for the legalization and regulation of online gambling are rightfully pinning most of their hopes on the Pennsylvania legislature passing an online gambling bill in the very near future via the state budget. That is something that could occur any minute, as the state budget for 2016 is over five months past due.

The hope is this: If Pennsylvania legalizes online gambling in the near future, other states will begin to follow suit, and expansion efforts will regain the momentum that was lost following iGaming legalization in Nevada, Delaware, and New Jersey in 2013.

2015 is still a possibility, and 2016 looks even better

Thanks to the historic delay in passing a state budget, online gambling legalization isn’t out of the question in 2015, but with each passing day the door is slowly closing shut.

Fortunately, even if an online gambling bill isn’t passed in 2015, most of the heavy lifting has already been done, and the legislature could make it a priority in early 2016 to avoid the standstill that often occurs during presidential election years. However, gambling does not appear to be the hot-button issue it once was due to the expansion we’ve seen over the past several years.

Just how likely online gambling expansion is in Pennsylvania, be it 2015 or 2016, is a matter of speculation.

An industry view of the landscape

Matthew Katz, the CEO of CAMS —  one of the leading providers of player verification and geolocation services — is optimistic about the progress Pennsylvania has made thus far, but he also feels the window is a lot smaller than most people believe, and fears the presidential election cycle will lead the legislature to once again pass on online gambling in 2016 if they don’t get it passed by April of 2016. Katz is also concerned daily fantasy sports talk could push online gambling to the backburner.

As Katz put it: “I’m concerned with what’s going in New York with daily fantasy and if that’s going to negatively impact Pennsylvania and other states as they move forward.” Katz also wondered if payment processors would start getting cold feet after being named in lawsuits: “This is getting too close to payments in my opinion, and will this cause the banks and associations heartburn over processing legal gambling transactions.”

In Katz’s opinion, online expansion in 2015 would require some heavy lifting, and while he’s still hopeful for 2015, but sees early 2016 as the best opportunity to get the ball rolling again.

“We need some movement in any state,” Katz said. “It’s a good market [Pennsylvania]; it’s no California, but I’m a firm believer in general momentum, and we lost it after New Jersey.”

An advocate’s view of the landscape

Poker Players Alliance Executive Director John Pappas is a bit more bullish all around, and isn’t ruling out an online gambling expansion package finding its way into the state’s budget, which (one would hope) will likely be passed before the legislature leaves for Christmas break.

Pappas recently told me he feels it’s better than 50-50 an online gambling bill passes this year.

And if it doesn’t, he seemed far more optimistic about 2016, or at least believes something could happen even if the bill isn’t passed early in the session, due to the amount of effort the legislature has put into online gambling, and the general consensus among lawmakers, potential stakeholders, and even Pennsylvanians, the momentum of 2015 could very well carry over to 2016.

This, coupled with the normalization of legal gambling, may buck the trend of what can and can’t pass during a presidential election year.

My own view of the landscape

I think both men make valid points.

We may be giving the current (very late) push for online gambling a bit too much credit than it deserves,  but at the same time, Pennsylvania seems quite serious about online gambling expansion, as well as other gaming reforms, and pretty much all the stars have lined up for them this year.

  • They have a new Democratic governor who must find common ground with a Republican legislature. One side wants new taxes, while the other wants to reform and/or enhance existing programs to find new revenue.
  • Several of the state’s brick & mortar casino properties are already involved with online gambling; have partnered with online gambling companies; and/or have created online gambling divisions.
  • The Republican chair of the House Gaming Oversight Committee, Representative John Payne, and his Democrat co-chair, Representative Nick Kotik, are the sponsors of an online gambling expansion bill, and have been able to whip bipartisan support. It should also be noted that Payne’s predecessor has very skeptical of online gambling.

If Pennsylvania does pass an online gambling it will double the number of U.S. residents who are able to legally play poker or casino games online. It will also (hopefully) light a fire in other states considering iGaming (New York, Massachusetts, and California), and reignite the fuse in other statehouses where preliminary discussions have taken place on the topic of online gambling in the past.

Worst-case scenario

What happens if nothing happens?

If Pennsylvania is unable to pass an online gambling bill in 2015 or 2016, we may see the death throes of legal online gambling in the United States. If a state doesn’t launch an online gambling site until 2017, the operators in Nevada and Delaware may not be around, and by the time a fifth state passed a bill and launched, we’d be looking at 2019 or 2020.

Outside of a few large states, the early returns from New Jersey, Nevada, and Delaware are not exactly going to instill confidence in other state legislatures that online gambling is even worth considering, particularly when options like DFS are presenting themselves.

Make no mistake about it, Pennsylvania needs to pass an online gambling bill; their industry needs to team up with the other iGaming states; and they need to succeed.

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