The Pros And Cons Of Massachusetts Omnibus Approach And Online Gambling

October 12, 2016
The Pros And Cons Of Massachusetts Omnibus Approach And Online Gambling

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.

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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.

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