Can New York Flip The Online Poker Script? State Starts New Push For Regulation

September 11, 2015
Can New York Flip The Online Poker Script? State Starts New Push For Regulation

New York’s legislature is giving online poker another try.

The Senate Racing, Gaming and Wagering Committee hosted an online poker hearing on Wednesday. The hearing was educational in nature, with the invited speakers outlining the financial and social ramifications of online poker expansion, and the potential impact on the state’s brick-and-mortar casino industry based on analysis and/or their own personal experiences in other states.

The hearing was presided over by New York State Senator John Bonacic. Bonacic has sponsored online poker legislation in each of the past two years.

Here’s a closer look at what was said at the hearing.

John Pappas of the PPA

The first speaker called was John Pappas, the executive director of the Poker Players Alliance. Pappas is no stranger to testifying at these types of hearings, having done so in several states as well as in front of Congress. Pappas’ testimony followed his usual MO, as the PPA chief focused on the continued presence of unregulated offshore operators, and the lack of safeguards this environment creates.

Pappas did field some unexpected questions from the committee members in attendance though, as Bonacic was curious about the PPA’s mission statement, the group’s membership, and what these members receive from the lobbying group.

NYGA expresses need for caution

James Featherstonhaugh, the President of the New York Gaming Association, appeared next, bringing with him Michael Pollock, an analyst for Spectrum Gaming Group, as an expert witness. Featherstonhaugh was at the hearing to represent the views of the state’s racinos.

Featherstonhaugh gave confounding testimony, at times appearing to tout the benefits of online poker such as its ability to bring in new players, and in the next breath he cited concerns about potential cannibalization, and called for the legislature to take a slow and measured approach to online poker expansion.

Featherstonhaugh asked the legislature to wait until the state’s three new brick-and-mortar casinos are completed, and the situation plays out at the federal level with respect to the Restoration of America’s Wire Act — a bill that would ban online gambling — before diving into further expansion.

In Featherstonhaugh’s opinion, “Any expansion of gaming over the next 24-36 months would be severely negative.”

Oddly, his concerns were essentially debunked by his own handpicked expert, as well as his own confusing comments. Without calling him out, Pollock said of Featherstonhaugh’s online gaming concerns: “It’s not guesswork or wishful thinking; most online gamers in New Jersey have never visited a casino.” Pollock then cited evidence that indicates roughly 85% of online gamblers in New Jersey were not in casinos’ databases.

Featherstonhaugh’s testimony even perplexed Senator Kathleen Marchione, as the senator asked, “If 85% of online gamblers have never visited a casino, then someone is getting that business. Why don’t you want it?” Marchione followed that blunt query with another, “Why would you want to wait to go online if there are players out there today?”

Witnesses go off script

Following Featherstonhaugh’s testimony, the next few witnesses decided to scrap their prepared remarks and address the concerns raised by the NYGA representative.

All three refuted Featherstonhaugh’s testimony:

  • John McManus, the Executive Vice President and General Counsel for MGM Resorts International
  • David Satz, the Senior Vice President of Government Relations & Development for Caesars Entertainment Corporation
  • Tom Ballance, the President of the Borgata Hotel Casino & Spa

McManus started by debunking the cannibalization myth, saying, “We’re one of the largest land-based operators, and we’re advocates for iGaming because it grows the market.” McManus later cautioned that if the gaming industry refused to change and innovate they would find themselves “Amazoned.”

McManus also answered the question Marchione posed to Featherstonhaugh, saying, “Why wouldn’t you want to capture the revenue? That’s the whole point; it makes all the sense in the world.”

Satz concurred, rhetorically asking the committee, “It’s happening already, so why not make it safe and secure and collect the tax revenue?”

Satz also decided to ring the RAWA alarm bell, cautioning against complacency. Satz called the threat from a “certain individual” — referencing online gaming opponent Sheldon Adelson — real, “This is not some idle threat. Sitting and waiting is a mistake,” Satz stated.

Ballance came at Featherstonhaugh’s objections from a more empathetic angle, explaining how he was a reluctant participant in New Jersey iGaming, which made him more atuned to Featherstonhaugh’s concerns. “I was him,” Ballance stated.

Ballance went on to say that he was wrong about iGaming, calling it an excellent addition to the Borgata‘s distribution channels. Ballance also explained how the casino quickly discovered that iGaming customers were an altogether different animal than its traditional casino customers. “Online gamblers play on average for 15-20 minutes at a time,” Ballance noted. “A brick-and-mortar visit requires a bigger time commitment.”

Witnesses highlight safeguards

Satz emphasized to the committee members (which by the end of the hearing numbered only one, Senator Bonacic) that the regulations work, and have been proven to work in the states with legalized online gambling and online lotteries.

Ballance detailed his personal experiences in New Jersey, telling the committee how difficult it would be to launder money via online gaming. Online gambling operators get your name, social security number, and can locate you to within three meters of where you’re standing, he explained.

If that isn’t enough of a deterrent, Ballance went on to detail the technology filters the company has in place in their software to see if players are colluding and to follow the money from Player A to Player B.

Anti-money laundering safeguards are so much more effective online,” Ballance told the committee.

Ballance also termed online gaming as “account based wagering,” meaning there is no such thing as an anonymous bet. Every bet can be assigned to a specific player.

Finally, at the behest of Bonacic, who recently visited New Jersey to see its online gambling industry in action, Ballance explained the sign-up process (paraphrasing):

“We collect your name, address, and social security number, and check that information against four databases including Lexis Nexis and Aristotle. Then we check it against the IRS to make sure the person is not deceased.”

New Jersey working with New York?

One of the more intriguing comments came at the tail end of Ballance’s remarks, when he was speculating about a potential interstate agreement between New Jersey and New York.

During these comments, Ballance indicated that New York could “take advantage of” the existing technology and regulations in New Jersey, which would save the Empire State a ton of startup costs.

Photo by MattWade used under license CC BY 3.0

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