Rough 2018 For NJ Online Poker May Cause Online Poker In PA To Hesitate

Bart Shirley January 30, 2019 4219 Reads

New Jersey‘s online poker market just struggled through its worst year in history. The dearth of action may give operators in Pennsylvania pause about launching online poker in PA.

According to Play NJ, online poker in New Jersey earned roughly $21.3 million in 2018. That figure represents a decline of almost $3 million in revenue from 2017.

It is also the lowest figure in the market’s history by $2.5 million. To put it into perspective, revenues in 2017 reached the same point midway through November.

Of New Jersey’s three licensees with poker networks, only one of them grew their revenues from the previous year. Caesars managed to leverage a relationship with the All American Poker Network and interstate player pool sharing into modest gains for its poker segment.

The other two groups, partypoker and PokerStars, suffered setbacks to their returns. PokerStars surrendered the top spot to Caesars in May and only has recovered it once since.

This reversal of position is especially shocking in light of Stars’ dominance worldwide. Meanwhile, partypoker has begun struggling to break $400,000 in revenue each month and hasn’t earned half a million in revenue since April.

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The Department of Justice opinion will probably exacerbate the decline in NJ

Things are not looking any brighter in 2019. On Jan. 14, the Department of Justice (DOJ) issued an opinion that the decades-old Wire Act renders all interstate online gambling illegal, not just sports betting.

Needless to say, all online gambling advocates shuddered at the opinion’s broad reach. However, online poker is especially in the crosshairs of this development.

The multi-state poker compact combines player pools between New Jersey, Nevada and Delaware. Unfortunately, the DOJ’s interpretation of the Wire Act probably makes the compact one of the more likely targets for prosecution.

Thankfully, the DOJ has not issued guidelines to its prosecutors just yet. So, until that happens, business will proceed as usual.

Poker sites might also be able to adjust their operations to be entirely intrastate. As we reported last week, doing so would shelter them from any liability under the Wire Act.

Unfortunately, the damage may already be done because of the effect on payment processors. Payment processors are already skittish about providing service to gaming sites because of the Unlawful Internet Gambling Enforcement Act (UIGEA).

In fact, it was the DOJ’s interpretation and enforcement of the UIGEA that precipitated poker’s Black Friday. As a result of the DOJ clampdown, poker’s days in the limelight quickly faded away.

Given that traumatic history, payment processors who have dipped their toes back into the water in New Jersey and Nevada might not wait for the hammer to fall. As a result, even if the DOJ doesn’t place the Wire Act at the top of its priority list, it might become quite difficult for poker players to transfer money to and from their accounts.

The outlook for online poker in PA may shrink considerably

Pennsylvania has become a somewhat mythical hero for the online poker community. The Keystone State’s population is almost equivalent to the combined populations of the other three states in the multi-state compact.

So, the potential for online poker in PA has generated tons of excitement for interested onlookers. However, the two factors above — revenue decline and legal difficulty — may cause potential PA operators to consider other options.

At present, the Pennsylvania Gaming Control Board (PGCB) has approved seven online poker licenses. The operators with approved licenses are:

  • Harrah’s Philadelphia
  • Hollywood Casino at Penn National Race Course
  • Mount Airy Casino
  • Parx Casino
  • Sands Bethlehem
  • SugarHouse Casino
  • Valley Forge Casino

An eighth casino, Mohegan Sun Pocono, has an application approved but has since rescinded its plans to open. A ninth operator, MGM, has submitted an application for online poker as a qualified gaming entity.

Each of these operators paid a licensing fee between $2 million and $4 million. The cost to bring a product to market will surely run millions more.

At some point, top brass at each of these companies will have to calculate the likelihood of recouping those costs based upon the potential of the new revenue stream. Given how bleak things look right now, a decision to write off the fee as a sunk cost and let the license go dormant would be understandable.

So, which sites will appear? At this point, Harrah’s, Hollywood, Mount Airy and Parx are the most likely, due to the status of their existing infrastructure, their current partnerships, or their sheer size and reputation.

However, as DraftKings demonstrated with sports betting, a dark horse or two may arise. Let’s hope whomever launches can avoid the same roads traveled by Ultimate Poker in Nevada.

Editor’s note: This article initially identified New Jersey as having three poker networks. There are actually four networks, but two of them share Caesars’ license. We apologize for any confusion.

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