US Online Poker Regulation: Where (And What) To Watch in 2015

In a bull case …

• California and another state of significant population pass online poker bills.
• The map of potential markets expands dramatically thanks to a smooth rollout of player pooling between Delaware and Nevada and the advancement of online lottery initiatives in multiple states.
• And New Jersey’s market sheds its growing pains and is jolted by the entrance of major players with money and expertise to spare.

In a bear case …

• No U.S. states pass regulation.
• Nevada and Delaware continue to delay the launch of their liquidity sharing, or suffer a botched rollout.
• Online lottery moves forward, but in a way that preempts or delays online poker.
• And existing markets in New Jersey, Nevada and Delaware all suffer year-over-year declines.

Here’s a more detailed take on the key issues, events and arenas that will ultimately steer the industry in one direction or another in the year ahead.

States on the cusp

California leads the pack

By nearly all accounts, California is the state with the best chance of passing an online poker bill in 2015 (although launch would be in 2016 at the earliest).

The process got off to an early start in December, when Assemblyman Mike Gatto introduced AB 9.

Gatto’s bill is unlikely to be the last voice in the conversation, and – as Gatto told OPR in an exclusive interview – is itself a work in progress.

Here’s what to watch in California:

• Are the tracks being genuinely engaged? Without buy-in from the tracks, it’s difficult to see an online poker bill moving forward in California.
• Are bad actor positions softening? San Manuel’s shift to PokerStars suggests that consensus opposition to PokerStars’ entry may be weakening. If PokerStars coalition (or rumbling of a compromise) grows, that could signal real political momentum for a bill.

Pennsylvania – go or for show?

Pennsylvania took several steps toward regulation in 2014: a favorable legislative report, legislative hearings and the introduction of a bill.

But sources close to the process told OPR that no small part of that progress was purely political theater and that Pennsylvania lawmakers lack the motivation to actually move a bill forward.

Here’s what to watch in Pennsylvania:

• What position is Parx taking? Parx head Robert Green has repeatedly sounded ambivalent notes regarding online poker regulation. A shift in his tone – in either direction – can be considered a reliable bellwether.
• How active is Adelson? Adelson arguably wields more direct influence in Pennsylvania than in any other state, save Nevada. But he and CSIG were relatively quiet during PA’s last legislative run at online poker. The louder Adelson and his allies become, the more credible one should consider Pennsylvania’s efforts to be.
• Where’s Wolf? Newly-elected governor Tom Wolf has little history with online gambling, although his on-record position is opposed. But Wolf made campaign promises that will require new revenue. If he suggests online poker as a possible revenue source (or even fails to discount the possibility), then the chances of a successful bill increase tremendously.

States inching forward

As it currently stands, California and Pennsylvania alone have a realistic chance of passing a poker bill into law during 2015.

But a number of other states could move the ball forward before the calendar closes.

New York pre-punting

New York’s nearly 20m residents would provide a sustainable – and potentially lucrative – online poker market.

But passing an online poker bill does not appear to be a legislative priority.

Instead, Assemblyman Gary Pretlow recently indicated to GamblingCompliance that, while he plans to refile his 2014 bill, he sees little happening beyond than hearings in the year ahead.

Illinois: change begets change?

It’s hard to see online poker getting serious play in Springfield this year. But the passing of the gubernatorial baton from Pat Quinn to Bruce Rauner might at least ungum the works.

What little Quinn had to say about online gambling was generally negative. As for Rauner, early analysis suggests that he’s slightly warmer to the notion.

More importantly, online gambling is unlikely to be addressed in Illinois before the question of land-based expansion is solved.

Quinn’s antipathy toward land-based gambling – manifested in multiple vetoes of bills that would have expanded casinos in Illinois – effectively served as a roadblock for online gambling regulation.

Massachusetts moves past land-based

Like Illinois, Massachusetts lawmakers have been clear that the land-based casino expansion dust must settle prior to any serious consideration of online.

Massachusetts is now miles closer to a functioning land-based industry than it was a year ago. And that, by definition, should allow online gambling the space to advance as well.

Washington getting a bill

Washington State remains arguably the least-friendly place for online poker players as the only state to explicitly make playing online a felony (I’m unaware of any actual charges filed under the law).

But that reputation may be turning with news that Curtis Woodard has found a lawmaker willing to sponsor his online poker bill.

Should that come to pass, it will be just the first step of many required – but a critical step nonetheless.

Federal forecast

Despite a defeat in the lame duck session, it’s unlikely that we’ve heard the last of the Sheldon Adelson-backed Restoration of America’s Wire Act (RAWA).

Adelson’s support within the GOP ensures that RAWA will rear its head in 2015 – most likely in the form of a hearing or two.

But the chance that the bill will come up for a vote or become law remain incredibly remote. Just a small sample of the many hurdles:

• The states’ rights issues raised by RAWA.
• The conservative backlash those issues have engendered.
• The questionable legal and logical underpinnings of RAWA.
• RAWA’s multiple carve-outs for various forms of online wagering will weaken support among social conservatives.
• The lack of political upside involved in actually bringing RAWA to a vote.
• The near-zero probability that Obama would sign a bill that (i) overturns a decision by his DoJ and; (ii) is the political wish of Sheldon Adelson.

Keeping the issue in play keeps Adelson’s money flowing. Expect talk on the federal level in 2015 – not substantive action.

Outcomes to monitor

Past specific states and the federal government, a number of scenarios set to play out in 2015 could carry significant implications for regulated U.S. online poker.

Nevada and Delaware player pooling

Nevada and Delaware appear set to be the first two U.S. states to share an online poker player pool.

That arrangement is expected to launch in the first half of 2015, although past (admittedly soft) launch targets have come and gone.

The significance of player sharing between the states for their respective markets is obvious. Both can use literally every player they can get.

But there’s a broader impact in play.

If Nevada and Delaware execute, it could trigger other small-population states that might not have considered online poker to give the activity a look.

After all, collecting a few million in tax revenue while someone else does the heavy technological and regulatory lifting is nothing to sneeze at.

And the launch of Nevada / Delaware is almost certainly a necessary precursor to New Jersey linking up with either state.

The launch doesn’t guarantee New Jersey will join, but it will force the issue on a number of levels.

Online lottery adoption

Lottery is bar far the most ubiquitous form of gambling in the United States, and online lottery is the most natural initial iGaming product for the majority of states.

According to research from GamblingCompliance, some form of online lottery is offered or authorized in a dozen states. And legislatures in three to five states will consider the issue of online lottery sales in 2015.

The general momentum and success rate of those initiatives will be a useful barometer for iGaming’s broader chances. And a state with online lottery is, I’d argue, far closer to offering online poker than a state without online lottery – all other things being equal.

Entry of MGM

MGM wasn’t an active force in the U.S. regulated online gambling market when 2014 closed. That status is likely to change by the end of 2015.

The company is back in the good graces of New Jersey regulators, paving the way for an online launch there. And MGM is thought to be gearing up for an iGaming launch in Nevada as well.

It’s not just MGM’s formidable land-based footprint and financial clout that makes them an iGaming force to be reckoned with.

It’s also that, thanks to MGM’s runaway success with myVEGAS, the company arguably gets the potential of online more so than most of its peers.

PokerStars’ progress

PokerStars’ entry into New Jersey remains stalled for reasons unknown. And while the PokerStars-led coalition in California appears to be picking up steam, significant opposition remains.

PokerStars entering doesn’t change the rules of the game in either market.

Both markets will still have to deal with their population constraints, regulatory hurdles, payment processing problems (and so on) in either case.

To say it another way: Delaware would probably still be a moribund market even if PokerStars was running the show.

But PokerStars can bend the rules a bit, helping a market to punch above its weight by generating consumer interest, bringing an arguably superior product to market and generally executing to a level befitting the world’s dominant online poker site.