Poker-Only Still A Viable Path To Online Gambling Regulation

Don’t Give Up On A Poker-Only Approach To Regulation

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For years the poker community sought to separate their beloved games from slot machines and unbeatable pit games.

The argument they made for legalization (first land-based and later online) was, “Poker is a skill game,” and should therefore be treated separately from other casino games and legalized.

There have been several half hearted attempts to legalize online poker at the federal level, most famously Reid/Kyl in 2012, as well as several attempts by Congressman Joe Barton.  These attempts are in addition to former Congressman Barney Frank’s efforts to legalize online gambling.

In the end federal legalization simply wasn’t in the cards, and iGaming advocates refocused their attention on state legislatures following an opinion by the Department of Justice regarding the sale of online lottery tickets at the state level. This opinion opened the door for individual states to legalize online gambling, including poker, and thus far, three states have done just that.

Several other states are now selling lottery tickets online as well.

But a funny thing happened on the way to state-by-state expansion: the online poker arguments have fallen by the wayside – even the PPA, strong supporters of poker carveouts over the years, is now sees comprehensive gambling legalization as the best path forward.

Sacking the poker-only argument

In the three states with legalized online poker (Nevada, Delaware, and New Jersey) revenues have been disappointing to say the least.

On the other hand, two of those three, New Jersey and Delaware have also legalized online casino games, and unlike online poker, those industries are generating a decent amount of revenue.

In New Jersey (considered by many to be the test-case for regulated online gaming in the U.S. due to its population of nearly 9 million) online poker revenue has been declining while online casino revenue continues to increase. The overall breakdown is even more troubling as iCasino is responsible for over 75%-80% of New Jersey’s online gaming revenue in recent months.

Because of these factors, comprehensive online gambling expansion is a much easier sell to lawmakers in other states looking at iGaming as a potential revenue stream, as well as to operators looking for profitable markets to enter. That’s turned many poker advocates into gambling advocates, figuring this is the quickest way to bring online poker back to the U.S.

While online poker revenue in and of itself hasn’t impressed, it seems like throwing the baby out with the bathwater (dismissing the poker-only argument) might be a mistake. Especially if it’s based in supposed regulatory expediency.

I’m of the opinion that the “poker is different than casino games” argument shouldn’t be abandoned.

It just needs to be employed strategically.

When to employ poker-only

So where would a poker-only argument resonate?

States with long histories of spreading poker games would be a good place to deploy the poker-only argument.

Whether it’s California’s numerous card rooms, or New York’s underground poker scene, poker is a longstanding institution in both locales, and this likely explains why both of these states happen to have poker-only bills sitting in the legislature.

States with poker histories AND socially conservative legislatures and populations are even better targets for poker-only.

Even though going poker-only severely limits the amount of revenue a state could generate from online gaming, in states with deep poker histories, and perhaps an abhorrence of “gambling,”  poker is an easier sell. It’s something the general public is familiar with, and something they feel is woven into their cultural fabric and history.

Texas, Arizona, Iowa, South Dakota, and Montana all fit into this category.

Don’t sabotage your online poker industry

“I hear people say “It sucks.” Well of course it sucks you just wrote a law that makes it suck.” – Eamon Tolland at the 2015 C5 Online Gaming Conference in New York City.

Because a poorly performing online gaming market can setback further expansion and open the industry up to criticisms, it’s important to make sure any state considering going poker-only does it the right way.

Any state considering going poker-only needs to realize this approach leaves little room for error and is easily sabotaged.

Once again, this is particularly true for smaller states where the margin for error is Bureau of Gambling Control .

You don’t have to go it alone

Not every state has the type of regulatory oversight in place to create and oversee an online poker market. Furthermore, operators are beginning to be stretched thin by the burden of setting up shop in each and every state they are licensed in, particularly if the state boasts a small population.

This is why NJ DGE Chief David Rebuck told any state looking at iGaming expansion: “If you partner with New Jersey, I can guarantee you, you can be up and operating in anywhere from 90 to 120 days, and you can set whatever tax rate you want,” at the 2015 East Coast Gaming Conference in May.

Embrace interstate agreements from the outset

This is the critical component for smaller states.

If you want to launch an online poker platform you’ll need to enter into interstate agreements right from the get go, and should be in talks before the industry is up and running.

Failure to do so means failure for your state’s online poker industry – assuming any operator would be foolish enough to pay the licensing fee to setup an online poker site in your state.

Without online casino games you have to maximize your liquidity potential, and that means partnering with other states.

Don’t make it about revenue

The key to selling the poker only argument in any state outside of Texas or California, is to shift the focus away from revenue.

Instead, focus on the right to play poker, the fact that people in these states are already playing online poker, and the consumer protections state regulation would create.

Another strong argument to utilize is setting aside funding for problem gambling initiatives. The creation of this type of trust fund will almost certainly bring problem gambling groups on board with a bill.

The above arguments are much stronger than potential tax revenue, as the revenue a state like Montana or South Dakota could realize from online poker is almost inconsequential, although any amount going into the state’s coffers instead of overseas should be highlighted.

Avoid writing nuanced regulations into the bill

Online gaming is a dynamic industry and evolves rapidly.

Therefore, any online gaming legislation that is too refined runs the risk of prohibiting future advancements. The best way to deal with online gaming legislation is to create a strong framework and leave the regulations up to the regulators. Let them decide whether something like fast/fold poker is a game they should approve, or simply whom should be approved to offer online gambling.

Another serious issue on this front is the creation of what I call “good intentions” roadblocks, such as requiring in-person registrations. As I have noted in the past, don’t fix problems that don’t exist.

Don’t create insurmountable regulatory burdens

High tax rates or creating too many (and too costly) hoops for affiliates and vendors is a surefire way to sabotage your online poker market.

In addition to turning away potential players and operators, these issues tend to lead to the continued presence of black market operators (not burdened by a high tax rate and able to enlist affiliates)  who are then capable of cannibalizing what are already shaky markets.

One other crazy idea: Work together

In addition to creating a problem gambling fund that operators would contribute to, a second fund should also be created amongst the operators that sets aside a portion of revenue for consumer awareness campaigns.

New Jersey online operators have discovered that despite their marketing, and being online for 18 months, a large percentage of the population is unaware online gaming is legal in New Jersey, nor do potential customers know how to differentiate between licensed and unlicensed sites.

Instead of marketing their own casino, online operators could pool a small amount of monies to run ads simply detailing the legality of online gaming and how to identify licensed sites.

- Steve covers nearly every angle of online poker in his job as a full-time freelance poker writer. His primary focus for OPR is the developing legal and legislative picture for regulated US online poker and gambling.
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