Louisiana Illustrates The Potential Mess That Can Come Out Of Online Gaming Legislation

Louisiana DFS legislation is one step closer to becoming law in the Bayou State.

H 484, a bill that would formally legalize and license daily fantasy sports, was approved by the state Senate recently. The Louisiana DFS bill would exempt paid-entry contests from being defined as “gambling,” and would instead categorize real money DFS products as “gaming” — while replacing existing laws that deem fantasy sports to be illegal.

It is already heading to the desk of Gov. John Bel Edwards. Many of the bill’s supporters believe it is likely the governor will provide his signature in upcoming weeks.

Yet despite this positive bit of news for Louisiana DFS proponents, formally regulated fantasy sports (along with online poker/casino games, which stalled in the Senate Committee on Judiciary last month) must pass a parish-wide voter referendum before going live.

This legislative wrinkle, which exists in several states, could have a significant impact on statewide iGaming licensure in years to come.

Distinction between Louisiana and Michigan iGaming proposals

Statewide voter referendum mandates represent a key catalyst to the passage of iGaming legislation in a number of states, including Louisiana and Michigan — where Rep. Brandt Iden is currently Michigan H 4926.

The proposal to legalize online gambling in the Great Lakes State would require all iGaming servers to be physically located within existing land-based casino properties, therefore bypassing the need for a statewide referendum vote to authorize a gambling expansion.

Such server location clauses are important to granting online poker and casino games a regulated outlet in Michigan, as residents narrowly approved casino activity in 1996 by a 51.5 percent to 48.5 percent ballot initiative. A referendum to formally legalize online poker and casino games without requiring iGaming servers to be located within licensed (or compacted) Michigan land-based casinos would complicate the process, although questions related to the constitutionality of Michigan’s proposed legislative workaround remain.

Louisiana lawmakers, on the other hand, are opting to forego potential constitutional challenges by putting such measures to a parish-wide vote. What this means is that Louisiana could become the first US statewide jurisdiction to partially offer regulated DFS and/or online gambling.

Parish-wide Louisiana iGaming concerns

Louisiana has a total of 64 parishes (commonly recognized as “counties” in other US states). Assuming some regions would approve iGaming measures while other parishes would not, the potential for a patchwork regulatory environment in that state raises a number of questions:

• How would licensing and taxation be handled?
• Would there be increased costs associated with implementing geolocation restrictions?
• Would licensing and tax revenue payments vary depending on parish population (or other variables)?
• Would customers who compete in peer-to-peer games theoretically be required to remain within a single parish for the duration of an event or session?
• Would such a regulatory scenario complicate Louisiana’s chances to eventually enter into a “shared player pool” agreement with other US states?
• Would Louisiana officials be able to effectively enforce unlicensed operator activity in non-approved parishes?

The voter referendum requirement in Louisiana also brings into question whether iGaming and DFS operators will lose their appetite for formal licensure as a result.

Pennsylvania — which will soon offer online poker and casino games to those located within its borders — hopes to generate over $100 million from regulated iGaming licenses alone. So it is feasible that the eventual nationwide licensing cost to operators will be in the billions of dollars if more than a handful of states move to authorize real money internet games such as poker and slots.

High demand for statewide iGaming licenses

Since Black Friday 2011, iGaming service providers including PokerStars, 888 and PartyPoker have sought ways to obtain formal licensure within the coveted US online gambling market. Efforts to license online poker and casino games aren’t going anywhere — which has prompted stakeholders to lobby for regulation on a statewide level.

It is no secret that the world’s largest poker site is actively seeking to obtain regulated iGaming licenses on a statewide level. However, voter referendum requirements in states such as Louisiana could potentially result in operators being forced to acquire hundreds of licenses within a country that has only 50 states.

Add to this the fact that each jurisdiction is likely to establish unique compliance guidelines for conducting real money online games (for example, a proposed bill for New York online poker would classify poker as a “skill-based” game that could “fall outside the general definition of gambling”), and it is easy to imagine how a statewide iGaming regulatory environment could cause confusion among even the most informed individuals who are tasked with iGaming oversight, compliance or patronage.

In a September 2017 Michigan Regulatory Reform Committee hearing, The Stars Group Head of Responsible Gaming Jeanne David told lawmakers, “We went from one [iGaming] license in 14 years to seventeen. We now have 17 licenses. The [most] recent is Portugal.”

But will the specter of mass-licensing eventually outweigh TSG corporate decision makers’ desire to invest so heavily within an American market that has quickly become one of the most difficult jurisdictions for iGaming companies to conduct business in?

Early returns suggest that TSG will continue its quest to obtain state-by-state iGaming licenses for now, but what about smaller operators who may not see the value in lobbying for (or operating) online gambling in parishes such as Tensas (northeastern Louisiana), which has a total population of less than 5,000 residents?

And could some municipalities (such as Houston, where local officials are debating whether brick-and-mortar poker clubs must obtain a license to spread real money games) eventually decide it’s in their best interests to offer regulated iGaming licenses?

These are just a few of the questions surrounding how the US online gambling market might evolve in upcoming years as lawmakers and stakeholders continue to iron out guidelines that are most appropriate for individual iGaming marketplaces.