Connecticut online casino gaming and poker will be taxed at 18% for five years, 20% thereafter

Full Steam Ahead In Connecticut As Mashantucket Pequot Tribe Reaches Compromise With Governor’s Office

Things are moving fast in Connecticut, and the state is now a clear favorite to legalize online gambling this year. As of this Mar. 18, both of the state’s official tribes have reached agreement with Gov. Ned Lamont on how things will work in the new market.

In Connecticut, the Mohegan and the Mashantucket Pequot hold a monopoly on casino gaming. That was initially a sticking point when it came to legalizing sports betting, as the state wanted to be able to conduct betting through the lottery as well.

The tribes had insisted that because retail sportsbooks are traditionally found in casinos, sports betting itself qualifies as casino gaming. In order to surrender exclusivity over the new vertical, they required concessions. Gov. Lamont was initially reluctant to consider the possibility of online casino gaming in Connecticut, while proposals for new retail casinos ran into other problems.

The COVID-19 pandemic changed the governor’s attitude. Discussing his agreement with the tribes Thursday morning, he had the following to say:

“I think of all the many things we’ve learned after a year of COVID is more and more the world is going virtual. And what that means in terms of gambling is […] more and more you’re going to see iGaming, iLottery, sports betting that’s online, fantasy sports. And there are a lot of moving pieces.

Thanks to really constructive negotiations with the state as well as the tribal Chairmen, we’ve reached a good agreement. An agreement that allows the tribes to grow and prosper in terms of iCasino games. It allows the iLottery, led by Rob Simmelkjaer, to continue to expand that. And the three of us together will be involved in the sports betting.”

Five-year compromise is enough for Mashantucket Pequot

The Mohegan tribe, which owns the Mohegan Sun Casino, had already agreed to the Governor’s terms earlier this month. However, the Mashantucket Pequot, who run Foxwoods Casino, had elected to hold out for a better offer.

Mashantucket Chairman Rodney Butler bristled at the fact that Gov. Lamont and his counterpart with the Mohegan tribe had announced their deal without waiting. However, both were quick to backtrack and clarify that they would not move forward with anything until Butler and his tribe were on board as well.

The specific sticking point was the tax rate on online casino games. The state was asking for a 20% cut of gross gaming revenue, while the Mashantucket wanted 18%. Butler claimed the difference would amount to a “rounding error” for the state, but make a significant difference to the tribe.

Although a two percentage point difference in tax rates isn’t quite a rounding error, it wasn’t likely to derail negotiations. Indeed, it took less than two weeks for the two parties to find a compromise. The Mashantucket (and Mohegan) will get the desired 18% rate for the first five years of online gambling in the state, after which it will rise to the original 20% proposed by the state.

This is probably a better compromise for everyone than splitting the difference at 19% would have been. The lower tax rate will help the new industry get off the ground, and by the time it rises, revenue should have as well.

Few obstacles remain

It’s hard to call anything a done deal this early in the legislative process. However, in Connecticut, it’s hard to imagine much going wrong at this point.

The people of the state want it. Connecticut politicians want it. The only real hurdle was finding terms that would be acceptable to the state, to the tribes and to Sportech. The latter runs the state’s off-track betting shops. It will be happy with the deal, since it allows the Lottery to establish up to 15 retail sportsbooks in Connecticut. We can assume several of those will be placed at Sportech locations.

Now that the governor and tribes have signed off on their agreement, we can expect the bill itself to move swiftly through the legislature.

“We’re proud of this landmark agreement with the State of Connecticut that cements a historic moment for our Tribal Nation,” said Butler. “This agreement bolsters the state’s economic development and growth, and allows us to develop a stable economic foundation for the future of our tribal community.”

Some details still need to be ironed out, however. It’s not entirely clear if Connecticut online poker is part of the deal, though there’s no reason to assume it wouldn’t be. There has also been no firm word about how many online partners each tribe can take on. A Foxwoods-DraftKings partnership is already in place to bring DraftKings Sportsbook to CT. If multiple skins aren’t allowed, competition for the Mohegan Sun partnership will surely be fierce.

- Alex is a journalist from Dartmouth, Nova Scotia, Canada. Now site runner for Online Poker Report, he has been writing about poker and the online gambling industry in various capacities since 2014.
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