Has state regulation of online gambling worked?
January 19, 2018 10:11 AM
by David Cash
Gambling legislation in the states falls under three sets of regulations. These are supposedly enforced at the local, state, and federal level. Many states have not updated their laws on the matter for many years, and as such, they’ve failed to keep up with the rapidly evolving industry.
Both state and federal level mostly target the providers of betting services, and not those using them. This has led to many online casinos still promoting their wares to unregulated states and on sites registered overseas. They will often accept customers from the United States. These sites operate outside of Federal jurisdiction and rely on punters bending the rules to play there.
That said, there are a few states that do indeed offer online gambling within their own legal framework. Like the current cannabis legalisation movement, the state legislature is at odds with the Federal one. This creates a confusing situation for companies and users alike.
Thanks to the specific wording of the UIGEA (Unlawful Internet Gambling Enforcement Act, 2006), it’s been interpreted that the online gambling is only federally illegal when funds cross state lines. This means that it’s up to the states to decide exactly what their legislation will be within their own borders.
Current legal states
As mentioned, there are some states that have licenced or operate their own gambling sites. In accordance with the UIGEA, these only accept local players. Meanwhile, more are attempting to join the number. Thanks to the growing legalisation movement, some estimate as many as 32 states will offer some form of legal online gambling by 2020. Such widespread support of the activity would surely force the Federal Government to update their stance on the issue.
Delaware beat both Nevada and New Jersey to the accolade of first legal state for online gambling. Their legislation was more tentative than those that followed, allowing for limited games and one network run by the Delaware Internet Lottery. It’s a joint venture between Scientific Games (the state’s current live slots provider) and 888 Holdings – those behind of the global brand 888. Whilst the backend system is handled by a single provider, each of the three big state casinos operate portals on the platform. Delaware Park, Dover Downs, and Harrington Raceway all have their own frontends to the software.
If any state were going to legalise online gambling, of course it would be Nevada. Governor Brian Sandoval signed the legislation in during February 2013. The bill was through the Assembly and Senate as an emergency measure to beat New Jersey to be the second official state with legal online gambling. Many of Nevada’s legislative leaders claimed it was crucial for them to maintain its position as the state synonymous with gambling. A former chairman of the Nevada Gaming Commission added:
"This bill is critical to our state's economy and ensures that we will continue to be the gold standard for gaming regulation."
Despite New Jersey looking so close to legalising online gambling in the early part of 2013 that Nevada rushed their own bill into legislation, it would be November before they’d become the third state allowing online gaming. New Jersey’s legislation went further than either Delaware’s or Nevada’s, however. They allow a full range of casino games in addition to just offering poker. It was believed by law makers that online gambling could bring around $150 million in tax revenue. This hugely inflated figure was later reduced to $34 million by the Treasury Departments. The industry has not performed quite as well as Gov. Chris Christie imagined but still provided $83.5 million between legalisation in 2013, and November 2016.
Very recently, plans to expand the scope of online casino gambling in New Jersey are being championed by one of the loudest voices in the 2013 legalise camp. State Senator Ray Lesniak seeks to allow those in other legal online jurisdictions to gamble at New Jersey casinos. This would help boost the tax revenue even further.
States taking a relaxed attitude to betting
As mentioned, there are several other states looking to modernise their own gambling legislation. Experts estimate that the sports betting industry could be worth more than $6 billion, with top estimates reaching over $15 billion, if all 50 were to legalise.
Chris Grove of Eilers & Krejcik Gamin, LLC, a watchdog analysing the legalisation movement highlighted the amount lost to offshore operations as being some $3 billion a year. He goes on to comment on the missed opportunity such figures represent:
"We estimate that a properly regulated market could be worth nearly five times that amount, resulting in a financial windfall for sports betting operators, sports leagues and media and state governments alike.”
Eilers & Krejcik Gaming, LLC predicted that the following states would open to the idea by 2020: Colorado, Connecticut, Indiana, Massachusetts, Michigan, Mississippi, Montana, Ohio, Pennsylvania, Virginia, West Virginia, Arizona, California, Idaho, Illinois, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Missouri, New York, North Carolina, North Dakota, Oklahoma, Vermont, Washington and Wyoming, Alabama, Arkansas, Florida, Georgia, Minnesota, Nebraska, New Hampshire, New Mexico, Oregon, Rhode Island, South Dakota and Wisconsin.
The report also goes on to suggest that the remaining states may never legalise sports betting thanks to entrenched public opinion on the issue.
Meanwhile, some are much more sceptical in their predictions. David Schwartz of the Centre for Gaming Research at the University of Nevada uses the fierce opposition to gambling that exists in a handful of states to support his opinion. He estimates the industry could be worth around $1.4 billion, and that’s based on every state that currently offers casino gambling offering sports betting too.
Naturally, such developments also bode well for the online gambling legalisation movement. With more states taking a more relaxed attitude to one popular form of gambling, it seems logical this will extend to online gambling. Currently, there’s optimism coming from New York, California, Michigan, Indiana, New England, Illinois, and Ohio with regards internet gaming legislation in the immediate future.
A recent development in the space may make it even harder for lawmakers to continue resisting the inevitable. Bitcoin is a peer-to-peer decentralised currency which is legal in the US and allows for cheap, fully international transfers in minutes. Many Bitcoin casinos have sprung up since the currency has become more widespread. Being as the cryptocurrency cares little for artificial lines drawn on a map, they too offer their services to US players. Thanks to the lack of Visa fees, and speedy withdrawals, they’re able to offer a very competitive service compared to standard online casinos. This allows players who live in the strictest states and nations to deposit and withdraw with relative anonymity without the need to ever involve their personal bank account. Such technological innovation will likely force the Federal Government to legalise and legislate online gambling, rather than continuing down a path of failing prohibition.
Clearly, the current situation in the US is failing. It seems only a matter of time before more states will legalise online gambling. This along with innovations like Bitcoin casinos will put immense pressure on the federal government to act too. With such a huge potential market that’s obviously desperate to play, it seems crazy that any legislature would continue to battle something that is incredibly difficult to police, the public are widely in favour of, and there’s a huge opportunity to generate tax revenue from. However, we’ve seen before, governments, particularly the US one, don’t always make the most rational decisions.
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