This post is brought to you by James Moore
To outsiders, the long and slow progress of online gambling regulation in the USA must seem difficult to understand. After all, America has one of the world’s largest gambling industries as the casinos of Vegas and Atlantic City rake in billions each year.
But conservative attitudes towards gambling remain prevalent among the electorate. Poker lobbying groups were horrified when, in 2006, the Unlawful Internet Gambling Enforcement Act (UIGEA) was “snuck” through the House of Representatives; attached to a completely unrelated port security bill. Those in favour of legal online gambling see this move as a diabolical assault on the democratic process but, in reality, there was very little public outcry (and even a deal of support) for the measure.
Nowhere is this cultural dichotomy more apparent than in California; where online gambling legislation has been debated in the state legislature for no less than six years. At the same time, tribal casinos operate legally and thousands of semi-legal “gaming parlours” offer scratchcard and slot games under the guide of operating as internet cafes.
There are essentially two ways that a regulated online gambling market could develop in the USA. Firstly, states could use their legal right to control commerce to set up regulators and licensing local operators. Lobbyists have belatedly accepted this approach, although it could conceivably lead to a messy patchwork of overlapping jurisdictions and a “race to the bottom” in terms of regulatory requirements (as states compete to poach operators and their tax revenue from one another).
The alternative approach would be to re-visit the UIGEA at a Federal level, which had previously been considered extremely unlikely. However, the USA has faced international lawsuits at the World Trade Organisation, claiming that tight regulation which bars foreign casinos amounts to “restraint of free trade”. This, in part, is the reason that Congressman Joe Barton (R-TX) has sponsored a new bill which would open up the online Poker market, but further restrict other online gambling.
The Poker market is, both politically and economically, a good place to start when looking at nationwide regulation. Poker involves a high element of skill, something that even the most dogged opponents of gambling have belatedly had to concede, putting the game in a separate category to other casino games. A successful Poker market also requires high “liquidity”; essentially a large and active player base, to function properly. The bill proposes that poker regulation be handled by the Department of Commerce; which would likely mean that all American players could be within the same “pool”.
Progress may seem slow, but large private equity firms have taken large gambles themselves, on the prospect of a legal online market. The Amaya group spent $4.9 billion acquiring cardroom PokerStars last year and more significantly a Canadian group, Intertain, has been assembling a portfolio of brands ready to assault the US Market, if and when it opens. Their largest (and most significant) acquisition was the $646 million (£425.8m) purchase of several key brands from gaming powerhouse Gamesys, including Jackpotjoy and Starspins.
The new bill has bipartisan support, but that does not by any means guarantee it will pass a House which is still wary of online gambling. Even projections of $7 billion additional tax dollars has little sway; as such projections have proved to be hugely optimistic in the past (just ask Chris Christie).
Online gambling has already reached the United States, as possibly millions of citizens have active accounts at offshore, or even black market, operations. This leads to tax revenue being diverted abroad and no protection for players who are exploited. Joe Barton’s bill may not be a complete solution to the tangled web which is online gambling, but it could be a step in the right direction!