Nevada and Delaware Interstate Poker Agreement not Enough

Nevada and Delaware signed on online poker compact last week.  This compact (read: agreement) means that residents of these states can play online poker against each other.  So, online poker operators in both of these states can accept players from either state.  The USA Today story on this agreement can be found here. 

This is a good thing, but it really isn't sufficient to make Nevada or Delaware online poker a big money maker.  Why?  Because the populations of these states are just too small.  Nevada has approximately 2.75 million people and Delaware has approximately 917,000 people.  This is barely 1% of the 316 million people in the USA.  For Nevada and Delaware to really get critical mass, they need to have deals with more states.  I don't see that happening.  If I was a governor of a larger state, I wouldn't necessarily compact with Delaware or Nevada because I won't get as much value from them as they get from me.

If you take the population of Nevada (rank 35 of 50) and add the populations of every state that is smaller, which includes Delaware (rank 45 of 50), you barely break 20 million.  Now 20 million isn't necessarily bad, but you have to have those 15 states working together and agreeing on the deal to get to an aggregate 20 million population.  To put that into perspective, that number is just slightly larger than the population of Florida (rank 4 of 50), which has a population of approximately 19.5 million.

Nevada and Delaware have to somehow get agreements with larger states to feed off of their larger populations before the larger states get wise.  I don't think that will happen.  I foresee something different. I predict that the four largest states will eventually work together and craft a compact just among themselves.  Those states are California (38.3 million), Texas (26.5 million), New York (19.6 million) and Florida (19.5 million).  Add that up and you have approximately 104 million, almost one-third of the entire US population.  THAT is a good number and you only need four states to work together.

Illinois and Pennsylvania are both a bit above 12 million in population, but that is a big drop from over 19 million.  If I were those four states, I would just work together and perhaps add Illinois and Pennsylvania, which would put the total size of the "Big 6" network at just under 130 million.  This is a large enough number that would be sufficient to have a good population of online poker players.  Then, that group could then cut deals with other countries.

With online poker, size DOES matter.  California, Texas, New York and Florida have it - Nevada and Delaware don't.

Late Legislation To Legalize Online Gambling in California

A couple of bills in the California legislature are still hanging around even though there are only a few weeks left in this year's legislative session.  Stranger things have happened than having bills that haven't gone through the full legislative review process get passed in the mad rush to get the end of session work completed.

In this case, although it is possible one or both of these bills are approved, I am not overly enthusiastic about their chances.  Personally, I am in favor of online gambling, but I much prefer the bills to be fully vetted and edited, with all stakeholders and opinion-holders having their full say in the matter.

Here's an editorial from a local newspaper that shares the same sentiment.  I agree.  In California, the tribes have huge leverage and influence.  And the tribes are not monolithic in their perspectives.  The tribes do compete against each other, which extends to the political arena.  In general, if all the tribes are not in consensus, the likely and easiest answer is no.

Federal Online Poker Legislation Reintroduced

New York Representative Peter King has reintroduced legislation attempting to federally regulate online poker.  This version is likely different than the version pushed by Senate Majority Leader Harry Reid of Nevada.  His preference is to have federal regulation and licensing, but biased toward the large Nevada casino companies being the only companies to be able to provide the games.

My view is that if the legislation can't be crafted to lock in the big Nevada casino companies as being the only online poker operators nationally, no federal bill will pass.  The fallback for the large operators will be a state by state approach, where the size of their checkbook will buy the licenses, keeping out competition, particularly foreign operators.

Foreign operators would be better served by trying to enter the US market by finding unique US-based opportunities to be their beachhead and not take on the large Nevada gaming companies head on.

The renewed efforts do show that online gaming and gambling is becoming more mainstream and as governments look for more sources of revenue, gambling suddenly becomes palatable.

The story can be found here.

No Chance for Federal Poker Bill in 2012

The Las Vegas Review Journal recently reported that the attempt by Congress to legalize online poker won't happen this year.  The AGA as well as those that wanted to have centralized control of iGaming in the US have been pushing for Washington to create a one size fits all approach.  That plan was thwarted for a couple of reasons, mostly due to politics.

First, this was an election year.  Not much was going to happen this year anyway.  The normal partisan environment was even more so.  Due to the even more partisan contest, any chance at a bipartisan approach to this issue was squelched.  Harry Reid, the Senate majority leader from Nevada, was very keen for this legislation.  No way were the Republicans going to do any favors for Harry Reid.  I would be surprised if this acrimony doesn't carry over into next year.

Second, with the fiscal cliff issue top of mind, that's what's going to be worked on as the primary topic, not online poker.

For now, online poker will move forward on a state by state basis.  A few more states implement on their own, and the window for any federal-level approach will be permanently lost.  That may likely happen as soon as 2013.

Online Poker Lobbying Group in California Quits

The reality that online poker is NOT coming to California soon finally reached consensus with a lobbying group specifically created to push for legalization.  The California Online Poker Association announced its winding down earlier this month, reported by GGBiGames.com.

The politics of the various tribes sunk the opportunity.  The tribes have a great deal of influence in California politics, particularly when it comes to gaming.  Since the tribes were not in alignment, online poker wasn't going anywhere.  Something eventually will come along, but probably not until enough other states move forward and California is faced with falling behind and losing revenue.

Zynga Posts Tender for Real Money Poker Platform

Casino Affiliate Programs commented on eGaming Review's story regarding Zynga soliciting for a real money online poker platform.  Zynga's interest in this area is not new.  Read the previous post concerning Zynga.  This is a good move for them as they have been very much tied to social/fun gaming and of course almost completely tied to Facebook.  They need to diversify their revenue streams.

The issue is now ripe as the DOJ several months back, clarified their position regarding the Wire Act and online gambling OTHER than sports betting.  A post discussing that development can be found here.

Zynga's stock price has fallen a great deal since the IPO, and last month there was a management shakeup where the COO was stripped of game development oversight.  Even competitors are throwing public darts Zynga's way.  An executive from Electronic Arts is claiming that Zynga "dropped to their knees."  Ouch.  Here's the link to the article from Escapist Magazine.

Zynga needs revenue and new sources of that revenue.  Online poker is a step in that direction.  They've just released the tender.  However, they do have a current poker platform that allows players to compete for virtual chips.  That game has millions of users, so they are partially down the path.

Poll Finds Californians In Favor of Sports Betting

Hot off the presses, a poll by the Field Research Corporation found that by a wide margin, Californians were in favor of legalizing sports betting and by a much smaller margin were in favor of legalizing online poker.  This poll was likely commissioned as there are a couple of bills working their way through the legislative process to legalize these exact things.  The sports betting bill is much further along in the process, having passed the Senate and is now in the Assembly Appropriations Committee, already having passed the Assembly Government Organization Committee.  A recent post on the sports betting bill can be found here.

The poll results were clear.  Any way you cut the population, a majority favored legalizing sports betting.  Republicans, Democrats, Independents, every age group and every geographic location is in favor.  Here is a snippet of the overall results:

Group / Favor / Oppose / No Opinion

Republicans  49/45/6
Democrats    64/31/5
Other            58/31/11

Male             61/34/5
Female         54/37/9

18-39            70/24/6
40-64            53/39/8
65 +              48/45/7

All                58/35/7

This is huge.  For any politician putting his/her finger in the wind, this makes no doubt about the will of the people of California - GIVE THEM SPORTS BETTING!  Oh, and by the way, the question was worded to ask if the person was in favor of sports betting AND having the state tax its proceeds.  So, not just sports betting, but sports betting and taxing it.  I would be shocked if the sports betting bill did not pass and get signed into law, setting up California to join New Jersey in a showdown with the unconstitutional federal PASPA law.  That being said, there are a couple of bills in Congress that would ease the PASPA restrictions, so that states could add sports betting in the next few years if they desired.

The results for legalizing online poker weren't quite as decisive, with a slight overall majority in favor.  The results for sports betting were far more positive - again, a majority of every demographic breakdown in favor.

The details on the poll results can be found here.

Wynn and Caesars Online Poker Push

In a sign that the major brick and mortar casino operators in the US are making the move toward internet gambling, both Wynn Resorts and Caesars Entertainment lock up deals with internet gaming companies. Wynn announced a partnership with PokerStars and Caesars received Nevada Gaming Commission approval of a relationship with subsidiaries of 888 Holdings.

There shouldn't be any doubt that the trend in the US is that in the not too distant future, internet poker will be legalized. From that point, only a few years will pass and I anticipate full internet gambling (with the exception of sports betting) will be legal. If New Jersey prevails in its lawsuit against the US Government over the constitutionality of PASPA, sports betting could also become legal. This won't happen overnight, but the big US players are getting ready.

The Wynn Resorts story can be found here and the Caesars Entertainment story can be found here.

Goldman Sachs Predicts US to Legalize Online Gambling, a $12 Billion Market

As reported by EGamingReview, a Goldman Sachs report predicts that the US will legalize online gambling, creating a $12 billion market. Not that this market doesn't already exist, but now the revenues can be captured (and taxed) legally.

The article focuses on poker and other casino games, and is silent on sports betting. That is where the REALLY large revenue lies. There have been old estimates from law enforcement that up to $1 billion is wagered illegally each week during the NFL season. That doesn't include any other sport, Super Bowl, March Madness, etc. Given the current politics, legalizing online poker and casino games is the easiest first step, not that you should diminish the prospect of legalizing a $12 billion market!

This prediction that online gambling will be legalized isn't that much of a stretch given the Democrats control both houses of Congress and the White House. There are polls and studies that support legalization. A post that discusses a poll supporting legalized online gambling can be found here. A post that reports on the university study recommending legalizing online gambling can be found here. In addition, this blog has other posts regarding this topic.

Harrah's Names New Online Gaming Head

Some commentators may make more of this than just the obvious, but it is another indicator that the trend for online gaming in the USA is on the upswing after the disaster of the UIGEA. RecentPoker.com reports that Harrah's has named an ex-CEO of PartyGaming as chief of its World Series of Poker and Internet operations. The site quotes the Sunday Times as speculating that Harrah's, by combining these two divisions and installing a seasoned online gambling executive at the helm, may be preparing to possibly expand by acquiring other online gambling assets.

That is speculative, but it does appear that Harrah's is reading the legislative trends in the US, and that their view may be that online gambling is going to make a legal comeback. With the Democrats firmly in control of both houses of Congress plus the White House, the UIGEA could be very short-lived. Please refer to earlier posts here and here with regard to online gambling.

At the state level, it is rumored that California may pursue legalizing intrastate online poker and Delaware is moving ahead with legislation to legalize sports betting, as discussed in a recent post.
This momentum would most certainly been much more muted if the Republicans had won the White House. With the Obama administration, online gambling is viewed as a revenue source and not a vice.

New Legislation Introduced to Regulate Skill Games

Senator Robert Menendez of New Jersey introduced S 3616, the Internet Skill Game Licensing and Control Act. This bill aims to legalize skill games such as poker, bridge and mahjong. Since the passage of the Unlawful Internet Gambling Enforcement Act (UIGEA), there has been calls for the relaxation of restrictions on games that have high skill elements, such as poker.

Although the hope would be that this bill is worked on during the lame duck session of Congress, after the November election but before the new year, my guess is that this bill will not be addressed, due to the seriousness of the recent turmoil in the financial markets and economy. Nonetheless, this does show that the desire is there by some in Congress to undo some of the draconian elements of UIGEA.

PoketFives.com has more details on this development, plus some quotes from the Poker Players Alliance. With governments looking for new revenue sources, it only makes sense to regulate these games, which now are being run from jurisdictions outside of easy US reach. Let US players play these skill games, which they enjoy, and allow them to be run in the US, via operators that are regulated and licensed. In this scenario, everyone "wins."