Challenges Facing US iGambling Expansion in 2016

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Thursday, January 21st, 2016 | Written by Stephen Smith

For those fortunate enough to live in Nevada, New Jersey or Delaware, legal online gambling is already a reality. For everyone else, it’s a dream. Every year, stories arise of states inching closer to regulating online poker and iGaming, but in 2014 and 2015, not a single state moved to legalize online gambling. Will it be possible for any progress to be made in online gambling expansion in 2016? Maybe. But there are some roadblocks in the way. Here are five of the challenges that could completely prevent, or at the very least hinder, the passage of new online gambling legislation:

1) 2016 Is a Big Election Year

In 2016, the presidency and seats in the Congress and Senate are up for grabs, meaning many incumbent lawmakers will be very cautious about controversy. While there are many people pushing for online gambling across the country, lawmakers are unlikely to want to upset the loud opposition to gambling, particularly in states where religious groups make up a significant part of the electorate. This means that many politicians will be hoping to forget about the issue of online gambling until after November.

2) Promising States Are Focused on Land-Based Casinos

New York and Massachusetts are two states that have showed interest in passing online gambling legislation before, but both are currently working first to expand brick and mortar gambling within their borders. As a result, lawmakers are taking a wait and see approach, wanting to postpone discussions about online gambling until the casino expansion is finished. Illinois similarly has a chance of one day legalizing iGaming, but Springfield is currently working on legislation regarding brick and mortar casinos that is holding up progress.

3) States Are Worried About DFS

After the controversy over daily fantasy sports betting that occurred near the end of 2015, many states’ justice departments and gambling commissions are scrutinizing the DFS industry and trying to determine whether or not betting on fantasy sports amounts to gambling. In New York, for instance, Attorney General Eric Schneiderman has attempted to block DraftKings and FanDuel operating in the state, and has now brought a lawsuit against the companies in which he is seeking to claim as much as a $5,000 fine per each user, which could amount to as much as $3 billion.

Cases such as this has shifted focus away from other types of online gaming in most states, and there is even some concern that states that decide to ban DFS may end up also banning other forms of online gaming, like poker, right along with it.

4) RAWA Is Still Alive and Well

The Restoration of America’s Wire Act (RAWA), the legislation championed by Sheldon Adelson that would completely ban online gambling at the federal level is still an issue. Even though experts believe it is unlikely to pass, particularly after a December 2015 disastrous hearing, some state lawmakers have said they don’t want to consider passing iGaming legislation until RAWA is no longer an issue.

In the meantime, RAWA still managed to gain 24 co-sponsors before its failed hearing in December, and further attempts to push the legislation are expected in 2016, although a successful hearing would still have to be followed by approval from both Houses of the United States Congress, before being signed into law by the president.

5) Everyone Is Waiting for More Data

Two years after Nevada, Delaware and New Jersey launched their iGaming industries, the three states have thus far failed to live up to initial forecasts and expectations, leaving some lawmakers hesitant to push through legislation. Nevada has stopped releasing its monthly revenue figures as it now has just one viable online operator in the state, while Delaware’s initial forecast of more than $5 million in annual revenues has fallen significantly short of the mark, with 2014’s tally coming in at $2.1 million, followed by $1.8 million in 2015. At least New Jersey’s iGaming market has shown some signs of growth, having jumped 21% in 2015 to $148.8 million, although that figure is still but a tenth of initial pre-regulation estimates.

As a result, many states are now waiting for others to introduce online gambling, so that they can gather more data about its overall profitability. Pennsylvania and California are the next states most likely to legalize iGaming, and until one of the two does, many other states are likely to remain in a holding pattern.