Where Did All The Online Gambling Regulation Momentum Go?

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Regulated online gaming once had a ton of momentum – so what happened?

After being empowered by a 2011 opinion issued by the Office of Legal Counsel at the Department of Justice, online gambling legalization at the state level came out of the gates at a full sprint.

Within a year and a half of the OLC opinion being proffered in September 2011, three states passed legislation legalizing online poker and/or online gambling, Nevada, Delaware, and New Jersey; three other states approved the sale of online lottery tickets, Illinois, Minnesota, and Georgia; and still more were looking to following their lead.

When New Jersey legalized online gambling in February 2013, the spigot was believed to be fully open and online gambling was expected to spread across the country in a matter of a few years.

Unfortunately, by the end of 2013, the spigot ran dry. Progress on the online gambling front slowed to a trickle, and it’s been in a state of stasis ever since.

The stalled legalization efforts aren’t from a lack of trying, as states ranging from California to New York to Mississippi have introduced bills that would legalize online gaming. Some have been Hail Mary passes, but others have been legitimate attempts that have progressed through state legislatures.

But in the ensuing three and a half years, just two states joined the ranks of online gaming states, Michigan and Kentucky. Neither state legalized online poker or online casino games; they simply authorized online lottery sales. These modest games were also partially offset when the Minnesota legislature repealed online lottery sales.

Aside from adding two states on the online lottery front, and some incremental progress on online gambling measures in New York, California, and Pennsylvania, there is little for online gambling advocates to get excited about.

What’s the holdup?

There are several reasons online gambling legalization efforts have stalled over the past three years.

Legislation is rarely a speedy process

Regardless of the perceived need for legalization and regulation (online gambling is currently taking place across the country on unregulated, offshore sites), and no matter how logical the reasons behind the effort sound, the passage of non-vital legislation is rarely a fast process, especially when the legislation has the hallmarks of gambling – DFS is the exception, not the rule.

But progress is still progress, and considering how long other efforts have taken (legalization of marijuana for instance) online gambling isn’t doing all that bad.

If you were to tell poker players on April 15, 2011 that they’d be able to play online poker legally in three states within two years they’d have laughed in your face. But once states started legalizing online gambling they adjusted their expectations and simply expected the momentum to continue.

New Jersey and Nevada are gambling states

Two of the three states that have legalized online gambling were two of the most likely candidates.

Nevada and New Jersey are synonymous with gambling, so it shouldn’t be overly surprising that other states didn’t rush to join them, just like other states didn’t rush to join them when they legalized casino gambling in 1931 and 1976 respectively.

The third state, Delaware, is simply too small to be of consequence.

What the US needs is a large state like Pennsylvania or New York to pass an online gambling bill to reignite the fuse, and prove to other states that online gambling isn’t simply something being done in historically gaming states.

Opposition formed after the first wave

Following legalization in Nevada, Delaware, and New Jersey, the situation became far more tumultuous by the presence of Sheldon Adelson, whose pronouncement in November of 2013 to “spend whatever it takes” to ban online gambling in the United States led to the creation of a well-funded, and high-profile opposition group.

The first wave of states to legalize online gambling didn’t have to contend with this type of opposition campaign. They were lucky to have gotten out in front of it.

Adelson’s efforts to prohibit online gambling haven’t gained any traction, but it’s likely not a coincidence that efforts in other states ground to a halt once he became involved. If nothing else, he’s helped stall further expansion.

Disappointing early returns

And of course, it’s always about the money.

Before any state actually launched an online gambling website, when legal online gambling was still theoretical, it was being bandied about as a potential windfall. Online gambling was going to be a panacea for budget shortfalls; an easy way to fill a state’s coffers with new tax revenue.

This proved to not be the case, and when New Jersey fell short of its (patently absurd) projections by a factor of 10, the wind went out of the sails in other statehouses across the country.

Once the conversation shifted from revenue to consumer protections and other legitimate but nuanced reasons, a lot of lawmakers lost interest in online gambling.

4 COMMENTS

  1. I’m done fighting. I feel like the PPA loves to make things sound a lot closer than it ever is. It’s a waste of energy. I’ll just accept what we have and assume it’s better than what we would have if the state government gained control over it.