Online Gambling Legalization Progress in the US

The legalization of online gambling at a federal level in the US is close to impossible at this point. However, a number of states have been pushing for changes in the way this type of offering is treated within their borders for years now. The past two and a half months have shown that the year will be marked by more iGaming legalization efforts and it is yet to be seen whether any of them will succeed.

Here are the states that have recognized the demand for online gambling and have been making steps towards the legalization of this type of offering, and how much they have advanced since the beginning of 2017.

Pennsylvania

Pennsylvania is believed to be among the states most likely to legalize online gambling by the end of the year. Local legislators have been looking for possible revenue sources to a tight budget and iGaming has been promoted as one such source.

Late last year, an online gambling bill came extremely close to being signed into law. It passed the House and only needed an affirmative Senate vote before being enacted. However, the upper house of the state Legislature failed to act on the legislation before the end of the year.

The effort was renewed in early January and it was even believed that Internet gambling would become legal by the end of the quarter as it seemed to have gained the necessary legislative support. However, that forecast may not be fulfilled, unless some miracle happens in the Legislature within the next ten days.

Online gambling has been a hot topic in the state for several years now. Multiple bills have been introduced on the matter, some of which gained certain momentum, while others failed in the Legislature from a very early stage.

This year’s push has been marked by the introduction of HB 392 in the state’s House and its Senate copy – SB 477. Both proposals call for the legalization and regulation of online gambling, among other provisions related to an overall expansion of Pennsylvania’s gambling industry.

During a recent joint hearing with the House Gaming Oversight Committee and the Senate Community, Economic, and Recreational Development Committee several concerns were voiced in relation to the legalization of iGaming. In the first place, involved parties pointed to the cannibalization that may occur in the local market as a result from the introduction of online gambling offering.

Land-based casino operators voiced concerns that they may lose much-needed revenue to Internet gaming offering. Although it cannot be said whether this would happen, there is indeed an opportunity for online gambling to impact negatively brick-and-mortar operations.

The proposed iGaming tax rate was another issue discussed broadly during the hearings. Concerned parties argued that the 14% tax rate was a bit too low when compared to the taxes paid by land-based operators. As a result, these may feel forced to convert to online operations in order to escape heavy taxation.

The issues posed will probably delay online gambling legalization. Hopes are that lawmakers will not need yet another year to sign the proposal into law. The good news is that the effort has gained support and can even be welcomed by Gov. Tom Wolf, as long as it delivers additional revenue to the state. According to recent forecasts, a regulated online gaming industry could bring tax revenue of almost half a billion dollars during the first five years.

New York

New York has made a considerable legislative progress in relation to the legalization of online poker. Here it is important to note that gambling expansion is prohibited in the state. However, under identical Senate and Assembly bills, online poker could be legalized within New York’s borders as a game of skill.

Earlier this year, Sen. John Bonacic and Assemblyman Gary Pretlow introduced S03898 and A05250 that call for the legalization, regulation, and taxation of online poker. The bills provide the necessary regulations for legal online poker operations in the state and tax operators at 15% on gross gaming revenue. Interested operators would have to pay a $10-million upfront payment upon applying for a license.

The online poker effort was tacked onto the New York State Senate’s 2017/18 $160-billion budget earlier this week. The budget plan was approved and it is now up to the Assembly to include the game’s legalization in its own budget. Action on the budget and online poker as part of it is expected to be taken in the weeks to come.

Although the Senate’s support has come as good news, online poker’s fate has still not been decided. As mentioned above, the Assembly is yet to add it to its budget plan. What is more, online poker is not part of Gov. Andrew Cuomo’s own budget, as well.

California

California has been pushing for legalized online poker for years now. However, clashing tribal, horse racing industry, and regulatory interests have prevented the state from making any significant progress.

Two main issues have been the biggest stumbling blocks over the years – how the state horse racing industry would benefit from online poker and whether PokerStars and other UIGEA violators would be allowed to enter the state.

The state horse racing industry has argued that it should be allowed a piece of the online poker pie, be that by being allowed to operate poker sites or by being compensated somehow for not being allowed to operate poker sites.

What is more, some influential local tribes have absolutely refused to support any legislation that could allow PokerStars to enter the local market, while others have teamed with the poker room’s current owner, Amaya, for potential partnerships when and if the market is open.

The latest online poker bill was introduced in February by Assemblyman Reginald Jones-Sawyer. AB 1677 was intended to begin this year’s legislative debates and to be seen as a starting legislation that can be further developed by interested parties.

The bill does not include a ‘bad actor’ provision, which means that PokerStars will be able to apply for a license, if it is enacted in its current form. Under the proposed legislation, interested operators will have to pay a licensing fee of $12.5 million in order to be granted a seven-year license. There is no fixed tax rate, it will graduate from 8.87% to 15%, with full-year revenue being the tax base.

AB 1677 was referred to the Assembly Committee on Governmental Organization. Committee members may hold a hearing on the matter on March 21.

Massachusetts

Although Massachusetts is still in the process of building its land-based commercial casino industry, lawmakers have begun exploring the possibility for the legalization and regulation of online gambling.

The state gave the green light to up to four non-tribal brick-and-mortar casinos in the early 2010s. As of this year, the Plainridge Park Casino slot parlor is operational and two casino resorts – Wynn Boston Harbor and MGM Springfield – are under development.

Senate Minority Leader Bruce Tarr, who has been calling for online gambling for some time now, renewed his push early in 2017 with the introduction of shell legislation that, if adopted, would allow the state’s commercial casino operators to apply for an iGaming license.

The two-page legislative piece (S 200) does not contain information about the taxation and regulation of this type of gaming offering. These important details will probably be added at a later stage and if the bill is considered by the state Legislature.

Massachusetts’ casino industry is a young one, so it may take a little while before any major steps toward the legalization of new type of gambling offering are made.

S 200 has been referred to the Senate’s Joint Committee on Economic Development and Emerging Technologies and is yet to be voted on.

New Hampshire

New Hampshire was not in the least of states expected to act on online gambling this year. Yet, three House of Representatives members – Rep. Eric Schleien, Rep. Robert Fisher, and Rep. Nick Zaricki introduced a bill on the matter only several days into 2017.

It can be said that HB 562 is a bit odd when compared to online gambling efforts in other states. Instead of legalizing and regulating online gambling, it decriminalizes this type of activity. However, the legislative piece does not contain provisions about the way iGaming operations will be regulated and taxed.

Said otherwise, it only removes online gambling from the list of criminal activities and places it in a list of activities that are sort of legal. HB 562 has been referred to the House’s Ways and Means Committee and is yet to be acted on.

There are three possible outcomes for the proposed legislation. It may be passed in its current form, although this is the least likely outcome; it can be rejected by lawmakers; or it may be amended to include regulation and taxation provisions and be given further consideration by New Hampshire legislators.

Michigan

An online gambling bill reached Michigan’s full Senate earlier this month. Sponsored by Sen. Mike Kowall, SB 0203 allows for the legalization of online gambling within the state’s borders and contains provisions for regulation, taxation, and other important matters related to the provision of this type of offering.

If signed into law, the bill would allow interested iGaming operators to apply and receive a license in exchange for an upfront payment of $200,000 and annual payments of $100,000 over a five-year period. Licensees will also be taxed at 10% on full-year gross gambling revenue.

Sen. Kowall pushed for online gambling last year, so it is not a surprise that he had decided to renew his effort in 2017. An identical bill, sponsored by the lawmaker, passed the state’s Regulation Reform Committee and was referred to the full Senate floor, but was not given any further consideration.

SB 0203 cleared the committee hurdle shortly after it had been introduced and now anticipates action from the Senate.

West Virginia

West Virginia was the latest state to introduce an online gambling bill this year. Authored by Delegate Shawn Fluharty, HB 3067 calls for iGaming legalization. The bill was introduced mere days ago and was referred to the House Judiciary Committee.

Similarly to other states, the bill draws a framework that would regulate the online gambling industry and provides criminal penalties for any illegal (unlicensed) online gambling activities. If the legislation gains the necessary support, it will make it possible for local gambling venues and race tracks to apply for an iGaming license. Interested operators will have to pay a $50,000 licensing fee, which is much lower than fees proposed by other states. Licensed iGaming businesses will pay a 14% tax on annual gross gaming revenue.

West Virginia’s online gambling bill may have come as a bit of a surprise, but it may eventually gain greater momentum than expected. No similar bills had been introduced in the state before, but iGaming had certainly been a topic to be discussed and welcomed for consideration.

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