DC law sets precedent

The District of Columbia recently became the first jurisdiction in the US to enact a law that explicitly permits online poker wagering.

Even though the DC law is the first of its kind to actually become law, other states have considered similar bills and it is worth discussing some of the notable features, and differences, of those bills.

The Unlawful Internet Gambling Enforcement Act of 2006 clearly reiterated that it is for each individual state to decide whether intrastate wagering would be permitted in their respective state. Therefore, nearly all of the subsequently proposed state bills (with the exception of the now dead Hawaii bill) have only proposed permitting
intrastate wagering.

For example, the DC law only permits online wagers by players located within the district. This intrastate limitation is problematic for two reasons: it is not beneficial for the players because it limits the potential pool of players, and it reduces competition among the operators because the limited amount of potential profit discourages greater competition and production of better sites.

One of the big draws of online poker is the ability to compete with a large pool of players from across the globe, which is negated by the state gaming bills that only permit intrastate players. An online site that only permits intrastate players would have a very difficult time building a critical mass of players.

After all, would you want to be the first player, or even from the first few hundred players, to play on a state-authorised site? And, why would a state resident choose to play on the newly created intrastate-only site, when the resident could easily play on the highly developed sites of the foreign operators and also have the advantage of playing against players from all over the world?

Therefore, many of the current intrastate players would likely continue to play on the websites of foreign operators that provide access to a much larger pool of players. Consequently, the difficulty of attracting players to a newly legal site begs the question of how profitable an intrastate operator would be, and, whether any of the larger operators would be willing to enter the intrastate gaming sphere.

The state bills also take different positions on the limitations placed on operators. For instance, the New Jersey bill only allowed Atlantic City casinos to become operators; the DC law only allows one operator; and the Nevada, Florida and one of the California bills limited their licences to three operators.

The rationale behind these limitations is that all the state bills require operators to pay large licensing fees and to share a sizeable chunk of the profits with the state ““ therefore, those operators need to be protected from competition in order to succeed.

The state bills also differed in their treatment of foreign operators who may have already offered online gaming to state residents. Notably, Nevada was the only state bill that would have definitively allowed such a foreign operator to apply for a gaming licence and become an operator. Nevada was rightfully concerned that it would otherwise exclude many of the operators with the most experience and expertise from applying for licences. However, most of the other state bills contained provisions that excluded any operator that had offered online gaming in the past to the state residents.

Regardless of its drawbacks and future hurdles, the DC law has finally set the precedent to permit online poker wagering and will hopefully open the floodgates for other jurisdictions, and eventually the federal government, to follow suit.

This article appears in the forthcoming issue of eGaming Review. For a free trial subscription, click here.