Analysis: The stage is set 

Online poker looks set to be high on the agenda when the New York legislature reconvenes next year. Martyn Hannah looks at what challenges need to be overcome to ensure progress is made 

New York’s efforts to legalize online poker got underway at an informational hearing on 9 September. What the hearing lacked in attendance it more than made up for in testimony, with seven speakers including John Pappas from the Poker Players Alliance and Tom Balance from the Borgata offering insight and opinion on why the state should, and in some cases shouldn’t, legalize the activity. The hearing took place in front of the Committee on Racing, Wagering and Gaming, chaired by Senator John Bonacic (pictured) who also happens to be the author of the only piece of online poker legislation currently in play in New York – SB 5302. [private]

The purpose of the one and a half hour hearing was not to discuss the inner workings of SB 5302, rather the future of online poker in New York and whether now is the right time to open its digital doors to the game. The state already offers several forms of online gaming: horserace bettors have been able to wager online for years, while some lottery products are also available for purchase via the internet. But so far online poker has remained firmly off the agenda. SB 5302 marks Senator Bonacic’s second effort, his attempt last year failing to gain any traction among lawmakers. But this year is different, and September’s hearing sets the stage for further talks in 2016.

“I think it was important for New York lawmakers to understand that internet gaming is already happening in their state, but that it is unaccountable,” says Pappas. “I stressed the need to protect consumers through regulation and how doing so would actually grow the live poker market in New York, not shrink it. I spoke about how regulated poker will bring additional revenues to New York and lead to the creation of new jobs. I also highlighted how a combination of technology and regulation is more effective than a ban on internet poker in preventing underage gambling, ensuring identity verification, protecting problem gamblers and deterring criminal activity,” he adds.

Stay in the game

Pappas’ points were echoed by the likes of MGM Resorts, Caesars Entertainment, the Borgata, and Rush Street Interactive, who each sent representatives to argue in favor of legalizing online poker. The state’s land-based tribal casino operators also appear to be mostly onside and in favour of regulation. The general consensus is that in order to remain competitive in the gaming sector, New York needs to embrace online poker to keep up with the likes of neighboring New Jersey and Pennsylvania, which looks set to be the next state to go live. Then, of course, there are the financial upsides. While online poker wouldn’t be a huge market in New York – Eilers Research estimates revenues of around $176m per annum – it would still provide a welcome boost to state tax coffers.

But as has proved to be the case in other states mulling online gaming legislation, not everyone is singing from the same hymn sheet. Sheldon Adelson’s Coalition to Stop Internet Gambling rolled out its usual spiel about cell phones, children and terrorism, but pushback also came from the New York Gaming Association (NYGA). James Featherstonhaug, president of the NYGA, says the association is broadly in support of New York considering online poker legislation, but believes the state should hang back until its three new bricks-and-mortar casinos have been built. He also raises concerns over cannibalization and the $10m license fee proposed in SB 5302, but says the Association is open to compromise.

“There are certainly some things that could be written into the bill that would change our point of view,” Featherstonhaug says. “One would be the effective date of the bill – you could pass a bill now but have it effective from sometime in mid-2017. You could definitely lower the license fee – we think the current fee is simply unrealistic for some of the racinos. I also have concerns over the number of licensees – if a bill did pass I don’t see New York being able to support more than a couple of operators. Then, of course, we think the New Jersey model of online operators having to partner with land-based casinos is essential.”

But Bonacic recognizes the need to bring the NYGA on board, and has already said changes will have to be made to the language of SB 5302 in order for it to garner enough support to stand a decent chance of passing into law – in particular lowering the license fee and requiring online operators to partner with land-based casinos.

“I believe the appetite for offering online poker in New York is significant,” he says. “But I believe that changes will be likely to the bill for the upcoming legislative session that begins in January. Debate and discussion will continue on the bill between now and then, and specifically I anticipate serious discussion on the license fee and tying the offering of online poker to instate gaming operators,” Bonacic adds.

Champion of the industry

A major factor in the success of any online gaming bill becoming law is an individual or body prepared to champion the cause. In New Jersey Senator Ray Lesniak pressured Governor Christie into action, while in Pennsylvania Rep. John Payne and Senator Kim Ward are becoming more vocal in a bid to drive their respective bills across the line. But with Committee co-chair Gary Pretlow unsure about the technology used to power online gaming sites and safeguard players, the question remains whether Bonacic is the right man to change opinion and move things forward in New York?

“Senator Bonacic is undoubtedly the right man for the job,” says Pappas. “He has exhibited great leadership on the matter and is willing to learn and share future legislation in a way that is good for consumers and operators. New York is only just starting, but I am pleased with the progress already. I am optimistic that we can get votes in Committee and in the Senate next year. And if other states like Pennsylvania move forward it will certainly accelerate New York’s efforts.”

But despite all that, the wider industry seems to be lukewarm towards New York. While those on the ground remain optimistic the state will make progress next year, it will most likely require a multi-year effort before the market actually goes live. More, Bonacic’s bill is very much poker only, meaning operators will have a tough time turning a profit in the state, even if it shares liquidity with the likes of Nevada and Delaware. Joining forces with New Jersey would certainly be a step in the right direction, but with its requirement that online gaming servers have to be located in Atlantic City, sharing player pools seems to be a long way off in the Garden State.

All in all, New York looks like it will be a slow burner – some even suggest in real-terms it is behind embattled California. But if Bonacic continues to champion the cause, and his bill can be brought to a vote in the next legislative session, momentum can, and will, build.

SB 5302 at a glance

Sponsor: Senator John Bonacic

Purpose: Legalize online poker in New York

License fee: One off $10m fee, valid for 10 years

Tax rates: 15% of GGR

No of licenses: Up to 10

Bad actor clause: No

The man behind the bill 

Name: Senator John Bonacic

Age: 73

Party: Republican

Roles: Chairman of the Committee on Racing, Wagering and Gaming