Inside Massachusetts' 'omnibus' approach to online gambling

 Massachusetts has thrown its hat into the ring to be the next state to legalize online gaming in the US. But will taking an ‘omnibus’ approach to legislation see lawmakers bite off more than they can chew? Martyn Hannah reports

The Massachusetts Gaming Commission recently voted unanimously in favor of establishing a panel to study how best to legalize and regulate egaming and daily fantasy sports (DFS) in the state. In doing so, it threw its hat into the ring to be the next state to finally pass egaming legislation since New Jersey opened its digital doors back in November 2013.

The Online Gaming Study Commission will be led by the chairs of the Joint Committee on Economic Development and Emerging Technologies, Senator Eileen Donoghue and Representative Joseph Wagner, and will meet before November 1, 2016.

The Commission has been tasked with exploring the potential, and pitfalls, of all areas of online gaming and DFS in the state, and will produce a detailed report of its findings by July 31 next year. A major aspect of the study will be to look into the feasibility of taking an ‘omnibus’ approach to egaming legislation, and the opportunities and challenges it will throw up for lawmakers, regulators, operators and suppliers alike.

“On the whole, there remains a great deal of haziness surrounding online and fantasy gaming, and everyone involved would benefit from some additional clarity, from DFS and online gaming operators and their investors to regulators and consumers,” says Senator Donoghue.

“The special Commission will bring together relevant stakeholders and experts for a thorough review of all of these questions. Its report and recommendations will help the legislature navigate a complex issue and find the most suitable path forward,” she adds.

The whole hog

The omnibus approach appears to be the Gaming Commission’s preferred method of delivering egaming legislation. This approach simply means getting everything done at the same time – poker, casino, daily fantasy sports, and eSports. In taking this route, lawmakers will be giving the state’s online gaming industry the best chance to thrive by offering a full suite of products.

Just look at Nevada where a lack of online casino led to one operator going bust (remember Ultimate Gaming?) with the other, Caesars, only able to keep its head above water due to its sheer size. Massachusetts’ approach is broadly similar to the one taken by New Jersey, although goes even further by including DFS and eSports.

But by casting the net far and wide, Massachusetts lawmakers could be biting off more than they can chew – it must be remembered that egaming bills in other states looking to make the move online have failed to gain much traction, with many being met with fierce opposition and political pushback.

“If it tries to cover too much ground in a single piece of legislation, it could fall of its own weight,” says Eric Schippers, head of government affairs at Penn National. By that, he means a clunky bill might not be able to clear the hurdles thrown up by the various interested parties.

Kill bill

Indeed, the more people the bill brings around the table, and the more compromise each needs to make in order for it to get across the line, the chance of success diminishes further. “The real disadvantage [to taking the omnibus approach] is that the vested interests may not be able to live with the compromise they are being asked to make and then try to kill the proposal until they get what they want,” says Barbara DeMarco, vice president of Porzio Governmental Affairs. “All you need is one chairperson of a committee or leader of one of the two houses of the legislature or the governor to block it from happening.”

The flip side, of course, is that while it may take longer to draft omnibus legislation, once it has been agreed by all parties nothing more needs to be done. In Nevada, for example, if the state decides to open up the market to online casino games in the future, lawmakers will have to go through the process of drafting a bill and getting it across the line, having already done so for poker.

Ditto for DFS – Nevada has already ruled the activity sports betting – and eSports. An omnibus bill may create more headaches at the outset, but once signed into law the job is pretty much complete.

Battle lines

As with any expansion of gambling, there will be champions for the cause and those who will fight tooth and nail to stop it happening. And in Massachusetts things will be no different. But Schippers argues the battle lines have yet to be drawn, and the state of play will only be revealed once the study Commission publishes its report next year.

“The battle grounds have yet to be drawn given how early it is in the process,” Schippers says. “However, I imagine you will hear some say the state’s existing bricks-and-mortar casinos should all get up and running before expanding to a new form of gambling,” he adds.

Yet Gaming Commission seems keen to move the needle and drive progress, as evidenced by the deadlines for the study group to meet and publish its report. But the state is also taking something of a considered approach and like others, such as Pennsylvania, is looking to those already live to learn what they have got right, and what should be done differently.

New Jersey is the most established and successful egaming state in the US to date and Donoghue says the Massachusetts study group will discuss its successes and failures during its investigation.

“This includes how they are regulating it, how difficult enforcement has been, whether there have been any upticks in consumer protection issues or criminal activity, what impact online gaming has had on bricks-and-mortar casinos, what kind of revenue and in-state jobs online gaming has produced, and what has been the effect on the states’ overall economic outlook,” Donoghue explains.

“We also need to keep in mind that states like New Jersey have only been doing online gaming for a few years and that, while it is helpful to see what others are doing, this is still a new industry and a lot can and will change,” she adds.

One area to avoid is New Jersey’s requirement that bets must be placed via servers located in Atlantic City, making it all but impossible for the state to enter liquidity pooling agreements with other regulated markets. But this will all be taken into account during the Commission’s investigation into online gambling, which in itself is seen as an encouraging development by the industry.

“We appreciate that the Massachusetts gaming regulators are trying to educate themselves on the issues surrounding egaming, and we hope to serve as a resource to them during the process,” says Shippers.

Race for the line

Whether the state will cross the line before Pennsylvania, California, or New York remains to be seen, but DeMarco believes Massachusetts is a little behind the curve and a few years away from actually getting it done.

“If I were a betting girl, which I am sometimes, my money is on Pennsylvania,” DeMarco predicts. “The state is in serious fiscal straits, while Massachusetts, so far as I am aware, isn’t enduring a budget crisis.

“The other reason is competition. I think once Pennsylvania goes live next, a wave of states, including Massachusetts, will flick the switch in order to keep pace. This will happen long before anywhere else in the US,” she adds.

Massachusetts may not be looking for a quick route to market, but the industry as a whole should be encouraged that another contender has emerged, and is going about the process of legalizing and regulating egaming in a thoughtful and considered way.