Igaming Focus: Wave of U.S. igaming regulation by no means guaranteed By Jake Pollard, CDC Gaming Reports September 25, 2020 at 1:55 pm The coronavirus health crisis has shown that a strong consumer appetite for igaming across the U.S. With social-distancing measures likely to be with us for some time and land-based casinos and racetracks coping with either significantly reduced footfall or full closures, the case for regulated interactive gambling seems clear-cut. The past six months have demonstrated that consumers are comfortable betting online and state authorities that have regulated their industries are happy to see much-needed tax revenues flow to their coffers at a time of major economic contraction. The American Gaming Association, sports leagues and other trade organisations linked to the sector broadly support online regulation. Native American tribes, however, are far from convinced. Casey Clark, senior vice-president for strategic communications at the AGA, tells CDC Gaming Reports, “The past six months have clearly demonstrated consumer demand for legal, convenient gaming options, like mobile sports betting or igaming. Jurisdictions are seeing real benefits from adding these forms of gaming to their regulated gaming portfolios, most importantly the consumer protections that only exist with legal frameworks that prioritize responsible gaming.” The closures and huge drops in land-based casino activity due to the pandemic have shown how interactive channels not only offer players safe online venues in which to play, but also generate important revenues for states. The argument for regulation seems clear from the AGA’s perspective, but for the Native American tribes that operate major casinos in California and Oklahoma and hold much regulatory sway across other states, that isn’t the case. The reasons for this lack of urgency vary but are numerous. Tribal priorities The Native casinos employ many tribal members and their priorities are to their communities, so any disruption to their mode of operation is approached very cautiously. They also represent many differing interests. For example, in Oklahoma the Otoe-Missouria Tribe and Comanche Nation signed a gaming compact with the governor that included sports betting, but was opposed by the Oklahoma Indian Gaming Association and they were thrown out of the trade body. A number of lawsuits are ongoing as a result and need to be resolved before any discussions on regulatory items can happen. Asked whether the pandemic added any urgency to the situation, one industry contact based in Oklahoma told CDC Gaming Reports, “I wouldn’t say it will be urgent. After all the lawsuits are decided, I’m sure Tribal Leadership will start to discuss options for added gaming offerings. Since it will have to go to the legislature, it will take some time.” Any new igaming regulation would also need the gaming compacts between tribes and state governments to be renegotiated. A proposal put forward in the past few days by New Mexico racetracks that would expand their product offerings to include online gaming and sports betting and table games is set to be reviewed on 1 October. The Gaming Industry Recovery Act (GIRA) would enable the state’s six racinos to recover some of the losses suffered from the pandemic, but the 14 tribes that operate a total of 24 casinos under a compact that expires in 2037 return between $70m to $80m annually to state coffers and pay a maximum revenue share of 10% on gaming revenues of $80m or higher. The new proposal would change that to commercial racinos paying 26% tax on net revenues from slot machines, 15% on table games and Internet gaming and 10% on sports betting and allow for three online sports-betting skins or sub-licences. New Mexico tribal casinos have been hit hard and the state’s governor, Michelle Lujan Grisham (D), has not taken a position on the proposal, but much is likely to depend on whether the compacts between the tribes and the state can be successfully renegotiated as part of the new regulations. California dreaming With regard to California, Susan Jensen, executive director of the state’s Native Indian Gaming Association, told CDC Gaming Reports, “First, it is important to note the difference between legalizing sports wagering and legalizing online wagering. Both are currently prohibited in California. While CNIGA opposes online gaming, we support an initiative, currently being circulated for signatures, that would amend the constitution to allow limited sports wagering at tribal casinos and select California racetracks.” The proposal, however, would not include regulation of online betting. As reported by CDC Gaming Reports in July, this seems short-sighted and would do nothing to prevent California residents from betting at offshore sportsbooks. Despite social-distancing rules and reduced footfall likely to continue, Jensen says, “COVID hasn’t affected our position on sports wagering. We remain dedicated to protecting the inherent sovereign rights of tribes. Tribal governments remain committed to protecting their brick-and-mortar facilities, which provide vital government services to our members, as well as support the local economy. CNIGA opposes any effort to expand gaming beyond brick-and-mortar facilities.” In the eyes of many, online would be an optimal channel for addressing COVID limitations across tribal casinos. It would also provide licensing fees and revenues from skins or sublicences, so why the reluctance to support igaming regulation in California? To explains CNIGA’s position, Jensen referred to an excerpt of the State of the Tribal Nations address given by CNIGA Chairman James Siva in February at the Western Indian Gaming Conference. “While many are focusing on the economic impacts of legalization (of sports wagering), it is critical to measure the social impacts as well and make responsible decisions. We reject calls to legalize the practice online. Make no mistake, tribes could easily profit from a state-wide online sports wagering market, but we believe it is at too high a societal cost. Good public policy and maintaining the support of voters is far more important than making a few extra dollars. Problem gambling proliferation, underage gambling, and threats to established brick and mortar facilities are deep concerns for us and the voters that must not be taken lightly.” Responsible gambling and player safety are paramount, but as the AGA has shown, commercial gaming revenue numbers for 2020 demonstrate there is clear consumer demand for online gaming options. Revenues across regulated states totalled nearly $778m from January to July 2020, a rise of nearly 200% on the same period in 2019. Sportsbook revenues in regulated states reached $394m during the same period, up 19% on 2019, despite retail sportsbooks being largely closed or limited in capacity from March to June. In addition, a regulated environment is the only one in which consumers can play safely and states can benefit from tax revenues.