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Bringing together legislators, regulators, academics, and industry leaders from around the country to develop the perfect online casino legislation proved to be difficult.
An early draft came in at more than 100 pages.
With many state legislatures expected to consider iCasino legislation to fill budget holes and modernize gambling in their states in the coming years, the National Council of Legislators from Gaming States (NCLGS) opted to take more time to get recommendations right.
So NCLGS didn’t release iGaming model legislation last week at its summer conference in Pittsburgh as planned. Instead, the legislators hosted an iGaming discussion to help influence the final draft that NCLGS will ratify at its winter conference in New Orleans this December.
“We got so much input, we just couldn’t get everything done,” NCLGS founder Steve Geller told PlayUSA. “Then the decision was made that we were going to spend hours at this meeting on iGaming, so we could take that input and get the first draft out in the next two to three weeks.”
By putting out iGaming model legislation in December, NCLGS can still assist the next wave of states looking to legalize online casinos beginning in 2025.
“When we looked at what we could do with iGaming model legislation, it’s one, let’s try to make it easier to build a foundation for what can happen for states looking to have iGaming expansion,” said NCLGS President Shawn Fluharty, a West Virginia delegate. “We realize it’s a hard process. I think the results show that it’s a hard process and there’s not the same effect as we have with sports betting, so we’re looking at this very carefully and getting ideas from everybody.”
NCLGS iGaming model legislation timeline
Geller told PlayUSA that NCLGS staff will produce a first official draft of the iGaming model legislation in the next few weeks.
After a comment period of at least 30 days, a panel of about 25 experts that includes regulators, academics and industry representatives will adopt a bill to recommend to the NCLGS iGaming Committee made up of state legislators. This must occur more than 30 days before the winter meeting in New Orleans, or roughly the first week of November.
In New Orleans, the NCLGS iGaming Committee will hold a public meeting to discuss and pass the model legislation. In legislative terms, Geller says this is akin to passage on second reading. While this will be the language recommended to legislators looking to introduce iGaming legislation in 2025, NCLGS won’t finalize the model legislation until the summer meeting one year from now.
However, Geller said any changes made when finalizing the bill likely will be technical in nature and would take a two-thirds vote from legislators.
“After the New Orleans meeting, there will be an opportunity for people to comment on the final final draft, which will be adopted a year from now,” Geller said. “But most people are going to take what we do out of New Orleans and draft their legislation off of that.”
Geller doesn’t expect states to introduce the online casino legislation as laid out by NCLGS. He hopes for legislators in different states to use it as a guideline.
“Crafting this model legislation, we fully recognize that each state and jurisdiction has a unique gaming sector with disparate interests and concerns. Remember, this is a model, and we’re expecting it will be amended in the different states.”
Geller said NCLGS plans to limit the model iGaming legislation to between 15 and 20 pages.
He mentioned the committee could put the rest of the suggestions into a separate framework of iGaming rules for regulators.
Online casino policy considerations
The NCLGS iGaming Committee identified eight policy areas on which the model legislation will focus.
- Revenue generation and expectations
- Tax rates
- Responsible gaming
- Brick-and-mortar cannibalization and involvement
- Advertising restrictions
- Licensing
- Age limits
- Data sharing and collaboration with universities
At the conference, three panels of experts offered their thoughts on these issues.
Juliann Barreto, COO of Spectrum Gaming Group, which serves as executive director of NCLGS, said NCLGS is considering suggesting a tax rate between 15% and 25%.
Playtech Head of Regulatory Affairs Charmaine Hogan suggested narrowing the recommendation to between 20% and 22%.
“A high tax rate does not translate into high revenue for the state if it’s not set up in a reasonable manner,” Hogan said. “Also there’s a risk that you overburn operators. And the risk from that is in your market you end up with an inferior product. For example, worse odds in comparison to what they would find on illegal markets offshore which don’t have to take that kind of tax burden.”
Howard Glaser, global head of government affairs and legislative counsel for Light & Wonder, offered the uncharacteristic industry opinion that there’s room for such high tax rates. While penalizing the regulated market could help the unregulated market, he said the best solution to tamping down the illegal market was getting iGaming more broadly regulated throughout the US.
“I think that on the iGaming side, it’s not that tax sensitive. People hate when I say that, but generally that’s true. … The best tax rate is a tax rate that gets you to pass legal iGaming in the state.”
Regulators say online casino cannibalization not a concern
A regulator panel of former New Jersey Division of Gaming Enforcement Director David Rebuck, Delaware Lottery Director Helene Keeley and Lee Copollo, director of iGaming compliance at the Pennsylvania Gaming Control Board, all said they had not seen cannibalization in their jurisdictions.
This corresponds with comments made to PlayUSA in March by regulators in states with legal US online casino.
Rebuck said states are missing the point if they focus on the impact that regulating iCasino could have on brick-and-mortar casinos in the future. He said gambling in most states exists in many forms, including illegal offshore gambling, skill games, social casinos, sweepstakes casinos, fantasy sports and iLottery. All of those are competition to physical casinos.
“If you’re just thinking that online sports wagering or online casino games will cannibalize essentially a retail market, then I think you’re making a big mistake. You need to look at the whole picture and realize that gambling is more than just casinos, buying a lottery ticket or sports betting.”
Copollo provided numbers to back up his claim in Pennsylvania. He said Pennsylvania land-based casino revenue was $3.2 billion in 2018-19. In its first full fiscal year of extensive online casino operations in 2021-22, land-based casino revenue was up to $3.4 billion. In the most recent fiscal year, land-based casino revenue stayed steady at $3.4 billion while adding $1.9 billion in PA online casino revenue.
“iGaming has been around for five years now in Pennsylvania,” Copollo said. “I think you have some crossover players, but you have two unique players. Your younger generation is more engaged with the online side. Then you have people who visit your land-based casinos for the entertainment options available there. If you continue to differentiate those two, I think it’s two different experiences you’re getting.”
