[toc]West Virginia Delegate Shawn Fluharty has introduced a bill in the House of Delegates that aims to “authorize Internet gambling through managed and licensed through existing authorized gaming facilities in West Virginia.”
- The text of HB 3067 is here.
The bill would allow online gambling on any games currently permitted in live casinos in the state. The state lottery regulator would expand its responsibilities to act as the licensing body.
In addition, the proposal specifically includes permission for interstate compacts:
“Authorized interactive gaming, once fully developed, will allow persons in this state to participate in interactive games, not only with other persons in this state, but with persons in other cooperating jurisdictions in the United States where interactive gaming has been authorized.”
Fluharty has got the support of Delegates Hornbuckle, Pushkin, Canestraro, and Bates who have each signed up to the bill as co-sponsors.
No PokerStars but taxes and fees are low
Only existing gaming licensees and racetracks will be allowed to apply for a license. They will not be allowed to offer online sites branded to third parties.
If PokerStars, 888 or partypoker wanted to operate in the state, then they would not be allowed to use their brands. Instead they would be reduced to technology partners.
License fees would be a comparatively low $50,000, and gambling taxes would take 14 percent of revenues. Both figures are on the low side compared to legislative proposals in New York, Pennsylvania or California.
In the states where online gambling has already been legalized, Nevada offers much lower gaming taxes, driven by the importance of gambling in the state. New Jersey’s rate of 15 percent is slightly higher, but in the same ball park.
Player protections are comprehensive
Online gambling legislation has a double headed argument. The pressure to enact legislation generally comes from the desire to add tax revenues. But the appeal to popular support comes from offering consumer protection.
In states where there is no online gambling regulation, players use offshore sites that offer a level of consumer protection that is much lower than US citizens are accustomed to.
A lack of oversight and legal control means that risks of gambling addiction and possible involvement in criminal activity are higher in states where there is no local control.
HB 3067 looks to have learned from the experience of other gambling jurisdictions. The bill proposes a set of consumer protections that should be of real benefit to online players in West Virginia.
What the WV bill mandates
The bill directs the Gaming Commission:
- To ensure, to a reasonable degree of certainty, that authorized participants are not less than twenty-one years of age;
- To ensure, to a reasonable degree of certainty, that authorized participants are physically located within this state or such other jurisdiction that is permissible under this chapter;
- To protect, to a reasonable degree of certainty, the privacy and online security of authorized participants;
- To ensure, to a reasonable degree of certainty, that the interactive games are fair and honest and that appropriate measures are in place to deter, detect and, to the extent reasonably possible, to prevent cheating, including collusion and use of cheating devices, including the use of software programs, sometimes referred to as “bots,” that make bets or wagers according to algorithms;
- To minimize compulsive gambling and to provide notice to authorized participants of resources to help problem gamblers; and
- To ensure authorized participants’ funds are held in accounts segregated from the funds of licensees and otherwise are protected from corporate insolvency, financial risk or criminal or civil actions against the licensee.
Penalties intended to drive players to the regulated offerings
One competitive pressure placed on gambling operators working under state licenses is that offshore operators don’t bear the same burden of taxes and costs.
One of the most important aims of gambling legislation is to move players from the black market and into the safety of the regulated system.
To that end, legislation must include penalties that will discourage players from going to offshore sites. Deterring offshore sites from offering services to players makes it more difficult for them to market themselves in the state.
The Unlawful Internet Gambling Enforcement Act (UIGEA) already imposes substantial penalties on financial transactions made by offshore gambling operators.
The West Virginia bill makes it unlawful for an unlicensed provider:
“to willfully and knowingly operate, carry on, offer or expose for play or to knowingly or willfully provide services for any interactive game or to accept any bet or wager associated with any interactive game from any person physically located in this state at the time of the play…”
The penalty for a first offense is a misdemeanor charge and a $75,000 – $150,000 fine. It could also include up to one year in prison.
Any second offense counts as a felony and carries a fine of $150,000 – $300,000. A second offense would also incur a potential prison term of one to three years.
Offenders will also be liable for back taxes on all their unlawful activity.
Will the West Virginia online gambling bill pass?
As we have seen across the US, bills do not in themselves guarantee that online gambling will make it past the legislative process.
Three states have managed to get online gambling laws on the books:
- New Jersey
Current progress on online gaming legislation in neighboring Pennsylvania may help give impetus to West Virginia legislators. Concerned about increased competition for its own licensed industry, West Virginia Lottery officials have been closely monitoring progress.
After the Pennsylvania House of Representatives approved a bill by 115 votes to 80 in June last year, acting Lottery Director John Myers said:
“There are certainly things we need to consider going forward. To stay competitive, we’ll have to consider these, as well.”
It is now nearly four years since New Jersey passed its legislation. It’s time for another state to join the party. And there’s no reason to think West Virginia will not be next.
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