Louisiana Illustrates The Possible Mess That Could Come Out Of Online Gaming Legislation

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Louisiana DFS legislation is one step closer to becoming law in the Bayou State.

H 484, a bill that would  formally legalize and permit  daily fantasy sports, was   approved by the state Senate recently. The Louisiana DFS bill would exempt paid-entry competitions  from being defined as “gaming,” and would instead categorize real cash DFS products as “gaming” — while replacing existing laws that deem fantasy sports to be  illegal.

It is currently heading into the desk of Gov. John Bel Edwards. Lots of the bill’s supporters believe it is likely that the Senate will provide his signature in forthcoming weeks.

Yet despite this positive piece of news for Louisiana DFS proponents, formally regulated fantasy sports (as well as  online poker/casino games, that  stalled in the Senate Committee on Judiciary last month)  have to  pass a parish-wide voter referendum before going live.

This legislative wrinkle, which is present in several states, could have a significant   effect  on statewide iGaming licensure in years to come.

Distinction between Louisiana and Michigan iGaming proposals

Statewide voter referendum mandates represent an integral catalyst to the passage of iGaming legislation in a number of states, including Louisiana and Michigan — where Rep. Brandt Iden is currently   Michigan H 4926.

The proposal to legalize online gaming in the Great Lakes State would require all iGaming servers to be   located within existing land-based casino properties, therefore   bypassing the need for a statewide referendum vote to authorize a gaming expansion.

Such server location clauses are important to granting online casino and poker games a regulated socket in Michigan, as residents narrowly approved casino activity in 1996 by a 51.5 percent to 48.5 percent ballot initiative. A referendum to formally legalize online poker and casino games without  requiring iGaming servers to be found within licensed (or compacted) Michigan land-based casinos would complicate the procedure, although questions regarding the constitutionality of Michigan’s proposed legislative workaround remain.

Louisiana lawmakers, on the other hand, are choosing to forego potential constitutional challenges by putting these measures into a parish-wide vote. What this means is that Louisiana could become the first US statewide authority  to partially offer regulated DFS and/or online gaming.

Louisiana iGaming concerns

Louisiana has a total of 64 parishes (commonly known as “counties” in other US states). Assuming some regions would approve iGaming measures while other parishes wouldn’t, the potential for a patchwork regulatory environment  in that state raises a number of questions:

How would tax and licensing be handled?Would there be increased costs associated with implementing geolocation restrictions?Would licensing and tax revenue payments vary based upon parish population (or other factors)? Would customers who compete in peer reviewed games theoretically have to remain within a single parish for the duration of an event or session?Would this type of regulatory situation complicate Louisiana’s chances to eventually enter into a “shared participant pool” agreement with other US states?Would Louisiana officials be able to effectively  apply  unlicensed operator activity in non-approved parishes?

The voter referendum requirement in Louisiana also brings into question whether iGaming and DFS operators will lose their appetite   for formal licensure as a result.

Pennsylvania — that  will soon offer online poker and casino games to those located within its boundaries — hopes to generate over $100 million from regulated iGaming licenses alone. So it is feasible that the eventual nationwide licensing cost to operators will be in the billions of dollars if more than a few countries move to authorize real cash internet games like poker and slots.

High demand for statewide iGaming licenses

Since Black Friday 2011, iGaming service providers such as PokerStars, 888 and PartyPoker have sought ways to obtain   formal licensure  within the coveted US online gaming market.   Efforts to license online casino and poker games are not going anywhere — which has prompted stakeholders to lobby for regulation on a statewide level.

It’s no secret that the world’s biggest poker site is actively trying to obtain regulated iGaming licenses on a statewide level. However, voter referendum requirements in states like Louisiana could potentially lead to operators being made to acquire hundreds of licenses within a nation that has just 50 states.

Add to this the fact that each jurisdiction is likely to set up  unique compliance guidelines for running real money online games (by way of example, a proposed bill for New York online poker would classify poker as a “skill-based” game which could “fall away from the general definition of gambling”), and it is easy to imagine how a statewide iGaming regulatory environment could lead to confusion among   the most educated  people that are tasked with iGaming oversight, compliance or patronage.

In a September 2017 Michigan Regulatory Reform Committee hearing, The Stars Group Head of Responsible Gaming Jeanne David told lawmakers, “We went from a [iGaming] license in 14 years   to seventeen. We now have 17 licenses. The [most] recent is Portugal.”

But will the specter of mass-licensing eventually outweigh TSG corporate decision makers’ desire to invest heavily within an American market that has quickly become one of the most difficult jurisdictions for iGaming companies to conduct business in?

Early returns suggest that TSG will continue its quest to acquire state-by-state iGaming licenses for today, but what about smaller operators who may not understand the value in lobbying for (or operating) online gaming in parishes like Tensas (northeastern Louisiana), which has a whole population of less than 5,000 inhabitants?

And could some municipalities (like Houston, where local officials are debating whether brick-and-mortar poker clubs must obtain a license to spread real cash games) eventually decide it’s in their best interests to offer regulated iGaming licenses?

These are just a couple of the questions surrounding how the US online gambling market might evolve in forthcoming years as lawmakers and stakeholders continue to iron out guidelines which are most appropriate for individual iGaming marketplaces.

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