Assemblyman Gary Pretlow has introduced a bill to regulate online poker in New York practically mirroring a bill introduced into the Senate last month.
Assemblyman Pretlow´s proposals for regulating online poker in New York are pretty much a copy and paste of the proposals he introduced last year – reclassify poker as a game of skill, charge $10 million per license, and tax operators at 15% of Gross Gaming Revenues. New Yorkers would have to be at least twenty-one years of age to play, and their funds would be kept in segregated accounts.
In many respects, Pretlow´s proposals mirror those introduced into the Senate last month by Senator Joseph Addabbo, with the notable exception Pretlow´s bill (A4929) does not contain a bad actor clause that would prohibit PokerStars applying for a license and operating in the Empire State. Despite not alienating PokerStars and its significant lobbying powers, the bill may still have difficult in passing.
The Major Obstacle to Regulated Online Poker in New York
New York desperately needs income from somewhere to replace a shortfall in tax revenues approaching $3 billion. The regulation and taxation of gambling is seen as a preferred alternative to deferring middle-income tax cuts or reducing state aid to education and health care. However, according to the state constitution, any expansion of gambling requires voter approval in a state-wide referendum.
Nonetheless, in 2016, the legislature passed a bill to regulate and tax Daily Fantasy Sports. The bill was contested by a group of citizens opposed to the expansion of gambling; and last year, the New York Supreme Court ruled the legislature did not have the authority to redefine a contest of chance from any game in which the outcome depends “in a material degree” upon an element of chance to a game in which the outcome depends “predominantly” upon an element of chance.
Both Assemblyman Gary Pretlow and Senator Joseph Addabbo believe that, by reclassifying poker as a game of skill, they will be able to circumnavigate the constitution without the expansion of gambling being contested. Although many players would agree that poker has a higher level of skill that Daily Fantasy Sports, the courts may not see it the same way if the billed is passed and contested.
Other Obstacles to Regulated Online Poker in New York
The constitutional issue is not the only obstacle to regulated online poker in New York. In 2013, voters passed a ballot measure allowing commercial casinos to operate in the state, but these have underperformed spectacularly – so much so that two of New York´s four commercial casinos asked Governor Andrew Cuomo for tax breaks last year (he said no). There are concerns that regulating online poker in New York would worsen the situation by cannibalizing the struggling casino industry.
There are also concerns an expansion of gambling could result in an expansion of problem gambling. Whereas a proposed study to assess the level of problem gambling is not going to stop casinos offering on-premises sports betting this year, it could present an obstacle to online sports betting and – by association – any other form of online gambling. Then there is the DOJ´s revised opinion of the Wire Act preventing interstate poker compacts and making a ring-fenced NY market less attractive to operators.
Looking at how neighboring states have performed, even with a cross state compact, you have to ask yourself how many operators will be willing to fork out a $10 million license fee and pay 15% tax on revenues in an unstable federal political environment, in which it could take more than two years to recover the license fee – let alone pay operating costs and marketing costs. Without being able to offer online casino games, the New York market looks exceptionally unattractive for online poker operators.
Never Say Never, but Further Progress Looks Extremely Unlikely
Pretlow´s bill will probably sail through the Assembly Committee on Racing and Wagering (of which he is Chair), but will probably stall thereafter. Pretlow has admitted in the past there is insufficient support for regulated online poker in New York´s Assembly, and it has difficult to see what has changed that would enable the passage of his bill.
Sure, the state needs the money even more desperately than before, but as a standalone product in an already over-saturated market, online poker is unlikely to deliver any significant contribution to state coffers. That´s assuming the bill passes, it is not contested by opponents to an expansion of gambling, and there are operators willing to take a bet on an unstable market.