World Regulatory Briefing (WrB) Philadelphia Day 2 Recap

World Regulatory Briefing (WrB) Philadelphia Day 2 Recap“It’s an evolutionary process- you’re never done”. –Patrick Moore, Director of Compliance, GLI

“We need to take the bull by the horns and drive it, otherwise we’ll be in the same place one year from now”. –Peter DeRaedt, President, Gaming Standards Association

“If you look at the speed this industry travels, I want it to be vague at the legislative level”. –Richard Schuetz, Commissioner, California Gambling Commission

“The rollout of the November 26th deadline will be a lot more successful than the October 1st rollout of Obama Care”. – Bill Pascrell, Principal Princeton Public Affairs Group

Day two of the World Regulatory Briefing (WrB) Philadelphia covered many of the same topics as day one in addition to cooperation and communication between US states and overseas jurisdictions, potential tax complications and the unique position of US lotteries.

One loud, clear message that was delivered today (and yesterday) is that compacting will be the most difficult hurdle for the regulated online gambling industry in the US, that is, if compacting even happens.

On the other hand, Bill Pascrell, New Jersey native and Principal of Princeton Public Affairs Group, does not view the compacting issue as too difficult- take two people from states who want to make a compact, put them in a room and let them work the details out, he said.  Pascrell acknowledges and agreed that California may never compact with Nevada, but other compacts will happen, he predicted.

Richard Schuetz of the California Gambling Commission believes the compacting conversations we’ve continually drilled into at WrB Philly have been driven by Nevada.  Compacts are of critical importance in Nevada he said, but also confirmed that in California there have been no discussions of liquidity concerns or compacts.

Before we even get into compacting, step number one should be for the regulators to communicate with each other and “commonalize” what they can.  Kevin O’Toole of the Pennsylvania Gaming Control Board believes that suitability will always remain a state by state decision, but there could be some streamlined guidelines across the country, especially the more technical standards.

Continuous communication between the states, and with European jurisdictions that have years and years of experience in online gambling regulation, is of upmost importance.  Peter DeRaedt of the Gaming Standards Association (GSA) explained his association is trying to promote a collaborative environment for the industry so that we can start to divide and conquer.  DeRaedt has talked with other associations, including Geoff Freeman of the AGA at the EiG conference several weeks back, and is encouraging collaboration throughout the USA and across the pond.

DeRaedt is not alone in his encouragement to speak with regulators across the pond, Roger Parkes of Gambling Integrity Services strongly advised US states not to start from scratch, rather they should chat with European regulators who have been in business for years- they know what to do, he said.

Tom Mungham, the COO of the Alcohol and Gaming Commission of Ontario, admitted they are “shameless plagiarizers” – he’s talked with regulators in Canada to find out what has worked, what has not worked, and he’s talking with Nevada to see how things are going with geo-location- its all about collaboration.

Over in Alderney, an online gambling regulator that has been in business for years, Michael Ellen of the Alderney Gambling Control Commission shared that his jurisdiction literally “nicked” their guidelines from Australia twelve years ago.  However, the guidelines are always a work in progress, for example, protection changes had to be made two years ago to manage the emergence of the cloud.  “The world keeps changing, the world keeps evolving- we must keep up with it, it’s a continuous job”, he said.

Patrick Moore of GLI summed it up nicely when he said that we work in a small, niche industry yet we don’t really take advantage of this fact- we’ve got all these associations but we need more collaboration- simple as that.

Something that is not so simple is the tax issue within the United States and beyond should interstate and/or tribal compacting actually become a reality.

Several possible models for sharing online poker tax revenue between states were presented at WrB, one by Greg Mullally that proposes placing the tax on the player directly.  Tax Associate Brad Polizzano added that competition could arise even within individual states such as California as on-reservation is not state taxed.  No state tax would be an unfair advantage within California, but this wouldn’t be an issue on or off reservation if the player is taxed as opposed to the gross gaming revenue itself.

Regardless of the different tax scenarios that are possible, Mullally suggested that a first good step would be to create a possible solution and get the conversation going. Polizzano agrees and said we cannot underestimate how critical revenue sharing is for compacts, treaties, or whatever you want to call it.

It is possible that tax complications may not even hit the drawing board if the interstate and international compacts fail to form, an absolute possibility based on what was discussed over the past two days here in Philadelphia.

However, as Attorney Mark Hichar pointed out, the American state lotteries have a longstanding history of cooperation with other lotteries, something that other players in the online gambling market don’t have.  Take for example the TriState lottery, an agreement between Vermont, New Hampshire and Maine, three US states with relatively small populations, so it doesn’t really make sense to have separate lotteries.

With all this experience in agreements across state lines in the form of shared jackpots and shared products, some say that if interstate compacting is going to happen in the regulated US online gambling market, its going to be the lotteries.

Attorney David Gzesh exclusively shared with at WrB, “Given the divergence in interests expressed by larger vs. smaller states towards any multistate compacting on the casino front, the most likely short term path to multistate compacts would have to come from the lottery sector.  They know how to enter multistate compacts and once they decide to do online gaming they are ultimately free to do so politically and under the law”.

Now there’s some interesting food for thought.