Hawaii could legalize online gambling in a limited way in 2024 despite not being high on anyone’s list of states likely to do so. Sen. Ronald D. Kouchi has introduced a bill to create a single-operator market for online poker and sports betting.
As it stands, Hawaii has no legal gambling whatsoever. It is almost unique in that regard, with Utah being the only other state in that situation. There have been other attempts to change that in recent years, but without any success.
Lacking even a lottery, Hawaii’s gambling expansion is an effort that must start from scratch. Sen. Kouchi’s bill would establish a Hawaii Gaming Control Commission (HGCC) to oversee the new products. It would consist of seven members appointed by the Governor and working part-time.
The bill, SB3376, is explicitly online-only and would keep Hawaii free of any regulated retail gambling. The HGCC’s first duty would be to establish a process to select a single operator for licensing. The bill gives the hypothetical Commission 120 days to begin accepting applications and a further 90 days to select a winning candidate for a 10-year renewable license.
The bill’s effective date is July 1, 2024, so the selection of an operator would need to happen by Jan. 27, 2025. In other words, Hawaii would be looking at a probable market launch in the first half of 2025.
Need to Combat the Black Market
The bill begins with an explanation of its rationale. It asserts that:
The legislature finds that tens of thousands of Hawaii residents illegally gamble using online sports and poker gambling websites or cell phone apps. These gambling websites often are operated offshore and are not subject to regulation or taxation by the State.
The National Council on Problem Gambling’s National Survey of Gambling Attitudes and Gambling Experiences confirms this, stating:
Legal prohibitions or restrictions on gambling have minimal effect on gambling participation. Even in the two states that allow no legal gambling (Hawaii and Utah), more than half the adults report some gambling activity in the past year.
The bill then argues—correctly, in the opinion of Bonus—that creating a regulated market to capture that lost revenue is in the best interest of the state and its citizens.
Finally, it points out the urgent need for such revenue to deal with the aftermath of the 2023 wildfires that killed nearly 100 people, destroyed over 2,000 buildings and caused $5.5 billion in damage.
Terms of Hawaii’s Online Gambling Proposal
Applicants would have to cover the HGCC’s investigation costs up to $50,000, and the operator receiving the license would have to post a $200,000 bond to guarantee its compliance and revenue payments.
The licensee would then be allowed to offer sports betting and online poker but not casino games.
The financial terms are for a profit split with the state, as well as a tax. The proposal is unusual in that it’s heavily in the state’s favor to start but grows more beneficial to the operator with each passing year.
Under the profit split, the operator would keep only 30% of its gross profits in year one (less tax), paying 70% to the state. However, each successive year, the percentage would shift by 5%.
So, the split would be 65/35 in Year 2, 60/40 in Year 3, and so on. By Year 14, the operator would keep 95%, and the state would collect only 5%, after which the operator would presumably pay only the tax.
All funds received by the state would go to the wildfire relief fund. That urgent need to raise money is presumably the reason for front-loading the state’s share so heavily.
As for the tax rate, it appears not to have been specified in the bill’s first draft. The relevant section is missing numbers:
Tax on gaming. Upon every person engaging or continuing within the State in the business of gaming, as authorized under chapter [], the tax shall be equal to [] per cent of the gross income of the business.
(The “[]” are inserted by Bonus to make clear where there appears to be missing information.)
Will Hawaii be Kentucky All Over Again?
Its unique financial structure aside, Hawaii’s proposal is unusual for two reasons:
- Creating an online gambling market in the absence of retail options and
- Proposing to legalize online poker but not online casino games
In both regards, it resembles the proposals put forth repeatedly by former House Representative Adam Koenig in Kentucky before the state eventually passed a sports betting bill.
That’s a comparison that might not excite Hawaii poker players. Despite Koenig’s personal desire to see poker legalized, that portion of his proposal became a casualty of the more important push to get sports betting through.
It would not be surprising to see the same happen in Hawaii. Poker is a niche product without much potential for revenue in a small state like Hawaii. At the same time, some gambling opponents (incorrectly) see it as more dangerous than sports betting due to its closer association with casino culture.
That said, there is one example of an active online poker market without casinos: Nevada. Technically, both are legal under state law, but the regulator has only authorized online poker sites because some of the state’s retail casino operators fear online competition.
But Nevada shares its poker traffic with Delaware, New Jersey, and Michigan. Sen. Kouchi’s bill doesn’t forbid such interstate compacts, but neither does it expressly direct the HGCC to negotiate one, as recent proposals have in some other states.
Hawaii’s population is comparable to West Virginia’s—1.4 million vs. 1.8 million. West Virginia online poker has been a legal possibility since mid-2020, but no operators were interested in it as an isolated market. That may or may not change since it has followed Michigan’s lead in joining the Multi-State Internet Gaming Agreement.
That would also be a necessary step for Hawaii if it is to have any hope of sustaining traffic to a regulated online poker room.
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