Legal US iGaming marketplaces are where online gambling operators want to do business. That means operators will have to stop any illegal offshore activity anywhere or risk losing their licenses in legal gambling states. That’s what lawmakers and regulators are loudly telling them.
Today, the Michigan Gaming Control Board (MGCB) sent out a press release notifying operators that Michigan and six other states with legal online gambling sites were seeking federal help with the problem.
Regulators from Colorado, Illinois, Louisiana, Mississippi, New Jersey, and Nevada signed a letter that they sent on April 28 to the US Department of Justice (DOJ). The letter asked the DOJ “to make combating illegal, offshore sportsbooks and online casinos a priority.”
MGCB Executive Director Henry Williams said in today’s announcement:
In Michigan, strict laws and rules govern internet gaming and sports betting and provide consumer protections, promote confidence, and ensure fair and honest gaming. We are willing to help the US Department of Justice in any way we can as it pursues enforcement of US laws against offshore illegal gaming enterprises that take advantage of our citizens.
Meanwhile, lawmakers in Iowa, Illinois, New Hampshire, and New York included language this year in online casino bills and measures amending legal sports betting that prohibited sites legal in their states from participating in any illegal activity elsewhere. None of the legal online casino bills became law.
However, those 2023 failures may not be the bills’ epitaphs.
New Hampshire Sen. Timothy P. Lang Sr., R-Sanbornton, introduced an online casino gambling legalization bill this year with that site-vetting language in it. However, SB104 died on April 26 in a House committee.
Page 8 of the bill detailed a “prohibition on authorization of online gaming agents operating in terror states and illegal markets.”
Lang told Bonus today:
That language would most definitely be included in future bills.
Criticism of Michigan’s Announcement
So the language in existing laws lends itself to the criticism that it’s allowed legal operators within its borders to continue conducting nefarious activities elsewhere. For instance, critics say that Michigan and New Jersey regulators are sounding the DOJ alarm now, despite allegedly overlooking such online gambling operator activity before.
A gaming industry analyst who spoke on condition of anonymity said states allowing online gambling operators to profit from their marketplaces “created a giant loophole that allows illegal offshore iGaming to thrive.” He wasn’t the first to voice such a complaint.
The Michigan announcement said:
Regulated operators recognize licensing is a privilege that can be taken away, but illegal operators do not face similar consequences for failure to follow laws and maintain integrity.
Online Gambling Operators Care About the US Market
If Flutter Entertainment adding a US stock listing in late Q4 2023 isn’t enough proof that online gambling operators care about being part of the legal US marketplace, there’s always the Dublin-based company’s CEO.
Flutter CEO Peter Jackson said yesterday in the Q1 2023 trading update:
We were also very pleased to receive overwhelming support among our shareholders for the addition of a Flutter US listing. The strategic and capital markets benefits this will bring to Flutter will position the Group well for its next phase of growth.
Flutter (Flutter Entertainment 25,35 +0,08%) is the primary owner of FanDuel, a top US online gambling operator in sports betting and casino gambling.
Still, questions remain:
- Do legal online gambling states have enough leverage as top revenue producers to prohibit online gambling operators from conducting business differently elsewhere – especially worldwide?
- Is the potential US market desirable enough to force that change?
Howard Glaser, the global head of government affairs and legislative counsel at Light and Wonder (LNW), told Bonus today:
The proposed New York, New Hampshire, and Illinois prohibitions on licensing illegal offshore operators mean that the days of Wild West operators being allowed in US states are coming to a close. The US is the biggest potential online casino market in the world. So mobile gaming companies in the future will be faced with a clear choice – get out of illegal offshore markets or forget doing business in US states as more states expand into iGaming.
In January, a half-owner of the No. 1 US online casino operator, BetMGM, announced it would leave unregulated marketplaces around the world. Isle of Man-based Entain (Entain PLC 639,40 -1,21%) jointly owns BetMGM with Las Vegas-headquartered MGM Resorts International (MGM Resorts International 35,01 -2,23%).
Most Bills Propose New Laws, Rather Than Amendments
The legal US online gambling market already exists, with many of the laws governing online gambling operators going on the books years ago.
More than half of the states have legalized sports betting since 2018, when the US Supreme Court repealed the Professional and Amateur Sports Protection Act (PASPA).
Delaware and New Jersey online casino marketplaces are a decade old.
The other US online casino states that also launched iGaming years ago are:
- Connecticut
- Michigan
- Nevada (online poker only)
- Pennsylvania
- West Virginia
Consequently, the options for adding online gambling operator vetting procedures into law are to amend current laws or create new ones.
Most state legislators who included such language in online gambling proposals opted for proposing new laws. They included wording about operators doing business in terror states and illegal markets not being granted licenses. If those approved operators ever took up did so, the states would revoke the licenses, the bills said.
In other words, lawmakers wanted new license applications from online gambling operators to undergo fresh forms of scrutiny through new laws.
Conversely, state Rep. Bobby Kaufmann, R-Wilton, introduced Iowa’s HSB228. While just one number away from another bill he proposed – HSB227 to legalize online casino gambling – HSB228 is about Iowa’s current sports betting operators.
HSB228, the bill to amend the sports betting law, hasn’t moved since March 8. That’s the day Kaufmann introduced it and placed it in the Iowa House of Representatives Ways and Means Committee, of which he is the chairman.
His online casino bill is also in the committee, not moving since a March 22 hearing. However, it doesn’t contain a section about prohibiting sites with illegal operations outside of Iowa.
Bills Proposing New Online Casino States Contained Vetting
Online casino legalization bills in New Hampshire and New York failed in 2023, but they’re likely coming back in 2024.
The proposed legislation may include the same language about vetting online casino gambling operators.
Similar to Kaufmann, Illinois Sen. Bill Cunningham, D-Chicago, introduced SB2558, to amend the Illinois Gambling Act (IGA). However, the Illinois bill caught the eye of state Rep. Edgar Gonzalez Jr., D-Chicago.
Despite Cunningham’s bill not advancing after March 29, there’s a possibility that aspects of it will be included in a 2024 Illinois online casino legalization bill Gonzalez told Bonus he may introduce in 2024.
On March 30, Gonzalez told Bonus:
Some stakeholders in the iGaming industry reached out to my office supporting this language. The language targets bad actors who, although licensed in other countries, might be using ill-begotten gaming money obtained through criminal activities, such as money laundering schemes, trafficking rings, amongst other criminal sources. Certain nation states are more lax in their granting of licenses. So we want to make sure we play by the book here in the States.
All Eyes May Fall on New York in 2024
Before the New York online casino bill failed, online gambling operators were excited about SB4856.
It would’ve meant the No. 1 sports betting revenue state was adding iGaming, which operators say generates even more money. Bonus found in dual online gambling states that online casino gambling generated 70% of the revenue and sports betting accounted for 30%.
So operators supported SB4856, which proposed a 30.5% tax rate on online casino operators. Analysts believed legal New York online casino gambling would result in $1 billion in tax revenue each year.
However, the nine-page bill proposed by state Sen. Joseph P. Addabbo Jr., D-Ozone Park, failed in 2023.
Addabbo didn’t immediately return a Bonus request for comment about whether the 2024 bill will include the three sections in SB4856 about how “the commission shall conduct a comprehensive investigation of the applicant.” The “commission” is the New York State Gaming Commission (NYSGC).
The NYSGC investigation’s purpose is:
to determine whether the applicant or any of its affiliates, including entities under common control, is knowingly (i) accepting revenue, directly or indirectly, derived from any jurisdiction sanctioned by the Office of Foreign Assets Control (OFAC) of the United States Treasury Department, or (ii) accepting or assisting, directly or indirectly, in the acceptance of online wagers or consideration related to online wagering from any country in which such online gambling is prohibited or illegal.
Addabbo’s bill said if the commission found that the online gambling operator was getting revenue from a terror state or an illegal gambling site, the operator wouldn’t be granted a New York iGaming license. Also, if the commission found a licensed operator was doing so, that operator would lose the license.
While SB4856 didn’t retroactively vet New York’s nine sports betting licensees, it would be a shock if the same operators didn’t apply for iGaming licenses.
Those online gambling operators are:
- BallyBet
- BetMGM
- BetRivers
- Caesars
- DraftKings
- FanDuel
- PointsBet
- Resorts World Bet
- WynnBet
All of those operators offer online casino gambling in states where it’s legal. So a new law would verify that the existing sports betting operators were following the new law, too.
Plus, that’d likely be the case in other states. For instance, in Lang’s state of New Hampshire, DraftKings Sportsbook is the sole online gambling operator.
So if states with legal sports betting move ahead with legalizing online casino gambling in 2024, they may add these vetting clauses. If so, they’ll likely be verifying two apps with one law.
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