Ifrah Law’s Three iGaming Predictions for 2014

As long-time observers of and participants in the internet gaming industry, we at Ifrah Law looked forward to 2013 as a year full of promise for internet gaming, particularly in the United States.  In the end, industry progress in 2013 was mixed:

The year saw the enactment of online gaming in New Jersey and online poker in Nevada and Delaware, but also saw a district court judge and then a three-judge panel of the United States Court of Appeals for the Third Circuit block New Jersey from proceeding with sports betting.  During 2013, a number of the individual defendants charged in the Black Friday case in the Southern District of New York settled their cases, and the former customers of Full Tilt Poker saw the beginnings of the remission process that is promised to return to them some or all of the money they had on deposit with Full Tilt at the time of the April 2011 seizures.

After a year filled with so many changes, we naturally are looking forward to see what will happen in theinternet gaming industry in 2014.  Here are a few of our predictions:

Easy Money

This past year we witnessed the definitive shift away from an expectation that poker would be legalized through federal legislation, and toward state-by-state enactment of regulatory schemes for online poker.  The limitation of the state-by-state approach, of course, is that the legalization of poker in a state only permits individuals in that state to play against other individuals in that same state.  In a state like Nevada or Delaware with small populations (and small player pools), there will be significant pressure to increase player liquidity by executing agreements with other states that will permit individuals from all of those states to play against one another.  It is very likely that Delaware, New Jersey and Nevada will enter into a multistate poker agreements with each other in 2014, and that any other states that enter the market will be close behind.  To the extent that states other than New Jersey authorize online gaming other than poker, those agreements may also encompass other games such as slot machines.  The result will be more people at the tables, bigger prize pools, and more competitive games. This, in turn, is likely to increase the popularity of the games, meaning more money coming in for the states to share. And more money will likely to encourage states on the sidelines to enter the market to get a cut of the earnings.  These latecomers may actually rely on the established regulatory bodies – such as those in New Jersey and Nevada – rather than creating licensing and regulatory infrastructure in their own states.

50/50

It seems obvious to us that other states will want to tap into online poker or gaming as a source of revenue.  But it is less clear which states will make the move – particularly the states with massive markets like California.  With a population of some 38 million people, California has nearly five times the population of New Jersey and more than a dozen times the population of Nevada, making it potentially the most lucrative online market in the United States.  So will California join the fray in the coming year?  Odds are even; numerous bills have been discussed in the past, but the state will have to start accelerating its legislative agenda in order to get anything off the ground in 2014.  The prominence of tribal gaming in California poses special challenges, as the Native American tribes – who view gaming as their special prerogative –will undoubtedly demand a significant share of revenues.  The only certainty is that, if California does enact online gaming, the size of its population will permit it to dictate to other states the terms of interstate agreements for its players.

Hail Mary Pass

No list of predictions for the year would be complete without calling one longshot.  In 2012, New Jersey attempted to enact sports betting in its casinos, but progress was barred after a suit by the National Collegiate Athletic Association and professional sports leagues under the Professional and Amateur Sports Protection Act (PASPA).  The past year saw the district court issue its injunction in NCAA v. Christie, and a federal appellate court uphold that prohibition.  This year we will see whether the United States Supreme Court will take the case and, if so, how it will rule.  The case poses just the kind of issues that the Supreme Court often addresses, including the balance of power between the power of the federal government and the rights reserved to the state by the United States Constitution.  If the Supreme Court were to hear the case and rule in favor of New Jersey, intrastate sports betting would undoubtedly soon begin, and be followed soon thereafter by online sports betting.  But the numbers do not lie: The Supreme Court historically acceptsfewerthan one percent of thecases it is asked to hear.  In the end, we have to concede that a favorable ruling from the Supreme Court is a bit of a HailMary pass.  But like its football namesake, to watch it happen can be awfully exciting because of what is at stake.

Here at Ifrah Law we will be keeping a close watch on developments in 2014 so that our clients may benefit from all of the new opportunities that are sure to appear in the online gaming industry.