As early as this summer, poker players in Nevada and Delaware will log onto local gaming sites and find tables that include players from both states. The governors of Nevada and Delaware, two of the three states to legalize internet gambling, signed a deal in February that will allow residents of their states to play online Poker together. Now both governors are hoping that New Jersey, the latest state to license online gambling, will join them, a move that could single-handedly reverse the fortunes of a fledgling internet Poker industry.
Governor Brian Sandoval of Nevada referred to the compact as “a landmark intersection in the road of gaming history”. In truth, interstate compacts are the only way that internet Poker can remain economically viable going forward, especially for states like Nevada and Delaware.
In Delaware, the second smallest state in the Union, the population is too small to sustain a closed internet Poker market. In January, Delaware’s top three gambling operators, Delaware Park, Dover Downs, and Harrington collectively netted a meager $88,000. For perspective, the average McDonald’s restaurant makes over $200,000 per month.
In Nevada, online poker rooms are still trumped by world-class, brick-and-mortar casinos. Insiders refer to the need for a large player pool as ‘gaming liquidity’, a term that became an industry buzzword in 2011, when the Department of Justice reversed its decision to ban internet gambling.
The Interactive Gaming Council describes liquidity as ‘having enough players online to create an experience that retains customers and profitability.’ Sites that have more players can offer their players greater options. Online Poker, in that regard, is a lot like online dating.
For example, Poker Stars, the world’s largest online poker card room, offers a million dollar prize pool every Sunday. They can do this because of the size of their player pool. A closed-market state would be hard-pressed to compete with that.
Nevada recognized the liquidity issue early on and passed the bill to legalize interstate gambling compacts in record time. Declared an emergency measure, Bill AB114 was passed unanimously in both the Assembly and Senate before being signed into law by Governor Brian Sandoval later the same day.
Is New Jersey In?
Nevada and Delaware are slightly better off in a pact, but without New Jersey’s participation, their player pool remains insufficient. New Jersey has ten times the population of Delaware and four times that of Nevada, plus the ability to attract gamblers from nearby New York City and Philadelphia.
Governor Sandoval has gone on record saying he has discussed the compact with New Jersey Governor Chris Christie, but no progress has been made thus far.
Insiders say New Jersey’s participation is unlikely in the near future.
On the day that Nevada and Delaware signed the deal, Adam Krejcik, managing director of Digital and Interactive Gaming for Eilers Research tweeted:
It’s not like the Garden State has anything to lose. The state launched online gambling in November as the latest ploy to reverse Atlantic City’s fortunes, but it has yet to bring in the amount of revenue expected. A larger player pool would generate additional revenue and a larger audience to whom New Jersey’s casinos may market their brand.
Additionally, as the top dog, New Jersey would have the upper hand in negotiating a deal with Delaware and Nevada, which could mean favorable terms in regards to revenue share.
Still there’s a big hurdle, and that may be New Jersey Governor Christie himself, who may shy away from signing off on any additional gambling legislation in an attempt to appeal to top GOP contributor and casino magnate Sheldon Adelson.
Adelson, who spent $92 billion on the 2012 presidential campaign, is a vocal opponent of online gambling and is largely behind the Restoration of America’s Wire Act (H.R. 4301) which Republican Congressman Jason Chaffetz and Senator Lindsey Graham introduced last month.
It will be New Jersey’s loss.
The Way of the Future
When it comes to gambling, it is the more, the merrier. The best example is the lottery. In 1985, states started forming interstate compacts in order to leverage their shared population and boost the jackpot. The higher the jackpot goes, the more people buy tickets. It’s the law of increasing returns.
Game operators in Nevada, Delaware and New Jersey are still struggling to provide their players with the ultimate gaming experience, but the challenge may be short lived.
Gambling Compliance released a report saying that proposals for internet betting could be considered in California, Colorado, Hawaii, Illinois, Iowa, Louisiana, Massachusetts, Mississippi, and Pennsylvania.
If California alone agreed to the Nevada-Delaware compact, it would wipe away the need for any other state to join, not even New Jersey. With close to 40 million people, a state like California could even sustain a successful statewide gambling network without ever opening its borders.
The same Gambling Compliance report predicted slim chances for a national law to regulate Internet poker, which means that interstate agreements are the way of the future. Going forward, as more states legalize internet Poker, the discussion will move toward how much is too much? When is a player pool too vast to be enjoyable?
For now, it’s a waiting game. The Nevada–Delaware compact will have a negligible financial impact in the short term, but it sets an important legal precedent that in the long term could keep internet Poker sustainable.