The United States of Online Gaming

Congress is not close to passing federal legislation that would authorize interstate online gaming, but last week interstate online gaming took a giant step toward becoming a legal reality.

On February 7, New Jersey Governor Chris Christie issued a conditional veto of online gaming legislation that informed state lawmakers that he would sign into law a bill permitting broad online gaming as soon as lawmakers bumped the tax rate from 10 percent to 15 percent and inserted a sunset provision that will require New Jersey to revisit the law in 10 years. State lawmakers immediately indicated in the media that they would do so as fast as possible.

Just as quickly, Nevada Governor Brian Sandoval and Assembly Leader William Horne announced that they would aggressively push for legislation that would empower Nevada, which already has approved intra-state on-line poker, to enter into interstate compacts with other states that permit gaming so that residents of those other states can play online through computer servers that are licensed and located in Nevada.

“Online gaming is a creature that is out of the bottle, and Nevada needs to be first,” Horne told the Las Vegas Sun.

“This is the future of gaming,” New Jersey State Senator Raymond Lesniak told The Press of Atlantic City. “It will give the Atlantic City casinos the opportunity to be the Silicon Valley of Internet gaming by positioning them to be the hub of future expansion into other states.”

But Delaware is poised to beat both New Jersey and Nevada to the market for authorizing online gaming.

The Delaware Lottery Office issued a request for proposals last week seeking bids from vendors to operate the state’s centralized online gaming system with a strict stipulation that it would be up and running by September 30 of this year. Delaware’s online bid package calls for awarding all contracts by early May and requires bidders to have at least one year of experience running legal, real-money online betting operations in Europe or North America.

“The first states to legalize and put online gambling in place will not only benefit from tough competition among rival contractors, but they’ll have the ability to set the terms of the new interstate compacts, experts say,” according to Doug Denison of The Wilmington News Journal.

“We have quite a head start,” Delaware Lottery Director Vernon Kirk told the paper.

If Delaware is the first state in what appears to be the imminent formation of the United States of Online Gaming to launch online gaming, it will be the second time the state has led the way. Delaware was the first state to ratify the United States Constitution.

However, no matter which state wins the race to be the first member of the United States of Online Gaming, software developers and distributors will need to acquire, manage and understand a portfolio of licenses and reporting requirements in all states in which they operate and enter into agreements to acquire authorization and regulation. Such a portfolio is likely to be complex and prudence will counsel that it receive regular attention in order to maintain continuous and uninterrupted compliance.