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Happy Together

Happy Together

Of the three states offering online gambling in the U.S., Nevada and Delaware have been hampered by their overall small state populations and player pools.

So the two states have done something about it by signing a pact to combine their player pools. Under the agreement, Nevada and Delaware residents will be able to play at the same online tables.

The pact is the first interstate internet gaming partnership in the U.S.

“We’re standing in a moment of history today,” Nevada Governor Brian Sandoval said at a news conference with Delaware Governor Jack Markell. “We hope the pact will serve as a model for multi-state collaboration and that other states will see the benefits of the agreement and soon decide to join for themselves.”

The deal is the first between two states offering online gambling, and was made possible after a 2011 U.S. Department of Justice ruling cleared the way for states to legalize online gambling within their borders. Three states then legalized online gaming—Nevada, Delaware and New Jersey.

The DOJ’s opinion centered on the Unlawful Internet Gambling Enforcement Act of 2006, or UIGEA, which prohibited banks from processing any bets made in prohibited forms of gaming. The DOJ said the law only applies to sports betting and that internet transactions between states where gaming is legal should be viewed as legal.

Still, the pact between the two states may test that interpretation. The two governors, however, see the partnership as a logical step for a new industry.

“We began that conversation because we know that Delaware and New Jersey were the only other states that were looking at passing online gaming,” Sandoval said. “We wanted to get ahead of the curve with that, and the conversation began in earnest subsequent to the passage of the bill.”

Nevada began offering online poker early last year, and Delaware went online with both poker and casino games in October. Players have to be physically located in each state to play on their online sites.

However, since both states have relatively small populations, online revenue has been relatively small in both Nevada and Delaware. The pact is seen as a necessity by many analysts to increase player pools for sites in both states. Online poker rooms especially need a large player base to operate well.

There are many thorny issues to be worked out between the two states, however. Nevada has legalized only online poker, while Delaware accepts wagers on the full scope of casino games. There were no details on how Nevada players will be prevented from accessing non-poker games.

Also short on detail was the massive difference in tax rate. The online gaming tax in Nevada is the same as the land-based casino tax—6.75 percent. The same is true in Delaware, but the tax rates are much higher—43.6 percent on slots, and 34 percent on tables. How the taxes will be designated is still a mystery.

More dangerous—for Delaware at least—is the imbalance of bonus money offered by online casinos because of the higher tax rate.

Melissa Blau, an online gaming consultant, told the iGaming Legislative Symposium in Sacramento last month that the deal could favor Nevada.

“Because of its lower tax rate, Nevada online poker rooms can offer more bonuses to players, meaning that they’d be playing with a bankroll made up largely of bonus money,” she explained. “In Delaware, where they offer much lower bonuses, most players will be using real cash, and that real cash could end up in Nevada more often than not.”

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