Now that Pennsylvania has legalized iGaming, how long will it be before other states join the club?

The year 2013 was the momentous time that saw online gambling legalized for the first time in three U.S. states, setting in motion high hopes that a critical mass of other states would soon follow suit.

But the underwhelming performances of New Jersey, Delaware and Nevada in their respective trial runs didn’t offer sufficient fodder to incent any other states to join the party.

As a result, talk of online gambling expansion in the U.S. in the ensuing years was just hot air.

But things changed in 2017. A strong performance by New Jersey’s online casinos, an interstate poker compact forged between New Jersey, Delaware and Nevada that creates a shared player pool, and a dramatic last-minute push in October to authorize internet gambling in Pennsylvania—as part of a massive package expanding gaming—were all, in and of themselves, monumental developments.

While many may be bemoaning Pennsylvania’s iGaming tax structure, which could very well prove punitive to interested operators, the passing of enabling legislation was an iconic victory that proponents hope will have spillover effects on legalization efforts in other states.

Already the country’s second-largest gambling market, a successful rollout of iGaming in Pennsylvania could indeed induce other states to take a heightened interest in exploring the activity to generate new tax revenues and bolster their land-based casinos.

At the federal level, iGaming proponents received quite a scare in January 2017 when then-attorney general nominee Jeff Sessions stated that he was “shocked” by the Justice Department’s 2011 decision to reinterpret the Wire Act so as to permit online gambling on a state-by-state basis.

Sessions went on to indicate that he would revisit the ruling and “make a decision on it based on careful study.”

For a multiplicity of reasons, that revisiting didn’t happen in 2017. Sessions has since pledged to recuse himself in the event such a review should occur under his watch because of his hiring of Charles Cooper, a lawyer who was simultaneously working for the Coalition to Stop Internet Gambling, to represent him amid a congressional investigation of possible Russian interference in the 2016 presidential election.

Obviously, the potential black swan event that threatens the viability of the entire nascent industry in the U.S. would be an undoing of the 2011 Wire Act reinterpretation. While the prospects of this occurring are low, iGaming opponents are mounting enough of an effort to merit concern.

What does 2018 hold in store at the state level? New York, Illinois and others appear positioned to make a legislative push to legalize online casinos or online poker once again in 2018, and a few new sleepers seem poised to get in on the act as well.

Will the momentum continue in 2018? Where will the activity be centered? Just how serious will these endeavors be? 2018 is also an election year—what impact will that have?

Here is a state-by-state scorecard gauging the likelihood of any form of online casino or poker being enacted this year.

California

One of the first states to seriously consider legalization of any form of internet gambling, never does a year pass in which California doesn’t have serious conversations about online poker.

For the last decade, the gambling industry stakeholders in the state, namely Indian tribes, card rooms and racetracks, have always seemed to find just enough common ground among them to make a serious push on the legislature front, only to come up short each year.

The main reason for the perennial failures has been an inability of the state’s 16 largest tribes to agree among themselves on what an acceptable framework would look like, particularly with regard to “bad actor” provisions aimed at keeping international operators with less-desirable track records out of the state.

The needle didn’t advance too much in 2017, and arguably moved backward when the powerful San Manuel tribe threw in the towel and withdrew from one of the leading iPoker advocacy coalitions, which also includes PokerStars and several card rooms, to redirect resources elsewhere.

It seems to be a safe assumption that we’ll see some sort of online poker legislation introduced in California yet again in 2018, but don’t hold your breath. It won’t advance unless there’s a major breakthrough.

Odds of Passage: 30%

Connecticut

While Connecticut is not typically regarded as a potential iGaming hot spot, it could emerge as a sleeper candidate in 2018 as neighboring states expand their gambling offerings. The most

formidable of the new competitors will be MGM Springfield, which is slated to open its doors in late 2018, and Wynn Boston Harbor in mid-2019.

While no formal efforts have been made to push the concept through the legislature in recent years, Foxwoods and Mohegan Sun—the two tribal casinos that have dominated Connecticut gambling for almost three decades—could find online gambling to be an appealing defensive bulwark against the powerful new players in the New England market.

Also working in Connecticut’s favor is the interstate poker compact that was forged by the current iGaming states last year. Being a small state of just 3.5 million residents, Connecticut could potentially benefit heavily from being able to join such a compact and potentially access a much broader market.

Odds of Passage: 20%

Illinois

Sitting atop the list of states in desperate need of new revenue, Illinois’ Senate came out of nowhere in 2017 to pass a bill enabling online gambling and daily fantasy sports.

That legislation will kick off 2018 in the House, which didn’t pick it up last year but may have more interest this time around—particularly as Illinois’ budget deficit now tops $6 billion.

“Will House Speaker Mike Madigan, a gambling-expansion opponent who moonlights as the state’s most influential politician, agree to move the internet gambling cum daily fantasy sports bill?” said Chris Krafcik, research director at

GamblingCompliance.

“If Madigan does, will his political archrival, Governor Bruce Rauner, sign it? Call us curious.”

Other questions will need to be resolved, particularly as Illinois’ land-based casinos continue to feel the pinch from the explosion of video gaming terminals throughout the state. Will they push back against online play over cannibalization concerns or see it as a potential lifeline?

Odds of Passage: 70%

Michigan

A Hail Mary attempt in late 2017 to rush through legislation that would authorize online casinos and sports wagering through Michigan’s House predictably went nowhere.

But the effort was not a complete loss. A crucial mile marker was crossed in that the state’s three commercial casinos in Detroit signaled their support for iGaming, at least conceptually, removing what had been a formidable impediment.

However, tribal interests in the state still upset over losing market share to the Detroit casinos remain wary about potential cannibalization impacts of new forms of gambling, even though the proposed legislation would allow tribes a piece of the iGaming pie. This will likely prove to be the major roadblock moving ahead unless a deal is brokered.

But because iGaming has an aggressive proponent in state Rep. Brandt Iden, who held a hearing on the topic last September in his Regulatory Reform Committee, a House floor vote in 2018 doesn’t appear to be completely far-fetched.

Advancing such legislation through Michigan’s Senate will be a much tougher sell. While an iGaming bill has been introduced, there are questions about its constitutionality, and the chamber’s leadership has signaled that it isn’t keen to move on it in 2018.

Odds of Passage: 40%

New Hampshire

New Hampshire became the fifth state to legalize online lottery sales in 2017, raising hopes that a more aggressive gambling expansion might be in the cards.

Later in the year, a stripped-down placeholder bill was introduced in the state legislature that would have decriminalized, but not regulated, online gambling—only to be killed by a unanimous vote in the House Ways and Means Committee in late October.

The prospects of a further iGaming push in 2018 will likely depend on the success of online lottery sales, which were slated to commence at the beginning of the year.

In the absence of that, it’s unclear where the necessary momentum would originate and who the potential licensees would be, though the state could adopt a model similar to Delaware whereby online gambling is housed under the state online lottery’s umbrella.

“With no land-based commercial casino industry to lobby for internet casino gaming expansion in New Hampshire, we are doubtful there will be another push for internet gaming expansion in 2018,” said Krafcik.

Further throttling momentum is that the state representative who introduced the 2017 iGaming bill is facing sexual assault charges and is currently awaiting trial.

Odds of Passage: 30%

New York

The underperforming bricks-and-mortar casinos in upstate New York may have some in the Empire State skeptical about the merits of authorizing even more gambling, but online play might also prove to be a steady complementary revenue stream.

Against that backdrop, along with the state’s $4 billion budget deficit and pent-up momentum from 2017, the prospects for the enactment of online poker legislation in 2018 seem favorable.

Indeed, iPoker bills that were introduced in both the New York Assembly and Senate in 2017 are still in play for 2018.

2017 nearly saw a breakthrough, but the Assembly bill was ultimately torpedoed in the summer when other interests came in at the 11th hour to lobby for the inclusion of online slots and table games.

While Senate passage in 2018 seems to be a slam dunk, getting a bill through the Assembly figures to be the logjam once again.

“We think legislative movement in New York is likely, particularly in the Senate, which approved internet poker legislation by near-unanimous margins in 2016 and again last year,” said Krafcik, noting that movement in the lower chamber will be much more challenging.

The level of interest in the Assembly will be the key indicator to watch. Bill A5250 will kick off the year in the Codes Committee, but there are signs that Gary Pretlow, chairman of the Assembly’s Racing and Wagering Committee and a champion of the 2017 effort, is less enthusiastic this time around.

Notably, Pretlow’s concerns that online poker will cannibalize revenues from the already underperforming land-based casinos is shared by the office of Governor Andrew Cuomo, who would need to sign off on any enabling law.

All in all, New York is the most promising candidate of all the states in 2018 for iGaming, particularly as both of its neighbors to the south have now legalized the activity.

Odds of Passage: 80%

Massachusetts

Massachusetts, which first opened commercial casinos just three years ago, emerged as a dark-horse online gaming candidate in 2017 before short-term hopes were derailed in the summer.

In July, a special commission recommended that lawmakers hold off on looking at online gambling until after Wynn Boston Harbor opens in 2019.

While there’s eagerness to explore the concept, it will likely have to wait a few more years.

“We think Massachusetts is a near-term candidate for internet casino gaming expansion but that lawmakers are unlikely to take up enabling legislation until after the state’s full complement of casinos is operational,” said Krafcik.

Odds of Passage: 20%

Rhode Island

An uptick in optimism that sports betting will soon be legal nationwide prompted a sudden rush of interest in online gambling legalization in Rhode Island toward the end of the year.

In December, Senator William Conley, chairman of the state’s Senate Finance Committee, expressed in an interview with local media his enthusiasm for online gambling and online sports wagering should the Professional and Amateur Sports Protection Act, which prohibits single-event sports betting outside of Nevada, be undone.

While it seems that Conley may have been conflating the concepts of online sports betting and online gambling, his comments—along with the rapid expansion of gambling in neighboring states that will undoubtedly put more financial pressure on Rhode Island’s casinos—are reason enough to be pay attention, though movement this year on legalizing online casinos or poker seems unlikely.

Odds of Passage: 20%

Washington

While there was no action to report in 2017, Washington state has flirted with online gambling and poker legislation in prior years dating back to 2015, and it is a dark-horse candidate to take up the matter again this year.

A 2016 report by Spectrum Gaming, commissioned by the state, estimated that Washington has all of the characteristics to become a $100 million gross gaming revenue market for iGaming.

So there’s appetite and interest. Whether or not that translates into real momentum is a different story.

The upshot: don’t hold your breath, but Washington state is certainly worth keeping an eye on.

Odds of Passage: 20%

West Virginia

West Virginia has been eyed for several years as a potential iGaming sleeper candidate due to a willingness among key state officials to explore the concept, and because its land-based casinos have been continually pummeled by new competition in the mid-Atlantic region.

Those predictions seemed to materialize, at least in part, last March when a bill that would legalize internet gambling and delegate licensing and regulation responsibilities to the West Virginia Lottery Commission was introduced by state Rep. Shawn Fluharty and three co-sponsors.

The euphoria proved to be a flash in the pan, however, as House Speaker Tim Armstead quickly indicated that he had no interest in advancing the legislation.

While the bill is still alive at the committee level in 2018, and it has not been objected to by the state’s commercial casinos or the lottery commission, brokering a deal with Armstead or convincing him to change his mind will be a challenging proposition.

But there is a wild-card factor in play: Will witnessing the massive gambling expansion being rolled out in neighboring Pennsylvania be enough to give Armstead second thoughts?

Odds of Passage: 50%

Federal

In Congress, a number of key proponents of the Restoring America’s Wire Act in the House of Representatives, including Jason Chaffetz (R-UT) and Charlie Dent (R-PA), have indicated they will retire at the end of 2018.

The RAWA bill, versions of which have been floating around and resurfacing for several years but were not reintroduced in 2017, would effectively reverse the reinterpretation by legislative mandate.

While a respectable anti-iGaming contingent still remains in Congress, it appears that heading into 2018, the efforts of Coalition to Stop Internet Gambling and other iGaming opponents are acutely focused on lobbying the Justice Department to reverse the ruling—seemingly a simpler route than pushing for a legislative solution.

In late November, Senators Lindsey Graham of South Carolina and Dianne Feinstein of California sent a letter to the Justice Department urging the agency to revisit and withdraw its 2011 opinion. The week before Christmas, four members of Congress—Daniel Donovan of New York, Brian Fitzpatrick of Pennsylvania, Tom Garrett of Virginia and Louie Gohmert of Texas—sent a similar letter to the agency with the same ask.

Regardless of the strength of these efforts and whether they are targeted at Congress or the Justice Department, opponents still face an uphill battle when it comes to potentially reversing the interpretation.

Odds of a change in status quo: 30%