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MA Commission Loves Online Gambling, But Wants To Take Things Slow

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The Massachusetts Special Commission on Online Gaming, Fantasy Sports Gaming and Daily Fantasy Sports unveiled a draft version of its findings and recommendations during its final meeting on Tuesday.

Play MA has obtained a copy of the draft. The report is all-encompassing and offers multiple recommendations. The commission is expected to submit a finalized version to the Massachusetts Legislature on Monday, July 31.

Key findings and recommendations

After multiple hearings and discussions during the last eight months, the nine-member commission came to the following conclusions:

  • “Online gaming” should be defined broadly to encompass all manner of online games (including DFS).
  • The legislature should work to balance regulation with innovation. Additionally, it needs to develop a robust framework as to how all online gaming should be governed, taxed, and regulated.
  • Rather than legalizing all online gaming at once, the legislature should retain oversight on which parts of online gaming should be legalized.

In reaching those conclusions, the commission recommends:

  • Permanently legalizing and regulating DFS under the classification of online gaming.
  • Slowing discussions about legalizing other forms of online gaming until the state’s land-based casinos are open for business.

Legalize on a case-by-case basis

The commission is recommending the legislature “proceed with caution” when it comes to legalizing online gaming. In fact, it recommends making all online gaming illegal. Then the state can legalize and regulate on a case-by-case basis.

“The Special Commission recommends that online gaming be illegal, but that there be game-based exceptions that may be legalized by the Legislature and regulated and taxed appropriately,” the report states.

The report goes on to explain the commission’s reasoning for supporting the legalization of DFS. It also justifies the commission’s cautious approach to online casino games:

“At this point in time, the Special Commission recommends legalizing DFS as a subset of online gaming and enacting legislation that would put into law the proposed regulatory, governance, and taxation system described above.

The Special Commission does not recommend extending legalization to more online gaming, such as traditional table games, at this time in order to allow brick-and-mortar casinos to open, but urges a re-evaluation of online casino games once that occurs.

The licensed casinos are in the process of investing billions of dollars in their facilities and the Special Commission believes that it would be prudent for Massachusetts to monitor the outcomes from these investments before proceeding with more robust online casino gaming.

The Special Commission also recommends that, if and when legislation permitting online casino gambling does occur, the existing brick-and-mortar casinos in Massachusetts be offered some form of preferential treatment. For example, through right of first refusal if a certain limited number of licenses are considered in deference to their investment in Massachusetts.”

It’s all gambling

Perhaps the most interesting aspect of the report is the recommendation of a broad definition of online gaming. This is something Massachusetts Gaming Commission Chairman and Special Commission member Stephen Crosby has long advocated.

In the report, the commission pushes for the following definition of online gaming:

“… an activity, offered through the internet or through other communications technology, that allows a person utilizing money or currency of any kind, to transmit electronic information to (1) risk something of value (2) on the outcome of an event (3) with an opportunity to win a prize. This term shall not include the purchase of stocks or other investment vehicles, online lottery games conducted by the state lottery commission, online pari-mutuel horse wagering, online bingo, online charitable gaming, or otherwise lawful online contests.”

Essentially, a wager of any kind in any online format constitutes online gambling, regardless of skill.

This definition eliminates the possibility of DFS-esque legal battles over skill and luck and whether a new product fits into the gaming box or needs a new classification.

If the legislature adopts the commission’s recommendations, it would all be classified as gaming in Massachusetts.

Benefits of online gaming abound

Even though the commission didn’t advocate for legalizing online gaming beyond DFS at this time, the report is very favorable to online gaming.

The report lists five benefits of online gaming:

  • Tax revenue
  • Jobs
  • Reduction in illegal activity
  • Transparency
  • Safety of online operations

Here’s a closer look at what the report says on each of these topics.

Tax revenue

“Many states considering legalization of online gaming see it as a solution to budget shortfalls; however, the tax rate should be carefully evaluated to balance state interests with the potential to cripple an emerging industry.”

Jobs

“Legalization of online gaming in the state will both create jobs and help to retain young graduates with high-tech backgrounds… Legalizing online gaming could make the Commonwealth a further draw for software developers and technology professionals.

Depending upon how the enabling legislation is crafted, emphasis could also be placed on creating in-state employment opportunities to capitalize on the wealth of young talent generated by the state’s many colleges and universities each year.”

Reduction in illegal activity

“Currently, the full extent of illegal online gaming engaged in by citizens of the Commonwealth is unknown. What is known is that the individuals participating in such contests have no consumer protections, no guarantees of fair games and no avenue for recourse in the event of improper operations.

Providing a safe, legal, regulated venue for online gaming is a much more attractive alternative to unknown black market operators. Offering a legal version of the same product at the same cost will strongly encourage players to move to the legal, regulated, and taxed marketplace.”

Transparency

“In an online gaming environment, every user action from the creation of an account to the placing of a wager or the routing of funds is recorded and capable of being stored for review. Online operators incorporate identification protocols for customers playing on their sites. These operators then track how often players play, how much they wager, how much they deposit, where they deposit their funds from, how often they withdraw their funds, where the funds are sent once withdrawn, and innumerable other metrics.

This level of data collection allows for careful monitoring of potential money laundering enterprises, and it also allows for the organic integration of problem gaming protections and/or the observation of such behaviors. If online gaming were legalized and regulated, this kind of data would provide a level of information to the state above and beyond that collected at a brick-and-mortar gaming establishment, and likely prove very useful.”

Safety of online operations

“Current online gaming operations can and often do include:

  • Identity verifications
  • Geolocation protections (to make sure only players from a state where online
  • gaming is legal are playing)
  • Account funding regulations
  • Recording of all game transactions
  • The ability to set loss limits, deposit limits, and time limits
  • The ability to self-exclude
  • Requirements that game operators provide independent verification that their
  • games are fair
  • Requirements that game operators provide independent financial audit results

The combination of these requirements and regulations serve to protect consumers and would also provide a regulator with numerous tools to monitor this new industry.”

These problems are not real problems

The report also rebuts the three core arguments of online gaming opponents:

  • Underage gambling
  • Problem gambling
  • Cannibalization

Underage gaming

The Commission notes that “online gaming provides for numerous safeguards against this behavior that are absent in brick-and-mortar facilities.”

The report goes on to explain that the requirements to protect against underage gambling can be tightened or relaxed based on the concern. Moreover, anything from dual-step verification to personal data verification can be implemented.

Problem gaming

The report is more concerned with problem gambling.

“Given the recent adoption of online gaming, it will be critical to require any legalization effort to include requirements for the study of any associated problem gaming,” the report says.

However, it also points out “online gaming provides an environment that can be completely controlled from the perspective of setting funding, betting and time limits on any associated play.”

It also argues the ability to collect data will “be invaluable to researchers on problem gaming to the extent it was made available.”

Cannibalization of existing games

“Another argument that has been raised against the legalization of online gaming is that doing so will result in the cannibalization of casino profits,” the report says. “Online gaming does not appear to cannibalize offline gaming.”

The report goes on to cite copious research (here, here, and here) as well as the firsthand experiences of casinos in New Jersey to set the record straight.

Steve Ruddock

About

Steve Ruddock is a veteran of the poker media, contributing to offline and online publications centered on the regulated US online gambling industry. These include OnlinePokerReport.com, PlayNJ.com, USPoker.com as well as USA Today. Steve is based in Massachusetts and is also a poker player.

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