Little Rhody's Big Impact
Rhode Island recently legalized online casino gambling, but its impact is limited by structural defects and the state's small population. Or is it?
The Bulletin Board
NEWS: When it comes to revenue, Rhode Island will be a tiny blip on the online gambling radar, but that’s not the only way to measure its impact.
NEWS: Tribal gaming revenue set a new revenue record in 2022, with over 500 tribal establishments generating a combined $40.9 billion.
VIEWS: Bovada finds itself at the center of a new case invoking an antiquated gambling law in Kentucky that cost PokerStars $300 million.
NEWS: RSI remains bullish on online casino legalization.
AROUND the WATERCOOLER: Gambling is always looking ahead to the next generation.
STRAY THOUGHTS: Give casual bettors a little credit.
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Why Rhode Island Matters
Rhode Island’s entry into the small but steadily growing list of legal online casino-poker states was unexpected but very welcome after several solid candidates struck out.
That said, Rhode Island is a sparsely populated state, and the structure of its online casino law leaves much to be desired:
A lottery-run monopoly run by Bally’s
The excessively high tax rate on online slots (62.45%)
Table games must be Live-Dealer
In-person registration
Eilers & Krejcik’s Chris Krafcik summed up RI online casino thusly:
“A "win" for the challenged U.S. online casino expansionary story that checks the "some state at least did something" box—but one that also comes with some potentially gnarly precedential risks.”
Why RI matters: I agree with Krafcik’s analysis, for the most part. I don’t see Rhode Island as a case of “at least someone did something.”
It will pressure other states and, perhaps more importantly, the gnarly precedents provide a roadmap for states that have struggled to pass online casino-online poker laws. Yes, it’s not ideal, but it’s far better than the alternative.
As I’ve written about Maryland’s efforts to legalize via referendum, online casino advocates must get more creative with their sales pitches because traditional legislative methods haven’t produced results.
Specific to border states, will Rhode Island force Massachusetts’ hand? Probably not. But what it will do is generate discussions in Massachusetts, which will have a domino effect in New Hampshire and perhaps Maine or Vermont, which will then put more pressure on Massachusetts.
An example of this is Kansas. Without Missouri considering sports betting (The Show-Me State didn’t get a bill across the finish line), Kansas may not have legalized sports betting in 2022. And now, Kansas is being used as an additional reason for Missouri to get a law passed.
Bottom Line: Rhode Island’s impact is 99% optics. We’ve added another state to the legal column, it’s in the same region as several other candidates, and provided, in Krafcik’s words, a gnarly way to find a compromise capable of passing a state legislature.
Tribal Gaming Sets New Revenue Record in FY2022
2022 Was a banner year for tribal gaming. Per the National Indian Gaming Commission (NIGC) FY2022 report, tribal gaming generated $40.9 billion in revenues based on financial audits of 519 tribal gaming establishments in 29 states. The tally is an 18.9% increase over pre-pandemic levels and a 4.9% increase over 2021.
Seven of the eight NIGC geographical regions posted year-over-year gains, with only the Sacramento region, which comprises California and northern Nevada tribes, showing a slight (1.4%) decline.
*Source NIGC
For comparison, commercial gaming generated $60.4 billion in revenue in 2022. For the math averse, that’s more than $100 billion combined gaming revenue from Tribal and commercial operators.
A story to keep a close eye on is tribal interest in online gambling, which could be heavily influenced by the outcome of the Florida sports betting (West Flagler) case covered yesterday.
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That Weird Kentucky Law Strikes Again
The state of Kentucky filed suit against PokerStars in 2007, invoking a gambling statute from 1798 that reads:
If any person loses to another at one (1) time, or within twenty-four (24) hours, five dollars ($5) or more, or anything of that value, and pays, transfers or delivers it, the loser or any of his creditors may recover it, or its value, from the winner, or any transferee of the winner, having notice of the consideration, by action brought within five (5) years after the payment, transfer or delivery. Recovery may be had against the winner, although the payment, transfer or delivery was made to the endorsee, assignee, or transferee of the winner. If the conveyance or transfer was of real estate, or the right thereto, in violation of KRS 372.010, the heirs of the loser may recover it back by action brought within two (2) years after his death, unless it has passed to a purchaser in good faith for valuable consideration without notice.
The case dragged on for years before the two sides settled for $300 million.
Now that statute is back. A plaintiff identified as Billi Jo Woods is using the same law to sue Bovada.
“Woods is the named plaintiff in a lawsuit filed August 8 against Morris Mohawk Gaming Group, Alywin Morris, Calvin Ayre, and Harp Media BV… The lawsuit filed in the Eastern District of Kentucky seeks class certification and alleges that there is at least $5 million in damages at stake.”
As was the case with PokerStars, this is not going to be settled overnight, and given the difficulty in tracking down some of the defendants, the likelihood that this reaches a resolution is pretty slim.
RSI CEO On US Online Casino Prospects
During the company’s Q2 2023 earnings call, Rush Street Interactive CEO Richard Schwartz discussed the online casino opportunity in North America, saying RSI has long-term confidence in legalization efforts.
“We continue to see positive activity on the legislative front,” Schwartz said. “Given the economic prospects and the potential size of the online casino market relative to the sports betting market, we continue to see online casino more and more as a topic on state legislative agendas post-2020 sessions.”
Schwartz pointed to developments in several candidate states:
Language in the Ohio budget mandating a study of the future of gaming, including online casino.
The Maryland Lottery and Gaming Commission has also been mandated to submit an iCasino study before the end of the year.
Schwartz noted, “A prominent legislative member in the state has expressed optimism about the potential for passage of iGaming bill when the legislator reconvenes in January.” This would most likely be done via referendum.
Schwartz also said RSI continues “to participate in discussions in states such as New York, Illinois, and Indiana.”
Per Schwartz, there is also interest in online gambling from Canadian provinces “following the lead of Ontario.”
One of the more interesting comments was Schwartz’s assessment of the process: “In states where we see progress, the topic doesn’t simply recede. Rather, it tends to evolve.” That is pretty much what I was saying above about Rhode Island and Maryland.
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Around the Watercooler
Social media conversations, rumors, and gossip.
Is this the future? Also, sign up for Cody’s excellent Sharpr substack. You won’t be disappointed.
It very well could be the future but never lose sight of the fact that young people have never been big gamblers. Rather, it’s something that people have historically aged into. Ten years ago, this same conversation centered on millennials. Now we’ve moved on to Gen Z.
More of my thoughts on this here (from 2021) and here (from 2015).
Stray Thoughts
I can’t tell if it’s the regulators or sharp bettors that have a lower opinion of recreational bettors. Both seem to think the recreational bettor has no agency and needs to be protected.
Regulators think every recreational bettor is easily coerced and always one suggestive advertisement away from a downward spiral into the realm of problem gambling. If a recreational bettor sees an advertisement that insinuates gambling is fun or perhaps profitable, they won’t be able to control themselves.
Sharp bettors believe their recreational counterparts are ignorant and easily duped into wagers with terrible odds. Sharps want to educate recs about line shopping and putting in the work to find winnable bets.
Without going into too much detail, both perspectives are an absurd way to view the motivations and betting IQ of recreational bettors.