Can Sports Betting Expansion Carry Online Poker To Broader Legalization?

The optimism of six years ago surrounding a second online poker boom in the U.S. has faded, but the sports betting boom provides new hope.
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New Jersey online poker players got their wish in November 2013 when legal, regulated online games launched just days after Delaware did — with the two states later entering into an interstate compact alongside Nevada.

But the last six years have proved to be slow going for online poker advocates, who for the past year have seen legal sports betting become “the belle of the ball.”

Given that the two industries presumably must compete for their share of a finite amount gambling dollars, is sports betting’s gain online poker’s loss?

In an interview at his Secaucus, N.J. office on Monday, 888 Holdings executive Yaniv Sherman told NJ Online Gambling he doesn’t see it that way.

“Sports betting [in the U.S.] has moved from being very taboo to being very ‘apple pie’ very quickly,” said Sherman, who moved to New Jersey last year. “Everyone is talking about sports betting right now. We hope states legalize sports betting, see that the technology is sound, see that regulation works, and that we’re pushing illegal operators out. Then maybe next regulate online gaming as well.”

Sherman added that sports betting operators also will find that having an alternative gambling product will help their bottom line.

“Cross-sell and variety is very important to players, and if you’re only doing sports betting, single-product strategy is quite challenging,” he said.

Kid Poker agrees

Sherman’s sentiments on the connection between legalization of sports betting and online poker echoed what Daniel “Kid Poker” Negreanu said on a recent episode of the Gamble On podcast.

“For me, I think what we need to do is piggyback on sports, because sports has gotten legislation that is very favorable — and it’s certainly much more popular,” Negreanu said. “Poker is kind of a niche game, with not as many people involved.

“If sports betting starts to proliferate across the country, they may want to add a component to keep players on their sites — along the lines of online poker. That’s why piggybacking on that type of legislation is our best shot.”

But Negreanu said he has to be realistic.

“It’s not going to happen anytime soon, because sports betting is a lot more lucrative for these companies so there is less incentive to offer poker as well,” he said, adding that the opposition to legalizing online poker in the U.S. strikes him as “kind of silly.”

Why is New Jersey so far ahead?

The relatively primitive steps being taken by many states regarding online gambling developments is contrasted by New Jersey, with that six-year head start on online casino gaming (along with Delaware) and its victorious six-year battle in federal court to set the stage for all states as of May 2018 to offer legal sports betting.

At last week’s East Coast Gaming Congress in Atlantic City (where Sherman had the opportunity to introduce New Jersey Governor Phil Murphy for his luncheon speech), the state’s chief gaming regulator was asked about the chasm between states rushing to legalize sports betting and their reticence regarding online poker and other casino gaming.

“As more states roll out online sports wagering — and not many have — the next question from constituents as well as legislators may be, ‘If we can do it for online sports, then what’s the harm for online casino gaming?'” said David Rebuck, the director of the New Jersey Division of Gaming Enforcement. “There is a hesitancy where they just are not as comfortable with expanding [online casino] gaming, whereas sports is much more mainstream. That’s just my guess — you’d have to ask them.”

In the more near-term, Sherman said that as soon as 888, in conjunction with the network, launched with the addition of Nevada and Delaware players on May 1 of last year, “we saw a dramatic effect on liquidity. The uptick was almost instant. This year is even better.”

Given online poker’s grimmer numbers worldwide, Sherman said this was a welcome trend.

“It’s the first time in a long while we’ve seen a turnaround, and it gives me great hope as far as the poker-in-the-U.S. agenda is concerned,” added Sherman, who is 888 Holdings’ head of commercial development. “Adding Nevada essentially doubled the liquidity. And once you double the liquidity, you more than double the revenues because with more selection, people spend more time on the site and play more games.”

Pennsylvania a panacea?

“Now we are hoping Pennsylvania joins the compact,” Sherman added, one month out from the scheduled July 15 launch of online poker in that state. “The more states that join, the better.”

Sherman said he is intrigued to see who launches online poker in Pennsylvania.

“To get it right, you have to balance the product,” he said. “Slots are 54% [tax rate], sports betting effectively is 41, and poker is at 15 — so having an effective poker proposition helps you balance things on a tax level.”

Adding Pennsylvania to the mix should add “20, 30, 40% more liquidity,” Sherman said.

Pennsylvania is a large enough state that some Garden State online poker backers have said that it should be sufficient to fill any lulls in the number of games available at most times and desired price levels for players.

But Massachusetts-based poker player and journalist Bernard Lee, another recent Gamble On podcast guest, isn’t as convinced.

“I think that’s New Jersey being very optimistic,” Lee said. “Ten years ago, I had high hopes [for online poker expansion]. Now, I doubt … that it’s going to explode in the next two or three years.”

Lee’s hope has been that enough states could create a “domino effect” of legalization that leads Congress to take notice and legalize online poker nationwide. Failing that, he says, there are “three states, and we have to get one of them: New York, Florida, or California. If you get one of those three states, you move the needle. But until those states do, I don’t see a Pennsylvania making the government say, ‘Whoa, now we have to legalize the entire country.'”

The Wire Act and online poker

The New Hampshire Lottery’s recent federal court victory against a formal opinion issued by the Department of Justice in January regarding the breadth of the 58-year-old Wire Act pleased Sherman.

“But we’re not celebrating anything yet,” said Sherman, with the multi-state online poker compact not officially safe beyond the end of the 2019 calendar year. “We’re waiting for the process to finalize and pan out. I’ll be happy when this is over.”

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