James Casingdom

James, Author

Donald Trump surprised many people with his Presidential win on November 8. Trump is scheduled to enter the White House on January 20, and many believe that his win will also be a win for gambling laws. The gambling community was thrilled that Trump won. But is it as simple as that? Will Trump legalize gambling in the United States? Let’s speculate!

Casinos might seek legal help

The narrative is simple: Trump was a former casino owner, he loves to gamble, so he should legalize gambling. That is the narrative casino owners in the United States are pushing for. Some speculate that with Trump in the White House, casino owners will renew their push to legalize sports betting and gambling.

One executive in the gambling industry, Sara Rayne, hopes that will be the case. In her words, “Trump understands the business”.

At the moment, only four states in the US allow betting on athletic competitions under the federal law. And that has no mention of online poker gambling, or other casino games. The four states are Nevada, Montana, Oregon, and Delaware. And the stats show that approximately $150 billion in illegal sports bets are placed annually. That money would be subject to tax and into the budget if gambling and betting is legalized. The last state to legalize sports betting in casinos was New Jersey, and the effort was blocked by federal courts. But now comes Trump, with his bold statements.

“I am OK with it, because it’s happening anyway. Whether you have it or don’t have it, you have it. It’s all over the place”, said Trump in a 2015 interview for Fox Sports 1.

Online gambling, on the other hand, is legal in three states. And the industry is split on the issue. On one side, you have Las Vegas Sands Corporation, which is opposed to online gambling. And almost everyone else on the other side. Las Vegas will lose the most by legalizing online casinos, as the Vegas Strip gets the most revenue from gaming. The revenue might be dropping, but it is still a whooping number. Latest reports show that Vegas Strip is making more than $500 million per month in revenue.

The recent merger of DraftKings and FanDuel again raised the question whether sports betting should be legalized. According to experts, the merger demonstrated the popularity and mainstream nature of the issue.

Why is online gambling still illegal?

One of the reasons why online gambling is illegal in the United States is that it is just not profitable. Only three states offer legal online gambling, New Jersey, Nevada, and Delaware. Of those, Nevada does not report Internet revenue separately. New Jersey and Delaware report the internet revenue from gambling separately. And the numbers are not as good as many expected. The research shows that revenue badly missed the initial forecasts.

For example, in New Jersey, the expectations were that revenue would bring more than $1 billion in the first year. And the reality was that revenue brought just 12% of that calculation. And what followed was negative PR, almost completely taking the wind out of the expansionary sails. New Jersey got 17.6% increase in the second year.

A different repot made recently by OnlinePokerReport suggests that the market of New Jersey is simply too small. There are just 9 million citizens in New Jersey, and that is not enough. Online gambling has taken a step forward in the state, but there is not a sustained success and continuity. Delaware, on the other hand, won $1.4 million in 2014, and $1.8 million in 2015 from Internet revenue. Nevada has an $11 billion gambling market, but the state does not show individual reports for online and offline gambling.

Things might change with New Jersey partnering with other states and parties. For example, PokerStars, the world’s largest Internet poker website, started operating in New Jersey in September 2016.

Another thing to consider is that four of the 12 casinos in Atlantic City went out of business one year after internet gambling was legalized. However, for those that remained, online gambling is the difference between up and down month.

“The market was smaller than a lot of people predicted, but the market is growing pretty nicely now”, said Tom Balance, who serves as the president of the Borgata, the top casino in Atlantic City. According to his calculations, online gambling generated $6 million in profit for the casino, just in the first three quarters of 2016. And in his words, “that is not easy to come by”.

Sheldon Anderson Gambling

Sheldon Anderson

Why Trump might not legalize online gambling?

One of the reasons people believe Trump will not legalize is Sheldon Adelson. He serves as the CEO of Las Vegas Sands Corp. and he is the loudest opponent of legalization of online gambling. He has basically bankrolled effort to stop online gambling at federal level. He supported Ted Cruz for much of the presidential campaign, but switched to Donald Trump once it was evident that Cruz has no chance of making it. And Adelson donated a lot of money for the Trump campaign. Adelson is one of the main supporters of RAWA, an act that should ban online gambling on a federal level. What is RAWA?

RAWA stands for “Restoration of the Federal Wire Act”. The FWA was passed in 1961 by Attorney General Robert F. Kennedy, and aimed to decrease organized crime by hitting the most profitable mafia enterprises: horse racing and sports gambling. The original law did not apply to Internet as the medium. After all, back then there was no internet. However, RAWA act seeks to extend the Wire Act to ban most forms of online gambling no matter if such activity was legalized by state governments or not. The current position on the Department of Justice is that the Wire Act applies only to online sports betting. The last time Republicans tried to pass RAWA it was a disaster.

 

Las Vegas Gambling

Las Vegas casinos

The Trump Christie relationship

Another variable on the subject of Trump and online gambling legislation is Chris Christie, the New Jersey governor that passed signed and authorized online gambling in New Jersey. He is slated to head up the Trump’s transition team. However, he has been hit hard with the Bridgegate scandal. He said that he is done being the punching bag for the scandal that spans for more than two years. Christie is accused that along with Anne Kelly and Bill Baroni conspired to reduce access from Fort Lee to the George Washington Bridge. And all of that is because Christie wanted to punish the town’s major for not supporting him in the campaign. More than 30 witnesses after the trial began, we are still looking for the truth.

Whether he will help Trump make online gambling legal is unknown. We know he was the governor that passed the law in New Jersey, but that was just so that he could help the ailing casino industry in Atlantic City. Yes, he will have a say, but just how much, we will have to see. It is also worth noting that he had a relationship with Adelson in the past.

 

What about Trump’s VP?

Mike Pence will serve as vice president during Trump’s term, and the Indiana governor has long history with online gambling. When he ran for governor in 2013, he said “I Do not support an expansion of gaming in Indiana”. And that statement won him praises from religious groups in the state. However, the truth is that he is more than happy to receive their money as donations.

A review of his campaign finance shows that Pence received more than $2 million from Indiana gaming interests since his run for governor began. And that is despite laws banning gaming industry to state officials. On first glance, Trump and Pence look like they have different opinions on the matter of gambling and gaming. However, they are very much the same.

Mike Pence Gambling

Mike Pence

Obama paved the way for online gambling

In 2011, the Obama administration cleared the way for states to legalize online gambling. Hillary Clinton was also supportive of this act, but she also pushed for proper safeguards to protect children and addictive gamblers.

How Obama cleared the way? He released a new interpretation of the law. The Law in question is the Wire Act of 1961 we mentioned previously. According to that act, it is illegal for states to use the internet to sell lottery tickets to adults. But the Obama administration released a new alternative opinion via the Justice Department . The new opinion is that the Wire Act “Does not make it illegal for states to use the internet to sell lottery tickets to adults”. Just after the announcement in 2011, online gambling experts voiced the opinion, and applauded Obama. But five years after that, we still have to see the big results experts expected. Only three states have legalized online gambling since, and New Jersey hasn’t had significant success.

“The United States Department of Justice has given the online gaming community a big, big present” said I. Nelson Rose, a gaming law expert. He further explained that the new decision eliminates federal anti-gambling laws that could apply to gaming that is legal under state laws. To put it simply, if a state legalizes intra-state gambling, there is no way that a federal law can top that.

 

What history taught us

Mike Matusow, a professional online poker player, tweeted just before the election that voting for Trump would help legalization. He tweeted “Just vote Trump, and online poker will be legal in a year”. But if history is any indication, it might take longer than that. Presidents usually want to take their time to make such a drastic change. And usually, that happens in their second term. For example, George W. Bush Junior signed the Safe Ports Act in 2006. The law had attached a section making it illegal for banking institutions to allow customers send money to offshore gambling websites. Prior to the 2006 law, US citizens could easily gamble online using their credit and debit cards to fund their accounts. But it all changed in 2006, taking offshore gambling websites away from US citizens.

Obama, also waited for almost his second term to begin. He offered the alternative interpretation of the Wire Act in 2011, which was just a year before his term ended. That being said, whether Trump will legalize gambling or not, we will have to wait for at least two to three years to wait and see. He will not make drastic changes in his first year of Presidency, at least not when gambling is considered. On the flip side, he is almost impossible to predict.

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