Opinion: Halting Nevada
Former California Assemblyman and president of Filament Strategies Lloyd Levine on why US states can't afford to let Nevada get ahead in the egaming race.
The failure of California, New Jersey and other gaming states to quickly legalise and implement internet gambling systems will likely give Nevada gaming operators such a big head start those states may never catch up.
Nevada has legalised internet gaming, drafted regulations, and is poised to offer games to players this year. Initially gaming will occur only within the state’s borders, however there are two paths which would legally allow the state’s casinos to offer games to citizens in other states. First is the “federal approach”, where Congress passes authorising legislation to create a national model.
In the “lame duck” session of Congress at the end of 2010, Senator Harry Reid introduced federal legislation that was laden with preferences for the Nevada gaming entities. The preferences were there because, at the time, the Nevada casinos weren’t ready to enter the marketplace. While that bill failed, at some point there will surely be another, and that legislation will not have preferences for the Nevada casinos because they won’t be necessary.
The Nevada casinos have recently established business partnerships with large European internet gaming operators like Party Poker, 888 and others. These companies have millions of players in multiple countries, and extensive experience in internet gaming operations and marketing. The combined power of their internet and land-based brand identification will give them a huge advantage in name recognition and player liquidity.
If and when the federal government moves to legalise internet poker at the national level, these entities will be ready to immediately take advantage and market to players all across the US, and they won’t need preferential treatment to dominate.
The other path to a dominant US position is the “interstate compact” model. Next year, in the absence of any movement at the federal level and at the urging of the Nevada casino operators, look out for the Nevada negotiating interstate gaming compacts to allow players in states like Idaho, Wyoming, and North Dakota to start playing on Nevada-based sites in exchange for a percentage of the revenue.
Look for Nevada and its casinos to try and build a network of smaller states which have little or no established gaming and not enough player liquidity to make an intrastate system worth the investment. Utilising this approach, given the budget deficits faced by most states, it isn’t unreasonable to see a scenario where Nevada is able to build a network of 10, 15, 20, 25 states all of whom allow their players to play on the Nevada network.
There are many other states with a significant number of gambling establishments (New Jersey, Florida, California, Washington to name a few), but if those states do not act quickly, their gaming entities will likely be facing a national internet gaming market dominated by Nevada casinos with better brand ID and an established network of loyal players in the US and around the world.
California is the last chance for the rest of the country to have any legitimate chance to stop Nevada from dominating the internet gaming space in the US market. The legislative session in California ends on 31 August this year. If they have not passed legislation by that date they will have to start over again next year. By that time they will likely have given the Nevada casinos to big a head start to catch up.
Given the opportunity and the right business plan, California and other state’s gaming entities can compete with Nevada and succeed in a global market place. However, the opportunity is quickly disappearing.