Forget Federal Regulation; States Finding Ways to Form Partnerships

02 November 2012

Legalized gambling is regulated in 85 countries around the world and pulls in almost $35 billion in wagers, some of that from US players. With a market expected to grow to $10 billion a year in the US alone, some states are anxious to get a piece of the action, or rather, a slice of the profits.

Those interested states, so far, include Nevada, Delaware, and New Jersey.

While most land-based casino operators, like MGM Resorts International Ltd, prefer the broader, consistent coverage of federal regulation, the passage of that kind of legislation–particularly in the chaos and wake of an election year, seems unlikely.

Jim Murren, CEO of MGM Resorts International, in an interview with Reuters said that MGM is “encouraged” to find the states talking to each other with the idea of creating interstate online gambling compacts. These compacts would expand the boundaries of an agreed-upon legislation and framework, pooling and sharing resources for mutual state benefit and regulation. While a promising alternative to federal regulation, interstate compacts generally require the approval of Congress, which has been less than cooperative. Murren goes on to say,

“We feel strongly that if it is in fact state by state, the states themselves need to compact with one another to create a more viable business model. Any one state going on its own presents an economic challenge, particularly in a small state like Nevada.”

Since a state-by-state framework can be patchy and inconsistent with regards to tax rates and liquidity, lack of federal regulation or state compacts not only puts unnecessary competition and instability into the mix, it also makes it difficult to attract businesses to the arena.

John McManus, executive Vice President and General Counsel for MGM, agrees, “Absent a federal law permitting online poker or gaming, I would urge that states … come up with uniform regulations and uniform technical requirements to the extent that they can because that will make it much easier for the industry to bring the product to your jurisdiction.”

MGM Resorts International expects to receive its online gaming license from the Nevada Gaming Commission this week. Only time will tell how far that license’s reach will go.

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