Economic Study: Washington State Sets Up Well for Online Gambling

The Spectrum Gaming Group, a non-partisan, independent gaming consulting firm, has published a report prepared for the Washington State Gambling Commission, analyzing the market for regulated gambling in the state. It is a meaty report, spanning 173 pages, and hits on all aspects of gaming in Washington, including the potential for online gambling. In looking to the future, the Spectrum Gaming Group suggests that online gaming could be a boon for the state. That is, of course, if legislators get their act together.

Citing the pervasiveness of mobile technology and the amount of time spent online by millennials (seven hours per day), Spectrum believes the market for online gambling in Washington could be as high as $100 million annually in terms of gross gaming revenue. Spectrum compared the state to New Jersey, which is one of three states with legalized and regulated online gambling, and though NJ’s revenue figures have fallen substantially short of early predictions, what the state has accomplished with online gambling should be considered a success.

New Jersey has more residents (by about 1.4 million) and a higher median income (by about $12,000 per year), but it also has a much higher cost of living (120.3 cost of living index versus 108.6 for Washington). As such, Spectrum believes Washington could compare with New Jersey quite favorably:

In our opinion, Washington has similar demographic factors to New Jersey, such as household income and population over 21 years old. As such, with a reasonable tax rate (15 percent or less) and an offering that includes slot machines, table games and poker, Spectrum estimates the potential for Washington iGaming GGR to be approximately $100 million.

Spectrum also refutes the notion from some opponents of online gambling that it would cannibalize the business of brick-and-mortar casinos. Common sense from those who have played online would tell you that while certainly there will be times those who live near casinos would opt to stay home and play rather than venturing out, more often than not, the experience of playing online makes people want to try it in the casino. In the report, Spectrum supports this logical notion, saying:

However, the experience in New Jersey has been little to no cannibalization of existing revenue. iGaming revenue should, in our opinion, be predominantly incremental to overall GGR for land-based casino operators if the regulations require iGaming operations to be provided by licensed Washington Indian casinos or cardrooms. In fact, researchers conducted a statistical study that found “economic concerns around the cannibalization of traditional gambling industries should be reconsidered, and provide support for prior research showing that Internet based firms can be complementary to brick and mortar businesses.”

Facts and figures were even provided:

In his testimony before the New York Senate, Caesars Entertainment’s David Satz stated, “Since legalization of iGaming in New Jersey, the overwhelming majority of our online players are either new customers who had never played in our brick/mortar casinos, or inactive brick/mortar casino players who revisited our casinos after [emphasis in original] playing with us online.” As a point of fact, Satz also testified before the Pennsylvania House Democratic Policy Committee in 2014 where he declared, “91 percent of Caesars’online gambling players in New Jersey weren’t listed in any of Caesars brick-and-mortar casino databases. What’s more, the 9 percent who were existing customers increased their brick-and-mortar spending by 11 percent following New Jersey’s online gambling launch.”

Online gambling, including poker, is currently explicitly illegal in the state of Washington. Back in 2006, the corruption of politics was on display when state legislators banned online gambling, making playing a game of No-Limit hold’em with a two-cent big blind a Class C felony, the equivalent of third-degree child rape, punishable by a $10,000 fine and/or five years in prison. Now, the police have yet to break down anyone’s door for logging onto partypoker, but the law is on the books and is a travesty.

washingtonThe law came to be because Washington tribal casinos and cardrooms saw online gambling as a threat to their businesses. They hired lobbyists to go to work on lawmakers through financial contributions and instilling the usual false sense of fear that online gambling would mean the corruption of our children and the end of civilization. They ended up getting new State Senator Margarita Prentice on their side and she quickly introduced a bill to ban online gambling, a bill which was just as quickly turned into law.

Not only was the whole thing a bunch of crony capitalism bullshit, the likes of which Sheldon Adelson has been trying to accomplish on a federal level with the Restoration of America’s Wire Act (RAWA), but Prentice herself was a hell of a piece of work.

When did a piece on the Washington State online poker ban, it talked to professional poker player Dan “wretchy” Martin, who lamented the fact that he would have to move out of the state in order to keep playing (remember that, at the time, players in the rest of the U.S., even after the passage of the UIGEA in late 2006, still had access to sites like PokerStars and Full Tilt Poker).

In response Martin and other players facing the loss of their careers, Prentice said, “I just think some of these arguments are utter nonsense. You mean you’re going to move so you can play poker? Gee, lots of luck in your life. … I have nothing against card playing. That’s fine. If you want to do that, but I’m sure not going to worry about someone … you know. Let them go pump gas.”

Prentice was voted out of office after just one term and “pumping gas” became a rebellious refrain in the online poker community, but the damage had been done. State Rep. Sherry Appleton (along with various colleagues) has tried to advance legislation to legalize online poker for the past couple years, but it has never gotten anywhere to date.


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