Olympic gold medalist Michael Phelps, Brazilian soccer star Neymar and legendary Australian cricket player Shane Warne live-stream a game of online poker.
This heavy-weight match, of course, is a dream scenario. It comes from the mind of Seth Palansky, vice president of corporate communications for Caesars Interactive Entertainment. Palanksy primarily deals with the World Series of Poker‘s (WSOP) land-based operations. But with recent events, his duties have shifted online.
Online poker hasn’t gone anywhere. It, along with online casino games, have merely vaulted to the front of the gambling activity list.
Due to the coronavirus pandemic, all 465 commercial casinos in the US have temporarily closed. All sporting events have gone on hiatus. Spectators around the world have dug deep into the gambling pit and taken to betting on sports like table tennis and Australian rules football.
In a way, one could argue the chaos has reignited the online poker discussion. (Last year’s WSOP tournament and the success of Pennsylvania online casinos are examples of recent conversations with a pro-online poker overlap.) But if it continues to be talked about in a post-COVID-19 gaming world, it is an entirely different conversation.
Pushing the online poker discussion forward
The central question is not whether legislation can be passed, because four states have done it. Instead, it’s getting lawmakers up to speed on how online poker operates.
“It comes down to the familiarity of government officials with sports, more so than poker. Obviously, they are involved in their communities, and they have their sports teams, and so it’s much more top of mind,” Palansky said in an interview.
This is true. Generally speaking, most state lawmakers are more familiar with their hometown team than the complexities of poker.
Following the demise of the Professional and Amateur Sports Protection Act (PASPA), states salivated at the opportunity of bringing sports betting to their residents. However, in the ensuing commotion, online poker was left behind.
A seasoned executive in the gaming industry, Palansky said his constituents have tried to help push online poker legislation forward with a federal framework and continue to lobby at the state level.
But he also said the current state of gaming might also be a catalyst for further discussion.
“I think something like what we are going to be going through here, not in just the short-term, but this [pandemic] is going to have long-term ramifications on the economy. Government entities are going to be looking for funds to help solve some of the issues that are being created as a result of where we are today,” he said.
Multi-state player pools in online poker
“With sports betting grinding to a halt and, of course, 100% of commercial casinos closed in the US, it’s a shame the states can’t be getting some tax revenue during these extremely difficult times from online poker,” Palansky said in an email.
Currently, only four states are operating online poker:
- New Jersey
The tax revenue generated is incremental compared to sports betting and general land-based casino revenue. It resembles more of a Band-Aid and is in no way keeping the gambling industry afloat. But it does, however, provide funds at a time where every nickel and dime is needed.
But according to Palansky, a critical hurdle preventing legislation from moving forward in other states is the understanding that online poker relies heavily on the ability to offer multi-state player pools.
Much like any gambler, players are interested in risking as little as possible to win as much as possible. However, according to Palansky, if you only allow players to compete against those in their state, you limit the prize pool up for grabs.
“The reason daily fantasy sports can offer those big prize pools is because they are offering them across multiple states. If they had to restrict to a single state, the prize pools wouldn’t be compelling enough to get people to play,” he said. “Same problem in poker. So, getting all players in the same pool allows the offering to be much more robust, which creates interest, creates demand and enhances the offering.”
Currently, DE, NV and NJ are locked in what is called the Multi-State Internet Gaming Agreement (MSIGA). This accord allows for players from the aforementioned states to compete against each other. Pennsylvania, unfortunately, only allows its players to compete against other players within its borders.
It can’t only be about the money
“The most important piece to understand for online poker is the reliance on liquidity to make it work. Meaning, right now, we are locked in a tri-state poker shared market where residents in NJ, DE, NV are all playing with each other. We are able to segregate by where the participant is from and ensuring the tax revenue goes back to that state on where the participant is.”
Some government officials hunt for revenue to balance state budgets. Others seek jobs to bring to their state. But there are a few lawmakers who look for both.
There is a painful trickle-down effect from the closure of all commercial casinos: No casino guests, no gambling dollars, no tax revenue and, most importantly, no jobs. Due to casino industry shutdowns, the American Gaming Association (AGA) estimates roughly 649,000 casino employees are out of work.
When it comes to online poker, Palanksy said one of the toughest questions to answer revolves around job creation.
“A lot of it seems to be dependant on jobs, how many jobs can be brought to the state,” he said. “Lawmakers like to have customer service located in their state, accounting, essential personnel, et cetera, et cetera. When running an online business, it’s hard to have 50 different staffing offices in 50 different jurisdictions.”
But regardless, Palanksy says “any online business that can generate tax revenue and jobs should be something all elected leaders should take a good look at to see if it works for their constituents.”
Proving it works
It’s a tough task to convince lawmakers anything. Try explaining geolocation to someone who doesn’t use a smartphone. But Palansky knows the power of a working product.
“What I think what we’ve done is we proved anything that needs to be addressed is being addressed inside these three states. Any other state looking to get involved, it would be very turn-key and very simple and very safe. The protections are in place, the regulatory framework is in place,” Palanksy said.
“We made (online poker) meaningful in Nevada. Then replicated it in New Jersey. Then you work with (lawmakers) to show how the revenue base can grow with other states.”
Palansky said some states could argue they have enough liquidity to operate alone, but the reality is, almost all don’t (outside of California.)
“Poker is going to need the ability to be across state borders with the eventual hope of a worldwide pool that has significant revenue potential,” he said.
What’s on the horizon for online poker?
The latest state to legalize online gaming was Michigan, which is expected to debut sometime in 2021. In addition to online poker, the bill also legalizes online casino games, DFS and sports betting.
The Wolverine State’s plan to join the MSIGA is still up in the air.
“They are writing the bill, so we will see how that goes,” he said. “We think everyone should be able to run (online poker), but we understand states want to take a cautious approach. But we are willing to do what’s necessary to prove it works. But it’s frustrating to see how quickly sports betting came about.”
In recent months, the WSOP has seen player traffic increase by 54%. Whether that number continues to trend upward is unknown.
“It’s hard to predict, but we are putting together new series with $4 million in guarantees in April,” Palansky said. “That shows we are bullish and willing to stick our neck out and anticipate (that) the demand will be there. But it’s hard to know, obviously this is a recreational activity, and we are cautiously optimistic that people will have more time on their hands. After all, this is a recreational activity to take your mind off things but also be successful and win some money.”
As the sporting industry grapples with ways to stay active, maybe a WSOP tournament featuring Phelps, Neymar and Warne isn’t such a bad idea. The NBA has recently gone the video game route by announced a player only NBA2K tournament.
Perhaps bringing together some of the most decorated athletes in the world to play poker isn’t such a bad idea.
“Knowing each of them a little bit, what’s great for poker is the personalities around the table,” Palanksy said.