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Gambling in the U.S. - Predictions for Trump’s first term in office




A look at what a Trump presidency may mean to gambling interests including online gambling, sports betting and daily fantasy sports.

Online poker, sports betting may be on Trump's agenda

With only a few days left until Donald Trump takes over the presidency, the question running through many American bettors' minds is, "what will happen now?"

Trump has indicated in the past that he is pro gambling expansion but that was as a private citizen when he had Democrat leanings but he is now the head of a party that has fought hard against gambling expansion, believing that it is sinful and counterproductive to the well-being of Americans. Yet if one looks in the tea leaves there are some indications of what will transpire over the next 4 years. So, with that in mind here are some fearless predictions about what will transpire in the area of gambling during Trump's first term in office.

Donald Trump gambling1) A federal law will be passed making online casino gambling in the U.S. illegal, but New Jersey will be given an exemption.

Even though Donald Trump made much of his fortune building casinos, most of the Republicans in The House and Senate feel beholden to Sheldon Adelson. They want to ensure that Adelson will continue to support them in future elections and probably also hope he will include the GOP in his will. Online gambling is an issue that Adelson is passionate about and not caving in to his demands could prove costly to the party. The problem, of course, is that Trump doesn't personally agree with Adelson's stance and probably doesn't feel indebted to Adelson either since he personally took little in way of donations from him. But Trump and his advisors know that they need to win some goodwill with the GOP if Trump wants to get some of his own more pressing ideas through and this could be an issue to win some favor. After all, Chaffetz, Graham and Rubio are deeply indebted to Adelson and they could say something to Trump like "if you want us to back your wall then back us on this."

So, look for RAWA or a version thereof to be passed in Congress and presented to Trump to sign. There will be a lot of backlash from states that hope to introduce online gambling, claiming this law interferes with their 10th amendment right and the biggest complaints will come from states that already introduced it, i.e. New Jersey, Delaware and Nevada. For that reason, I expect to see a compromise whereby the new law will have a grandfathering clause like the one that was put into PASPA that allows states that have already introduced online gambling to continue to do so but only to the extent they are offering it now. This clause will appease Chris Christie, who Trump likely still feels somewhat indebted to for being the first Republican governor to endorse him, and this should sit ok with Adelson since he has no casinos in New Jersey or a desire to build one. As for Nevada and Delaware, two states that legalized online poker, they will only be allowed to offer what they currently do, i.e. poker, which means online casino gambling (slots, roulette, blackjack etc.) will be off limits.

2) Interstate online poker will be decriminalized.

The Republican Party have removed their objection to poker from their platform and John Kyl even wrote a letter with Harry Reid supporting it before retiring. By all accounts Adelson is indifferent to online poker because the product isn't a money maker for land based casinos. In fact, Adelson may welcome it by telling Nevada residents that if they want to play poker then do it online and in turn he can close the poker rooms in his casinos and turn those areas at The Venetian and Palazzo into a space for more slot machines, where casinos make the bulk of their money. The UIGEA already allows states to run intrastate gambling so this new law could be introduced via an amendment to the UIGEA or the Wire Act or it could simply be a new online skill gambling legalization bill where DFS can be included too (see #4 below). By doing so, states will have the opportunity to say "not us" as Utah and Alaska will certainly do, without concern of being forced to offer a product they don't want it. In order to decriminalize poker, it will have to define poker as a game of skill which will enamor the Poker Player's Alliance and poker players in America. This will also allow Trump to say that while he has taken a bit away in terms of casino gambling, he is giving gamblers something back with interstate online poker.

The new rule will do nothing to help solve the ongoing poker fight in California, but when more states start offering the product and when the legislators and tribes realize just how much potential revenue they are losing, they will finally come to a consensus and allow online poker in the state. Though it will likely be with Pokerstars sitting it out for a couple of years and paying a fine directly to the Pechanga tribe and the others in their coalition for their  previous involvement in California poker online.

3) Sports betting will be legalized for all leagues who agree to it.

The NCAA will immediately demand they be left out while the NBA, Major League Soccer, NASCAR and a few other leagues will opt in and capitalize on it via advertising and sponsorships. As part of the legalization, a portion of profits will be given to the sports leagues from betting on their sports and a portion will go to the horse racing industry. The casinos, racetracks and whoever else offers sports betting will take their share and a large portion will go to the states via taxes and fees. This is a no brainer. Several states like New Jersey, Florida and most recently New York are requesting that sports betting be legalized and sources have told me that more than half the states would like the opportunity to explore it. And the NBA has said for years they are for it. The NHL, MLB, PGA and some other sports leagues have given no indication as to their stance, but if betting proves successful and profitable for the NBA and the other leagues who embrace it, then they will almost certainly jump at the opportunity to make money from betting on their products as well.

The one sport that has been vehemently opposed to legal sports betting is the NFL, but it's unclear if the owners don't want it or whether it's Goodell personally. If it's the latter that can be rectified easily. My guess is the NFL will say "not us at the current time" but leave the door open unlike the NCAA who will make it clear they will never approve of sports betting for fear of vulnerable youth being lured into riches from match fixing. To assure the NCAA's demands are met, any sports betting law that passes will contain language that excludes amateur sports. It's possible this new law will force Nevada to reconsider offering college betting as well.

Sports betting will make Christie and several governors happy, it will appease the racetracks in Delaware and elsewhere that are looking at sports to attract more customers, it will satisfy leagues that believe this could resolve financial stress for them and it won't have any effect on Adelson since the law does not deal with online gambling and Nevada casinos including the Las Vegas Sands casinos already offer it. I'm not sure if the new law will simply be an amendment to PASPA or a new law that supersedes it. To ensure that game fixing doesn't take place expect the sports betting law to have measures that forces casinos, race tracks etc. to report suspicious betting to leagues for investigation, as happens in Europe now.

daily fantasy sports legislation4) DFS will be specifically legalized.

It's clear that daily fantasy sports is here to stay. The leagues want it, the bettors want it and most states want it. DraftKings and FanDuel are to be commended for taking advantage of a loophole in the UIGEA that encouraged them to offer a unique product and it's unfortunate that the greed of a few individuals at each site led to a situation where they jeopardized their industry's future. And of course, laziness and carelessness allowed for the leak at DraftKings that started the downfall of DFS and caused states to examine the product more carefully. FanDuel and DraftKings are now talking about a merger which won't really benefit anyone, but which may be necessary because of a decrease in revenues to the point that the sites are unprofitable. So, with Trump in power and in conjunction with the last prediction regarding sports betting, I look for the new government to change the UIGEA to specifically include daily fantasy sports as an exemption to the law. It's only common sense and probably will happen before sports betting itself is legalized. This will not only allow both DraftKings and FanDuel to move forward without fear of prosecution, but it will open the doors to other competing sites and most importantly it will get rid of the confusion about whether DFS is gambling or skill. And most importantly it will provide some sort of guidelines that states can follow and clear up some ambiguities in the law.

Once again Trump and his team will be looking for ways to satisfy the state governments and the GOP in Congress while not upsetting Adelson or the casinos and DFS is a product that accomplishes all those goals. It doesn't interfere with the revenues of land based casinos, it's not online gambling per se and if sports betting does get legalized DFS is just an extension of that.

5) The Antigua crisis will come to an unsatisfactory close for the island nation.

Antigua found the last Republican led government to be disinterested in the case they won in 2003 at the WTO that ordered the U.S. to offer gaming services to the island. The USTR under George W. Bush never agreed with the ruling so they simply didn't address it while they were in power. Things didn't go much better with the Obama administration but at least the Democrat led USTR seemed a bit more willing to discuss the situation. Although, at the end, it appears negotiations tapered off, leading to the government of Antigua telling the U.S. it was going to use the award offered to them by the WTO under TRIPS that would permit Antigua to offer cheap copies of licensed software, music and videos and ignore copyrights and trademarks.

If one thing has been clear of late, it's that Trump doesn't really care about U.N. organizations or decisions they make, if Trump believes those decisions are wrong. So, it's unlikely he and his administration will abide by the WTO ruling if they believe is not best for America. If Antigua attempts to offer the unlicensed copies of U.S. software or even threatens it, look for the new USTR to tell Antigua that as far as the U.S. is concerned the decision by the WTO is irrelevant and if Antigua attempts to cross the United States, they will face repercussions either by sanctions or a travel ban to the island nation. My expectation is that Antigua will back down and do nothing until 2020 and if Trump wins again in the next election I expect Antigua will simply give up and look for new forms of revenue and employment for the country that doesn't involve gambling. And if the U.S. indeed increases gambling stateside as expected it may become a moot point anyways as few Americans will be interested in offshore gambling.

A few other predictions of what will happen are as follows:

• The U.S. will increase prosecutions against offshore operators with a focus on casino sites. This will be necessary due to the crackdown on online casino gambling.

• The number of land based casinos across the United States will increase. I expect the new regime to offer federal tax incentives for casino development and states will take advantage. No doubt Trump will make a ton of money off that decision too although it will be through his company which "he no longer benefits from."

• Horse racing will introduce exchange wagering in more states and trade deals will be made with more countries to offer simulcast racing. Betting from Australia, the UK and Canada has proven very successful for the industry and I believe the new GOP regime will make deals that benefit the U.S. and other countries to increase betting options in the United States on horse racing.

• The next Supreme Court justice will be more in the center of the spectrum rather than on the extreme right and be more open to hearing cases relating to overturning gaming laws such as PASPA. It seems clear that if Trump tries to appoint a radical Supreme Court nominee then it will be blocked via filibusters by the Democrats in the Senate who will want revenge for the Republicans not affirming Merrick Garland. And while Trump has said some things during the campaign to appease his party and the extreme right wingers in the party it's also well known that his political viewpoints along with many of those in his sphere of influence (e.g. Ivanka Trump and Jared Kuchner) are not that radical. Consequently, Trump will likely appoint a pro-life Republican justice but it will also be one that is more right center than far right.

So, it will be an interesting four years. It could be an exciting time for American gamblers or it could be a disaster. Only time will tell. But if these predictions come true the clear majority of gamblers will be happy.

Read insights from Hartley Henderson every week here at OSGA and check out Hartley's RUMOR MILL!