Abstract
New Jersey's Attempt to Legalize Sports Wagering: A for Effort, F for Results
Well, New Jersey's lost another round in the long-running reality show of “Will the state be allowed to offer sports betting?” A 12-judge panel of the U.S. Third Circuit Court of Appeals, sitting en banc, held in a 10–2 ruling that the state's 2014 law attempting to legalize sports betting is an illegal attempt to get around the federal prohibition on sports betting, which essentially “freezes” in place the state's status quo of making sports betting illegal. Wrote the majority: “Absent the 2014 law, New Jersey's myriad laws prohibiting sports gambling would apply to [the state's] casinos and racetracks . … Thus, the 2014 law provides the authorization for conduct that is otherwise clearly and completely legally prohibited.”
Not everyone agrees, of course. Judge Thomas Vanaskie wrote in dissent that the federal government lacks the power to order states to prohibit sports betting. “[T]oday's decision tells the states that they must maintain an anti-sports wagering scheme.” And New Jersey Rep. Frank Pallone, Jr. (D-6th District) addressed the seeming inconsistencies in “sports betting” today, saying that “[t]he decision is both hypocritical and unfair as several states can already operate sports betting and millions of Americans are essentially betting on sports through daily fantasy sports websites.”
With the en banc loss, barring congressional legislation to allow sports betting, the state's only recourse 1 is to seek certiorari the U.S. Supreme Court—unlikely to be granted, and if granted, less likely even to succeed.
New Jersey to Lose Yet Another Casino
Four of twelve wasn't enough; now it looks like it will be five of twelve Atlantic City casinos that close. Billionaire Carl Icahn, owner of the Trump Taj Mahal casino, has decided to shut down the money-losing casino. Icahn has said that acquiring the Taj was “a bad bet” and claims he has lost $100 million keeping the casino afloat over the last 18 months. The most immediate or proximate cause of the shutdown is alleged to the long-running strike by the main casino union against the Taj. Tony Rodio, president of Tropicana Entertainment, which runs the casino, said: “[o]ur directors cannot just allow the Taj to continue burning through tens of millions of dollars when the union has singlehandedly blocked any path to profitability.”
The union has been striking over health and pension benefits, eliminated during the Taj's recent bankruptcy. Icahn offered to restore the worker's health insurance, but the coverage offered was less generous than what the city's other seven surviving casinos offer. While the workers’ ire and frustration is completely understandable—the middle class has been squeezed for years between stagnant wages and limited opportunity on the one hand, and rising costs, particularly including health care, on the other—one has to wonder the following: isn't a job with less pay or benefits than you'd like better than no job, no pay, and no benefits? Especially in a city with an almost 10% unemployment rate (June 2016)? And even more so if you're working in an industry (Atlantic City casinos) which already has thousands of surplus workers from prior casino shutdowns? The Taj closure, currently scheduled for October 10, 2016, will add another 3,000 people to the long roster of unemployed Atlantic City casino workers.
Latest Macau Casino to Get Only One-Third of Requested Tables
The new MGM Palace in Macau, which will have opened by the time you read this, requested permission to operate 400 tables. Macau's government, however, only authorized a bit more than one-third of that number, 150 tables, all of which must be for mass-market players. While 150 tables is the lowest amount recently authorized for new construction large integrated casinos in Macau, the low allotment is in keeping with the smaller-than-requested 250 tables authorized for each of two new Macau casinos opened last year by Galaxy Entertainment Ltd. and Melco Crown Entertainment. Worse, the Wynn Palace can only operate 100 tables initially; the other 50 will come during the next two years. (The casino did get approval for 1,145 slot machines.)
The lower table numbers are in line with the three percent table growth the government is aiming for each year from 2013 to 2022. The government is trying wean the jurisdiction off its near-total reliance on gambling, especially high-stakes VIP gambling (hence the stipulation that the new tables be for the mass market only), and force the territory to focus more on tourism generally and, in terms of gambling, on recreational gamblers. The low allocation also raises the question of how many other pending casinos, such as those in development by Sands China Ltd. and MGM China Holdings, will be allowed to open.
Wynn Macau shares fell on the news, unsurprisingly: 100 initial tables, and 150 total, is not a lot to provide a good return on investment on a $4.2 billion casino.
Perhaps counterintuitively, despite a more-than two year decline in casino revenue, casino building is running at a fevered pace.
Macau Population Continuing to Grow
Also perhaps counterintuitively, despite 26 months and counting of declining casino revenues, Macau's population continues to grow: year over year, at the end of the first half of 2016, the population was up 1.49 percent, or 9,600 people, over first half 2015. While immigrants accounted for only a small percentage of the growth—for example, during 2Q 2016, only 339 people from outside the territory were granted the right to live there—one might have expected the weaker casino revenues to encourage more immigrants to emigrate out to potentially greener pastures, resulting in population decline. However, that does not appear to be happening; non-resident workers continue to account for 28% of the territory's population: 182,400 out of 652,500.
Are Esports Gambling? at Least Some Appear to be, Mulls UK Gambling Commission
The UK Gambling Commission is currently tackling the issue of whether at least some eSports need to be licensed as gambling. Some eSports, such as the popular online card game Hearthstone, 2 may well be gambling, according to the Gambling Commission. Such online card games feature a random number generator, or RNG, which determines which cards players receive; and in many of these games, there is in-game gambling using “skins” or virtual currencies. Chance as a factor determining whether people win prizes—sounds like gambling. As the Gambling Commission as put it: 3
Many eSports appear to fall within the definitions of gaming. For example, we are aware of card[-]based games, where players can win prizes, which appear to have similar game mechanics to poker (such as an RNG to determine which cards are dealt to a player) and do not require a stake. In our view such games fall within the definition of gaming that be illegal without a licence … Where “skins” are traded or are tradeable and can therefore act as a de facto virtual currenty and facilities for gambling with those items are being offered, we consider that a license is required.
Philippines Cracking Down on Domestic Online Gambling
New Philippine President 4 Rodrigo Duterte said, shortly after taking office, that “Online gambling must stop. It has sprouted here and there. This is out of control.” He recently fit actions to words, refusing to renew the exclusive license of a 13-year operator of more than 300 Internet cafés, preventing Filipinos from gambling in those venues. He also called the chief executive of the operator, Philweb, Corp., a corrupt oligarch, profiting at the expense of the poor. In refusing to renew Philweb's license, President Duterte also put at risk 5,000 jobs, though Pagcor, the state's gambling regulator, is working to try to save as many of those jobs as possible.
At present, online gambling headquartered in the Philippines—the nation has the largest share of Asian international online gambling operators, who hold licenses issued by the Cagayan economic zone—but which is not offered domestically to Filipinos has not been attacked by the president. (The licenses offered by the Cagayan economic zone bar operators from accepting bets from Filipinos.)
It also appears so far that the Philippines’ integrated casino resorts, which are hoped to bring in tourism dollars from offshore, are safe.
New York Legalizes Daily Fantasy Sports
On August 4, 2016, New York State Governor Andrew Cuomo signed into law a bill legalizing daily fantasy sports. This made New York the eighth state to legalize it, after Colorado, Indiana, Maryland, Mississippi, Missouri, Tennessee, and Virginia. For a full discussion of this, see I. Nelson Rose's column on this topic in this issue of Gaming Law Review and Economics.