Will The Stars Align For North Dakota Online Poker?

Will the stars align for North Dakota online poker?Will the stars align for North Dakota online poker?

Dreamstime/Vivilweb

Everyone loves a good underdog story, and one is shaping up this year in North Dakota.

On Tuesday, the state’s House of Representatives approved a pair of resolutions and companion bills related to gambling expansion. One set potentially paves the way for the state to introduce sports betting (Res. 3032/HB 1234), and the other covers online poker (Res. 3012/HB 1389).

The state is not currently considering online casinos. If both these efforts succeeded, then, North Dakota would join Nevada as the only other state with legal online poker but no online casinos.

On both fronts, state lawmakers elected to leave the final decision to the electorate. If the Senate agrees to the proposals, they would become ballot measures in the 2022 election. The companion bills lay out the terms under which the new gambling products could be offered.

Letting voters decide reduces pressure on politicians

HB 1389, which covers poker, is light on specifics beyond establishing that it is a game of skill (and therefore “not gambling”) and applying a 10% tax rate. Proceeds from this would have to be split between responsible gaming programs, education and the state’s general coffers.

Holding these referendums is necessary because authorizing new gambling in North Dakota requires a constitutional amendment. Even if poker doesn’t count as gambling under HB 1389, passing that law without a referendum would likely provoke a lawsuit.

The silver lining it that the prospect of a public vote seems to have helped sway lawmakers who might otherwise have been on the fence. By putting it to a general vote, they can frame it as “listening to the will of the people,” and avoid making a decision that would be sure to upset some portion of constituents either way.

After the sports betting resolution passed, Rep. Rick Becker, a Republican commented:

“By allowing the people to vote on it, we put this to rest once and for all.”

North Dakota looks to shatter state stereotypes

For either proposal to take effect, it would have to be endorsed by the Senate, Gov. Doug Burgum, and finally by the people of North Dakota. That makes for a long road ahead. If North Dakota does complete that journey successfully, however, it will be breaking new ground.

Looking at states that have had the most success with iGaming legislation – NJ, PA, WV and MI – several trends are apparent. Most or all of these states have the following features in common:

  • Large population (except WV)
  • Neutral to moderately liberal political landscape (except WV)
  • Proximity to other states which have passed or are considering similar laws
  • Presence of commercial casinos
  • Absence of competing interests such as card rooms or tribal casinos (except MI)

North Dakota would be an exception to every item on that list. It has a small, highly conservative population and is a long way from those other states, Michigan being the closest.

The state also lacks commercial casinos, but has a dozen tribal gaming establishments. Indeed, there was a competing proposal, House Bill 1448, which lawmakers rejected on Tuesday. This would have allowed North Dakota tribes to negotiate online gambling and sports betting directly with the Governor.

Elsewhere, in states like Connecticut and California, we’ve seen gambling expansion held back due to tribes’ desire to have exclusivity over new forms of gambling. The fear with HB 1448 was similar, that it would result in the tribes fighting any later effort to authorize commercial sports betting or online gambling. Conversely, if the state starts by authorizing commercial sports betting and online poker, then federal law mandates that the state negotiate in good faith with the tribes to allow them to conduct those same activities.

Online poker has been on ND’s radar for a long time

This isn’t the first time North Dakota has taken a serious look at “live internet poker,” to use its own terminology. In fact, the push dates back to 2005, when the US gray market was in full swing. Black Friday was still six years off and the Unlawful Internet Gaming Enforcement Act hadn’t passed yet. The largest poker site in the world was PartyPoker, which was still accepting US players.

Put that way, 2005 seems like an eternity ago. However, it’s the same lawmaker behind both efforts: Rep. Jim Kasper, a Republican representing the district of Fargo.

“There’s thousands of people in the state of North Dakota who are playing online poker,” he told his fellow Representatives prior to Tuesday’s vote. “It’s not regulated. It’s not taxed. We don’t know for sure if the machines are fair or not because we don’t know anything about it.”

Kasper was among a group of North Dakota politicians who foresaw the consequences of the US gray market. They knew the federal government would eventually crack down and that states would have a decision to make.

“It seems to me that somebody in this country has an obligation to regulate this stuff. And maybe we’re not the best people to start it,” said Connie Triplett, a Democrat who co-sponsored the 2005 effort, speaking at the time. “But I sure think that somebody needs to be regulating it.”

The fact that this effort is 16 years in the making doesn’t mean its chances are good. The 2005 effort also made it out of the House, only to die in the Senate. Such could easily be the fate of Resolution 3012, which had some trouble just clearing the House. While the sports betting resolution passed 70-24, poker squeaked through by a much smaller margin, 54-40.

Governor’s signature would only be the starting line

Even under normal circumstances, there’s a big lag between an iGaming bill passing and the new products launching. Crafting the regulatory rules, issuing licenses and doing the requisite testing typically takes a year or more. However, it is more or less guaranteed that most states which pass such a bill ultimately do get the new industry off the ground.

North Dakota would be facing a much longer road and less certain prospects. Even if the Senate endorses Res. 3021 and Gov. Burgum puts his signature to HB 1389, there will still be a lot of work to do.

With no election happening this year, the need for a referendum pushes things back to 2022, and there’s no guarantee the vote will pass. Gambling referendums have a high success rate, and all such measures on last November’s ballots passed. However, North Dakota’s approach feels much more speculative. Sports betting will probably prove popular, but it’s hard to make any predictions one way or the other for poker.

After that would come the usual rule-making process, probably pushing back a hypothetical launch to 2023 at the earliest. That’s assuming any operators are actually interested in the market, though, which isn’t a given.

Interstate networks a prerequisite for ND poker

After all, West Virginia now has two online casinos and four sportsbooks, yet has failed to attract any poker rooms. Even PokerStars, which is so far the only operator in Michigan or Pennsylvania, hasn’t bothered.

The nature of poker is that, unlike casino games, it requires multiple players to participate. A critical mass of population is needed to keep a decent selection of games running around the clock.

Based on West Virginia’s experience, it seems that the industry believes a population of 1.8 million doesn’t clear the bar. North Dakota is less than half the size, at just 760,000 people, which probably makes intrastate poker a nonstarter.

Fortunately, this year should mark the end of the Wire Act battle. Among other things, that means there are no longer any federal obstacles to regulators forming multi-state poker networks. Already, Michigan is in talks with New Jersey, which has had such a network with Nevada and Delaware since 2018. Pennsylvania and West Virginia may be thinking about it as well.

That’s yet another step, however, and probably adds another year to the timeline. It’s also a lot of work for the state, for not very much revenue. Gross poker revenue in New Jersey and Pennsylvania is on the order of $2-3 million per month, with perhaps $300,000-500,000 of that collected in taxes by the state. Scaled down to North Dakota’s population and proposed tax rate, it would be doing well to generate that much in a year.

All of that said, it is still exciting that North Dakota is making progress on online poker. Realistically speaking, however, it still has to be classified as an underdog to have a legal poker room operating any time soon. If it does, then it probably won’t be until late 2023 or early 2024, given the number of steps involved.

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