The West Virginia House of Representatives passed a bill on Friday that would legalize online poker and other forms of online gaming in the state.
HB2934, which passed the House 72 to 22 with six representatives not voting, is now with the Senate where it will be considered in the Judiciary Committee and then the Finance Committee. If, as expected, the bill passes through the committees and then the full Senate, it will be set before West Virginia Governor Jim Justice to sign into law.
But proponents of online poker may not want to celebrate so quickly. Given the recent reinterpretation of the Wire Act by the US Department of Justice (DOJ), online poker operators in West Virginia would be prohibited from allowing their players to play with players in other states that have legal regulated online poker, such as those in New Jersey, Nevada, Delaware and Pennsylvania when it comes online later this year.
Such a confinement would dramatically limit the ability of the state to house a successful online poker market. It has been demonstrated in Europe and in other states in the US that segregated online poker markets do not work.
After years of declining revenue figures, the largest countries in Europe with segregated online poker player pools took notice of the trends and worked together to remedy the situation by allowing operators in their jurisdictions to share liquidity with the other countries that have similar gaming regulations.
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In 2018, gaming regulators in France, Spain and Portugal began allowing the online poker companies operating in their countries to combine their player pools with those in the other countries. The move resulted in each of the countries reporting increased revenues from online poker, reversing the trend of declining revenues that had been seen in those countries since soon after the markets opened.
The implementation of shared liquidity has also turned around online poker revenue trends in the US, at least for the single network that is able to pool its players from multiple states. Last year, the All American Poker Network (AAPN) added its players in New Jersey to its shared player pool between Nevada and Delaware.
The addition of New Jersey took the population of potential players from 4 million people (Nevada and Delaware combined) to 13 million. As a result, revenue for WSOP.com and 888poker (operating on AAPN under the Caesars license) in New Jersey has been rejuvenated. The Caesars-sponsored rooms have shown significant annual increases since the move while the other operators in the market continue to see their revenue figures decline.
Prior to New Jersey joining the MultiState Internet Gaming Agreement, Nevada and Delaware (both of which have only a single online poker operator) saw only minor improvements compared to when those states were completely segregated.
With under 2 million people, West Virginia just doesn’t have the critical mass of population on its own that is required to support online poker without joining forces with other states. And in the current political environment, it seems highly unlikely they will.
With the DOJ explicitly stating that cross-border online gaming is illegal, there may not even be a US shared liquidity pool for West Virginia to join. By the time it passes legislation, crafts regulations and launches its online poker market, West Virginia may find that shared liquidity in the US disbanded.
While the DOJ has yet to release any specific enforcement directives to clarify its new stance on online gaming, the 90-day period it gave to operators to become compliant with the new opinion will expire in early Q2.
Depending on just how aggressively the federal law enforcement agency pursues online gaming operators, not only could interstate online poker become a thing of the past in the US, but online poker operations available only to people within the borders of each state with legal and regulated online gaming could be in jeopardy too.
Under the strictest reading of the new interpretation of the Wire Act, even if data used in the transmission of online gambling temporarily crosses states lines in its normal course of routing across the internet, it could be deemed illegal.
So while West Virginia is poised to become the fifth state to embrace online poker, there will be nothing for online poker proponents to celebrate until the current DOJ opinion on the Wire Act is vacated or otherwise reversed by a court ruling or new legislation.