Ifrah tells EGR North America how iDEA can help push egaming legislation across the line for the first time in three years
Brad Allen | EGR North America
As Hollreiser tells the story, he expected the usual rebuttal from Ryan, but instead he was told: “I absolutely agree.”
“I must be on to something,” thought Hollreiser. And the exchange didn’t go unnoticed by the man moderating the panel, gaming lawyer Jeff Ifrah, who took it upon himself to bring the industry together. Ifrah is now the chairman of North America’s first online gaming trade association, iDEA – the internet development and economic association.
Below, Ifrah explains how the association came about and how it can help the nascent egaming industry in New Jersey spread across the country.
EGR North America (EGR NA): Why you decide to put this association together?
Jeff Ifrah (JI): Most of us have known for a long time we should be pushing for legislation on a state-by-state basis. But most of that lobbying effort has fallen on the shoulders of Caesars and Amaya, and MGM to a lesser extent.
It’s a very expensive and daunting effort and the smaller operators, many of whom don’t operate on a national level. And it’s very expensive at a time when they are not necessarily turning a big profit in New Jersey.
The problem has always been the cost of this body and what the association will do. If the objective is national lobbying, how are the members going to afford it? There have been approaches to the industry about this in the past, but it’s always been too expensive to do it.
So I asked what contribution we can make to push for other states to come online. What can we afford to do?
I met with some clients and companies I knew and we came up with this idea of a study. Instead of trying to do something huge, why don’t we contribute a few dollars to hiring an economist and putting together an impact study looking at all the ways the industry has created a positive economic impact?
EGR NA: Why did you personally decide to drive this forward?
JI: After almost three years of watching New Jersey grow, but watching the legislative push in other states stagnate, I became concerned about the future of the industry. I felt if we didn’t do something now to start pushing online gaming, we would be stuck in this rut, and my concern was that one state wouldn’t be sufficient for the companies. Some of my clients were also talking about leaving the US market all together, so I decided to do something about it.
Everyone was asking me what I was going to charge. And I told them I was doing it pro bono because if this doesn’t happen we could be in trouble as an industry and we all need to participate and make sure legislators hear from us. I’ve put 100 hours a month into this project for the last year and haven’t charged for my time.
EGR NA: And what do you hope your study can achieve?
JI: Nobody ever talks about jobs. You have all these hearings in New York and Pennsylvania and no-one is able to say: “This is how many jobs were created in New Jersey,” and that’s such an important issue. It was an issue in the Trump campaign, and it’s an issue on the state level. Pennsylvania, Michigan and Wisconsin are all states considering online gaming and all states Trump campaigned in about jobs, but no one has stats about jobs. They talked about tax revenue, but that’s not going to win the day. We already know that.
EGR NA: What’s the structure of the organization?
JI: We tried to get together at the major conferences like ICE, G2E, but of course we never get everyone there. We’ve also had teleconferences once or twice a month and we do a lot of online surveys on those to make decisions while we talk. i.e. how often should we meet, how they feel about the white paper, or the communication strategy. It’s a way for everyone to participate while we’re spread around the world. The group needs to make some major decisions about what we do in the future. But if Pennsylvania comes online, that will make everything a lot easier.
EGR NA: According to your recent statement you’re up to 20 members, with nearly every major company from New Jersey involved. Have you been surprised with the uptake?
JI: Most recently IGT and Scientific Games have joined, and they are obviously huge companies. It takes a while to grow enough to get the attention of an IGT and the fact they’ve joined up is an indication we’re getting stronger and the industry thinks we’re worthwhile.
There are three key firms that haven’t joined up. Firstly Caesars, but we have a very good relationship with them. They’ve helped with introductions and they’re doing their own thing and we share information and data with them. 888 is also not a formal member but again they have provided our economist with data for this report as well. I don’t know what political issues prevent them becoming a member, but we’re hopeful they will.
The Borgata has also given us data, but again they’re not a member. I’m not ragging on them, I’m sure they have some intracompany reasons.
EGR NA: What kind of things are you relaying to regulators and legislators?
JI: This is indeed the first time the legislators have met with the industry in the US. One of the problems we have always had is that lawmakers think this entire industry is offshore in Costa Rica in some shady office. They don’t know these people live in New Jersey and New York and Pennsylvania. One of the great things abbot this organisation is we can walk into Harrisburg and we can say I’m Tropicana, I’m Amaya, I’m GVC, and this is what we do, this is who we employ and that’s a very important story to tell that hasn’t really been told. We can convey all of the important messages about problem gaming, age restrictions, geolocation, and dispel all of those silly myths that exist around online gaming.
EGR NA: So how was your first meeting between iDEA and Pennsylvania politicians?
JI: It went well, the members were very excited. We met with every level of the House and Senate and on the one hand it was surprising how much confusion there was around some of the issues that are second nature to the members; issues like cannibalization, job creation, it was a bit surprising that we were still discussing that. But that was a reminder of the importance of engaging.
A big part of the meeting was the tax rate. Everyone was asking us why we couldn’t tolerate 54% tax when casinos can. Of course it’s completely different. Thomas Winter with the Golden Nugget was helpful there as he could say “Our land-based casino spends 1% of revenue on advertising, whereas its 35% for online gaming.” Jim Ryan showed them some studies comparing France and its 40% tax rate and the UK with its 15% rate and showed how you can increase GGR with a lower rate and increase channelization.
That said, the governor is really pushing this tax rate and that’s a problem. We called them again to talk about this and spoke for another hour about the tax rate, so that’s something we’re working on.
We also had figures showing how every dollar of revenue was spent on bonusing, advertising, revenue sharing and so on. The politicians view online operators as profit machines, so we tried to correct that to an extent.
EGR NA: Do you have any idea what the focus will be after Pennsylvania?
JI: If Pennsylvania passes that will infuse the group with a lot of energy. That will also generate some more profits which can be put back into advocacy in other states such as Illinois and Massachusetts for instance. We’re very much hoping for a domino effect and if that happens this group could be around for a while.
The next step for us is to adopt a corporate integrity model where all members of the group agree to adopt certain corporate integrity values. Every member is already regulated by the DGE, but I want legislators to know exactly what we stand for so I want each member to communicate to the world: here’s where we stand on fairness, consumer protection, fraud and so on. It’s not going to be anything dramatic, just adopting these stances together and making it clear.
And if gaming continues to grow we can be helpful in providing testimony on issues that might come up with state and federal regulators.
Colombia, for instance, was recently looking at what kind of gaming model they should have? A closed market or open to the world? This association would be very helpful in testifying that an open market benefits the players’ companies and tax receipts.
EGR NA: Do you have a model you think egaming legislation in the US should follow?
JI: A place like New York has only been willing to look at poker. We want to try and stop the proliferation of that. While poker is great, it doesn’t generate the type of revenue and jobs that casino gaming does. It just doesn’t. There’s really no reason why the industry should stand behind poker-only bills as if it’s some kind of springboard into more gaming expansion. They don’t want to go all out for casino because they’re worried the public will say no. So the association needs to advise on that too.
When gaming first started in the US almost 100 years ago. Everyone was averse to land-based casino and now they’re legal in 40 states. We don’t have a hundred years to see online gaming expand. But in the next two to five years we’d like to knock off some big gaming markets, especially in the north east, then Illinois and California. We can’t push for real money in every state but we can contribute to the efforts of Caesars and Amaya in these big blocks.