More than skin deep

The multiple-skins approach for licensing online gaming in Pennsylvania is a potential win for tribal gaming, writes Jessica A. Feil

Tribes across the country have been eager to get involved with online gaming. However, as only four states offer legalised online gambling, how many opportunities truly exist?

That is a question that licensing structures and regimes can help answer.

Following in New Jersey’s footsteps, Pennsylvania has just released new regulations that allow online gaming operators to offer multiple skins. That is, while one entity holds the licence, it can work with other operators to offer different skins.

As more states seek to come online, tribes must remain active in the skins debates. By supporting a multiple-skins-per-licence regime, tribes will benefit from a lower cost to enter the online gaming market.

Further, licence holders will benefit by partnering with the tribes and their already robust customer base. And of course, the customers benefit by having access to products from gaming tribes they already support as well as access to a variety of gaming sites.

The skins debate
In October 2017, Pennsylvania became the fourth state in the country to legalise online gaming. The legislation has authorized the Pennsylvania Gaming Control Board (“PGCB” or the “Board”) to offer 39 licences to be split evenly between online poker, online table games, and online slots.

However, the legislation does not dictate how many skins an operator may offer on each licence. On 4 April, 2018, the PGCB announced that licence holders will be permitted to offer multiple skins per licence.

When these rules were being debated, it was not a sure thing that Pennsylvania would take this approach. As other states continue to debate legalisation of online gaming in their jurisdictions, the industry will surely be watching the impact of Pennsylvania’s decisions.

Learning from New Jersey
During New Jersey’s initial igaming roll out in 2013, state regulators only allowed one skin per licence. However, after preliminary technical and licensing kinks were worked out in the first year of operation, state regulators increased the limit to five skins per licence. Now, among the five main licence holders, New Jersey players have access to 17 skins.

And the model has worked. Licence holders have more opportunity to expand their business with different operators, and customers are given a variety of gaming options. As the number of skins has increased each year, the gaming market has grown. Online gaming now generates over $20m in revenue a month across the 17 skins in New Jersey.

Why the multiple skins model works
Allowing multiple skins per licence is key to ensuring a dynamic, competitive marketplace. For licence holders that are smaller operators, sharing costs of the licence and marketing with a business partner helps them to compete with the larger licence holders.

This is especially true if other states adopt a main licence fee similar to that in Pennsylvania, which might be cost-prohibitive for smaller operators.

What’s more, as all online operators know, brand loyalty is key for players. Operators spend much of their budget on targeting and keeping their customers. Brands that have already developed a following through casinos in other states or other outreach can support licence holders in expanding their market share.

By sharing the cost of player acquisition and retention, operators can focus on developing and improving the games.

Where do the tribes fit in?
A multiple skins solution is critical for tribal gaming. As other states debate legalising online gaming, the cost of the licences remains to be established. While New Jersey’s licence fee is a few hundred thousand dollars, Pennsylvania has opted for something more significant — $4m for each type of license (poker, table games, or slots) or $10m for all three.

In Pennsylvania right now and potentially in other states in the future, this fee might be cost-prohibitive for tribes. However, by being able to partner with a larger entity and offer a tribal gaming skin, tribes can still be part of online gaming in new states without the huge upfront cost.

Additionally, tribes have a head start on acquiring gaming customers. Players that are already familiar with tribal gaming are likely to then support a tribe’s online offerings as well. Thus, online operators of all sizes that partner with gaming tribes will have a head start on building their pool of customers.

Looking ahead
Pennsylvania will surely not be the last opportunity for gaming operators and tribes. Indeed, several other states are still considering online gaming bills, including New York, Illinois, Michigan, and California.

While tribes are already deeply involved in the crafting of legislation in many states, they must remain involved in the drafting of rules and regulations and support a multi-skin approach.

In many places, tribes are often the only form of legal gaming; thus bringing their success to bear in a new online gaming jurisdiction is a win for tribes, operators, regulators, and players alike.

Jessica A. Feil is an associate at Ifrah Law PLLC in Washington, D.C. Her practice focuses on litigation and regulatory defense of gaming companies. Additionally, she advises companies seeking to introduce new games, including skill-based gaming, social gaming, and esports.