On Tuesday, June 20, 2023, Rhode Island Governor Dan McKee (D) signed SB 948 into law, along with identical companion bill HB 6348, legalizing online casino gaming. Rhode Island thus becomes the seventh state to regulate casino games on the internet, following in the wake of New Jersey, Delaware, Pennsylvania, Michigan, West Virginia, and Connecticut. The way online casinos will work in The Ocean State is different from elsewhere in the country, so a close examination of the bill is in order.
Info About the RI iGaming Bill
Under the terms of SB 948, the iGaming market will be regulated by the State Lottery Division. Persons 21 years of age or older will be able to set up accounts and play as long as they are physically within the borders of Rhode Island. The act will become effective March 1, 2024, so this is the earliest that online casino games could go live in the state.
Bally's Monopoly Extended
Bally's, which already operates Rhode Island's two land-based casinos as well as its lone online sports betting site, will be the only operator licensed to run internet gaming in the state. Bally's and its tech partner IGT Global Solutions hold a 20-year, no-bid, exclusive contract to run these forms of gaming, and this arrangement will extend to online casino games too. Therefore, there will be only a single internet casino licensed by Rhode Island.
This 20-year timeframe will extend to 2043. There are no provisions of the recently passed bill that would enable any competitors to enter the market until that year.
What Games Are Allowed?
The games that will be permitted online to Rhode Islanders fall into two categories: online slots and online table games. The first group of games is basically self-explanatory: electronic versions of the familiar one-armed bandits that fill terrestrial casinos.
The second set of games, online table games, bears some elaboration though. This is because there is a requirement in the law that these games be “conducted by one or more live persons.” Thus, the table gaming envisioned by SB 948 more closely resembles Live Dealer casinos than traditional online casino table games.
Although all games to be offered online must be specifically approved by the Lottery Division, the text of the bill contains a list of games that are considered casino gaming: “roulette, blackjack, big six, craps, poker, baccarat, paigow, any banking or percentage game, or any other game or device included within the definition of Class III gaming as that term is defined in Section 2703(8) of Title 25 of the United States Code and that is approved by the state through the division of state lottery.”
Revenues and Allocation
Of all online slot revenue, a whopping 61% is designated as being for the state. 22.55% will go to IGT, and Bally's will only keep 15%. The remaining 1.45% is committed to the towns that host RI casinos, split up 77%/23% between the Town of Lincoln and the Town of Tiverton.
The online table gaming revenue is similarly split up, but the percentages are different. The state will get 15.5% while IGT will take 35%. This leaves 48.5% for Bally's and 1% for the two towns (80/20 in favor of Lincoln).
This tax burden is heavy, especially for slots, but there are a couple of details that may make it more bearable for Bally's. Free play money distributed to customers but won back by the casino does not count as revenue. Also, certain marketing expenses, as agreed to by the Division, can be deducted from revenue.
The taxes paid to the state for internet casino gaming revenue are to be deposited to the lottery fund for administrative purposes with any remainder going toward the general fund.
Lottery Revenues Protected
The state lottery has ironically done some grumbling about licensed online gaming despite being in charge of the whole enterprise. This is because it foresees some cannibalization of existing lottery products, some of which are sold over the internet, with the advent of legalized internet casino games.
Perhaps in order to assuage these concerns, there are provisions in the bill that would reimburse the Lottery from online casino revenues. For the purposes of these calculations, the Lottery's net revenue for the last full fiscal year before the arrival of iGaming is used as a baseline.
In any given year with net lottery revenue lower than the baseline, Bally's will have to pay the Division 100% of any shortfall up to $1 million and 50% of any shortfall between $1 and $2 million.
Projections
Rhode Island is a small state, so most interested parties foresee only a modest return from online casino profits within its borders.
The Rhode Island Department of Revenue made a forecast that the state could see $69.3 million in taxes from the first year of hosting a virtual casino and $162 million within five years. A report commissioned by Bally's meanwhile pegged potential tax revenue at $210 million over five years.
What About Poker?
Poker is specifically listed as a form of casino gaming in the legislation although it's not explicitly stated as a type of game that will be spread online. Arguing in favor of the inclusion of poker within the iGaming market is the fact that “rake” is defined within the text. However, this word “rake” does not appear anywhere else in the bill, which makes one wonder why lawmakers decided to include it in the definitions.
If poker is allowed under the terms of this bill, then it will assuredly be counted as an “online table game.” This means that it would have to be operated by a live dealer. Unfortunately, no major internet cardrooms currently use a Live Dealer model for offering poker games, so it might take a while for this kind of gaming to get off the ground.
Another factor seemingly spelling doom for licensed online poker in Rhode Island is that the technology provider, IGT, has not yet launched any interactive poker products of note. Through a series of acquisitions and mergers, IGT has become heir to the old Boss Media poker software. However, this may be more a curse than a blessing because even during its heyday in the mid-2000s, the Boss poker client was notorious for being outdated and graphically uninspired.
Compacts to the Rescue?
There's an interesting paragraph toward the end of SB 948 that makes the matter of interstate compacts more a question of “when” than “if”:
(b) The Division may enter into an interactive gaming reciprocal agreement with a regulatory agency of one or more other states or jurisdictions in which interactive gaming is authorized to allow an interactive gaming operator to accept wagers from persons not physically present in Rhode Island, and to allow persons physically present in Rhode Island to place wagers with parties to the interactive gaming reciprocal agreement, if the Division has determined that the reciprocal agreement is not inconsistent with federal and state law, including Rhode Island constitutional and statutory law.
Not only does this open the door to Rhode Islanders benefiting from the more mature online casino products in larger and more established sites, but it also offers a possible lifeline to online poker in the state. If Rhode Island residents are eventually allowed to access internet gaming products in other states, then it stands to reason that the requirement for table games to be “conducted by one or more live persons” would likely be waived for out-of-state firms.
Furthermore, Rhode Island is likely too small to function successfully as an isolated internet poker market. With a population of just over a million, it's likely that there would not be enough instate online poker traffic to keep tables going at all hours of the day, and any tournaments run would have small guarantees. If Rhode Island joins the Multi-State Internet Gaming Agreement, then these issues would disappear.
Legislative History
On April 27, 2023, State Senate President Dominick Ruggerio (D) introduced SB 948 in the Senate, and his colleague State Representative Gregory Constantino (D) introduced HB 6348 a day later in the House. Both bills basically sought to accomplish the same thing and ultimately were amalgamated together, so we will focus only on the legislative journey of SB 948.
The initial version of the bill called for a tax rate of 50% on slots and 18% on table games. It also would have allowed users as young as 18 to participate.
On May 10, the Senate Committee on Special Legislation and Veterans Affairs held up the bill on the grounds that it might be unconstitutional. The Rhode Island constitution stipulates that all gambling expansion must be approved by the voters in a referendum.
The bill was changed by adjusting the tax rates and raising the minimum age to 21. To address concerns about unconstitutionality, language was added requiring gaming servers and Live Dealer casino studios to be located at the two existing physical Rhode Island casinos, which would not count as an expansion of gaming for constitutional purposes.
On June 8, this bill was passed by the Senate in a vote of 30-4. It then proceeded to the House, which amended its own bill to be identical to the Senate version and passed it 56-11. The final vote in the Senate was basically a formality, given that the House version was identical to its own, and the legislation passed by a 32-4 majority.
SB 948 was sent to the desk of Governor Daniel McKee on June 15. He held on to it for a few days but then signed the bill on June 20, and it is now the law of the land.
Reactions
As can be seen from the lopsided votes in both chambers of the Rhode Island General Assembly, the overwhelming sentiment was in favor of SB 948 being passed. In a press release, Senate President Dominick Ruggerio said:
This legislation provides an added convenience to Rhode Islanders who would like to play the existing table games offered at Twin River via their mobile devices. It helps ensure the continued strength of the state facilities in the competitive regional gaming market, and in so doing protects an important revenue stream that provides funding for vital state programs and investments.
State Representative Jon Brien (I) had the following to say during the legislative debate on the bill:
Gambling is here to stay. And, for once, Rhode Island is being proactive. How many times do we sit in this room and say, well, we’re being reactive. We’re just doing what other states are doing. For once, Rhode Island is leading the charge. It’s out there. It’s not going away. Let’s lead the charge and be proactive.
However, the online casino bill did have a few detractors. Besides fears about gambling addiction, some questioned why Bally's is going to have a state-mandated monopoly on the market. Among them were Representative Teresa Tanzi (D) who voted against the bill. She explained her reasoning:
Why does Bally’s get a monopoly on this? I know other states that do this, they have a multitude of options for their folks. So if we really wanted to bring iGaming to the residents of Rhode Island because we thought it was such a great idea and it had nothing to do with money, that we would just open this up and have a multitude of different options for our citizens to choose from. But we haven’t. We chose one. We chose Bally’s without a process or bidding or any of that.
Better Options Available Offshore
Even when the regulated Rhode Island online casino opens its doors for business, you might want to avoid it and look elsewhere. As noted by some of SB 948's opponents, the single operator called for by the bill means that there won't be any competition, and Rhode Islanders won't have any choice as to what website to play at.
Fortunately, there are offshore casinos that welcome residents of Rhode Island and are available to play at right now. To learn more about the most reputable of these organizations, check out our guide to online casinos in the United States.
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