The State of Online Gambling

Despite the roadblocks being thrown up by some very well funded lobbying efforts from some on the land based casino side, online gambling is moving forward. In the US, three states have legalized online gambling, and nine more have introduced legislation to legalize. We think that the progress of online gaming means more than just online profits. We think online gambling can also be a shot of adrenaline for land-based casinos, both by attracting new audiences and by bringing innovative new entertainment options to casino floors. In fact, we’ve based our business model on it. Here is a market-by-market look at the current state of online gambling in New Jersey, Nevada, Delaware, US Virgin Islands, and the UK.

New Jersey

New Jersey has around 200,000 registered online-gambling accounts with seven casino operators and their online-gambling partners that have launched their online gambling accounts. According to a poll released Jan 30, 2014, the number of New jersey players who gamble on Atlantic City websites could nearly triple in 2014. The state only allows online gambling by people over the age of 21 and physically located in New Jersey. The state also requires that the online operator work with a casino that has a physical presence in the state. New Jersey levies a 15% tax on online gambling revenue versus the 8% tax on revenue from brick-and-mortar casinos. All games played in Atlantic City casinos can be played online. After its November 26, 2013 launch, Internet gambling in New Jersey generated $8.4 million within 5 weeks. However, this number significantly lags behind the state’s forecasted revenue of $1.2 billion total by the end of its fiscal year in June 2014. Monthly revenues from Internet gaming totaled $9.5 million in January, up 28% from $7.4 million in December. One reason for the lower-than-expected revenue intake in New Jersey (as well as Delaware) is poor credit card cooperation, especially from Visa. Only 20% of Visa transactions have processed, while about 80% of MasterCard transactions have processed. Additionally, many financial institutions have refused to process online gambling transactions, both for credit risk reasons and because federal laws are unclear whether they can do o legally. State officials have been in talks with federal agencies, payment processors, and financial institutions to allow more customers to gamble using their credit cards.

Nevada

Online gambling in Nevada is limited to online poker operated by only two sites, Station Casino’s UltimatePoker.com and Caesars Entertainment’s WSOP.com. The state’s casino companies have the exclusive right to be online gaming operators. All players must be at least 21 years old and physically playing on a computer or mobile device located within Nevada’s borders. Like other gross gaming revenue in Nevada, online gambling is taxed at a rate of 6.75%. Nevada officials haven’t released revenue data yet, as the state is waiting for a third operator to begin business before disclosing any such data; however, Morgan Stanley estimate that by 2017, Nevada will generate $400 million in revenue from online gambling.

Delaware

Internet gambling in Delaware brought in a total of $253,000 during November and December 2013. At the current rate, it will put the state well short of its goal to generate $5 million in revenue during the first year of online gambling operations. Delaware collects 100 percent of the first $3.75 million of online revenue in a given year, meaning casinos have yet to receive any of the proceeds from online gaming. Despite the revenue shortfall, Delaware officials do not believe online gambling has reached its full potential and are making investments in marketing and promotion to drive more players to gaming sites. At the end of December 2013, only 4,000 out of over 550,000 people over the age of 21 had registered to game online. As of January 25, 2014, Delaware was averaging only 18 players online at any given time. Because Delaware is such a small state and the population is not big enough to bring in much revenue, officials from the state have had preliminary discussions with officials in Nevada and New Jersey about forming an interstate partnership that would allow gamblers to play across state lines Delaware currently offers online slots, blackjack, roulette, and poker. The state intends to add craps and other games at some point this year. To get into the gaming sites, players must be of legal gambling age and be using a PC or smartphone/tablet within the state’s borders.

US Virgin Islands

On Oct 31, 2013, the US Virgin Islands (USVI) Casino Control Commission announced that it was ready to regulate online gambling. Laws are already in place that allows for such an industry to exist within the territory. The online gambling services offered will follow along the lines of Nevada, Delaware and New Jersey. Additionally, the USVI aims to enter into interstate compacts with other US states. While the Virgin Islands have a population of only around 107,000 people, the islands do bring in around 2 million tourists every year. Online gaming companies will likely market their services to those vacationers in order to achieve major success. Currently, USVI Host and St. Croix Internet Group are the two master service providers authorized to act as web hosts for USVI-licensed online gambling companies. Both service providers are approved for 10-year licenses with two 10-year renewable terms, but only USVI Host has applied for the license. In order to play in the Virgin Islands, players must be at least 21 years of age and not a resident of a jurisdiction where Internet gambling is prohibited. For any person or entity to engage in the offering, advertising, or soliciting in the Virgin Islands the playing of Internet games, an Internet gaming or Internet gambling license from the USVI Casino Control Commission must be applied for and received.

United Kingdom

In 2013, mobile betting was the fastest growing market in the UK’s real money gaming industry. According to a report published by OddsWinner.com, the UK’s mobile betting industry grew by more than 100% in 2013. Online gambling in the UK is projected to be worth £2.5 billion in 2014. The report attributed significant part of the growth in UK’s mobile betting industry to record levels of smart phone penetration, a huge surge of in-play betting advertising, and an encroachment of betting operators in professional sport. A company based in the UK must apply for a license from the Gambling Commission if they wish to offer gambling services of any kind and advertise their services. Players must be over the age of 18 and based in jurisdictions where online gambling is legal. All forms of online gambling are licensed by the Gambling Commission and can be legally provided in the country.

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