Status of Internet Gaming in the United States

Since our last entry on Internet gaming (https://tmgconsulting.wordpress.com/2012/03/13/igaming-more-joint-ventures-strategic-alliances-and-mergers-acquisitions-than-you-can-shake-a-stick-at/), much has changed.  National-level legislation did not move as quickly as some had hoped, while individual states are considering legalization of online gaming on their own.  In service to our clients, TMG continually monitors the progress of Internet gaming in the United States.  This blog entry is a brief summary of some of the more relevant developments of late.

In 2009, New York and Illinois’ lotteries petitioned the Department of Justice (DOJ) for a legal opinion on their plans to sell lottery tickets online. In response, the Department of Justice (DOJ) issued a Memorandum Opinion[1] on December 23, 2011 which stated that Internet gaming transactions are legal between states were gambling is legal, effectively reversing its previous interpretation under the Federal Wire Act that implied it was illegal. The ramifications of the DOJ’s opinion are still developing throughout the country, with several states passing or attempting to pass new legislation to allow iGaming within their borders and reap the economic benefits.

As of June 2013, there were five states with some form of legalized iGaming and at least 18 other states that were exploring their options or working to pass enabling legislation. Only two states, Utah and Texas, have specifically prohibited iGaming, while the remainder of states in the U.S. have yet to publically take a stance.[2]  The types of games that are offered (or will be offered) in states with enabling legislation vary from online lottery tickets, online poker, online Vegas-style table games (e.g., blackjack), and online slots games.

Factions within the U.S. Congress have also introduced legislation on the federal level this year. Senate Majority Leader Harry Reid submitted a bill that would set federal standards for online poker throughout the nation, while banning casino-style online games (e.g., blackjack, slot-style games, etc.). In a separate effort, Rep. Peter King introduced a bill that would also seek to set federal standards for online gaming, but would not ban casino-style online games. At least one other bill related to online poker is also expected to be introduced this summer.  Without more uniform agreement on whether or not casino-style games should be allowed online, it seems unlikely Congress will pass an online gaming bill in 2013.

States that have Taken Action

  • Delaware: Legislation has been passed allowing poker, slots, and table games to be played online within the state’s borders. The Delaware Lottery will oversee a centralized iGaming system which will be operated by the current land-based racetrack casino operators in the state. Delaware expects it will bring its iGaming online by September 30, 2013.[3]
  • Georgia: New legislation now allows an online lottery in the state. The Georgia Lottery controls this operation and offers lottery ticket sales on its website.[4]
  • Illinois: New legislation now allows an online lottery in the state. The Illinois Lottery controls this operation, which has already commenced.[5] Online poker was proposed in a recent gaming expansion bill that was vetoed by Governor Quinn.[6],[7]
  • Nevada: In February 2013, Nevada passed iGaming Legislation which allows online poker to be operated by companies that are already licensed to operate land-based casinos in the state. Existing operators must successfully apply for an iGaming permit with the Nevada Gaming Control Board. The first company in the US (Ultimate Poker) was awarded an online gaming license in April 2013 and is now active.[8] Additionally, in February 2013, Nevada’s Governor signed a bill authorizing the state to enter into interstate compacts allowing online poker.[9]
  • New Jersey: New legislation now allows online versions of all games currently offered at land-based casinos. The law has yet to be executed and awaits activation from the New Jersey Division of Gaming Enforcement. Industry executives estimate online gaming may not be live in NJ until after mid-2013, possibly not until 2014.[10]

States Considering Online Gaming

  • California: Interested parties are pushing for online poker to be operated by the existing land-based casinos.[11]  Two bills are currently (June 2013) under consideration in the Senate.[12]
  • Connecticut: Facing pressure from Foxwoods casino to authorize Internet gaming. As of June 2013, it is unclear what route Connecticut will ultimately take with iGaming.[13]
  • Florida: As of June 2013 there are two bills, one in the House and one in the Senate, proposing online lottery ticket sales.[14]
  • Hawaii: Legislation was proposed in 2013 session, but failed to pass through the Legislature.[15]
  • Iowa: Proposed legislation for online gaming was rejected by the Iowa House of Representatives in 2013, for the second year in a row.[16]
  • Kentucky: The Kentucky Lottery Corporation approved the sale of online lottery tickets, which is expected to boost annual lottery proceeds to the state by $80 million per year. Online ticket sales are expected to begin in 2015.[17]
  • Louisiana: A resolution was passed by the State Legislation in June 2013 that authorizes a study for the impact of Internet gaming in Louisiana and to report its findings by March 2014.[18]
  • Maryland: Various bills were proposed in 2013.
  • Massachusetts: Various online gaming bills have been proposed.[19]
  • Michigan: Two forms of legislation prohibiting online lottery ticket sales in the state were proposed in April 2013.[20]
  • Mississippi: For the second year in a row, Mississippi failed to pass its intrastate online gambling bill.[21]
  • New York: The New York Senate has declared it supports authorizing online poker. A bill has yet to be introduced.[22]
  • Ohio:  Legislators are exploring the issue which may require a state constitutional amendment to allow online games.[23]
  • Oklahoma:  A bill was proposed in the State Senate to make playing of lottery games on VLTs and on the Internet illegal without first purchasing a paper lottery ticket at a lottery retail location.[24]
  • Pennsylvania: Legislators have indicated that there is pressure to enable online gaming in the state in order to keep up with Nevada and its neighbor New Jersey.[25]
  • Texas:  Multiple constitutional amendments were proposed in 2013 seeking to allow online poker.
  • Washington: Online poker bill failed in early 2013. Another attempt next year seems likely.[26]
  • Washington D.C.: A forerunner in last year’s race to enable iGaming, Washington D.C. came up short. Current legislative plans regarding online gaming are unknown.[27]

Revenue Potential

Of course, the question on everyone’s minds: how much $$$?  Some recent forecasts are shown below:

  • “The American Gaming Association says that roughly 85 countries have legalized online gambling and there is around $35 billion bet online each year. The Association believes that the US market will be worth $10 billion each year by 2017 and has the potential to grow far larger than that.”[24]
  • “…should online gaming be legalized, the U.S. market for online casinos and poker could be worth as much as US$12 billion, according to Goldman Sachs.”[25]
  • “…revenue from the United States earned from online gambling in 2012 was estimated at $17 to $19 billion.”[26]

Contributed by:

Nicholas Farrae

Senior Analyst, Economics & Gaming

nicholasfarrae@tmg-consulting.net or 504.569.9239 x 31

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Disclaimer
The views, interpretations, or strategies expressed are those of the authors, and do not necessarily reflect the position of TMG Consulting. This site is meant for educational purposes only and does not constitute professional advice. TMG Consulting makes no representation as to accuracy, completeness, or suitability of any information on this site and will not be liable for damages arising from its display or use.

[1] Department of Justice. “Whether proposals by Illinois and New York to use the Internet and out-of-state transaction processors to sell lottery tickets to in-state adults violate the Wire Act, Opinions of the Office of Legal Counsel in Volume 35.” December 2011.

[2] iGaming Business North America. “State of the Union.” iGaming Business North America. Issue 05, February/March 2013.

[3] Stradbrooke, Steven. “PokerStars among bidders for Delaware Lottery contracts.” CalvinAyre.com March 2013.

<http://calvinayre.com/2013/03/20/business/pokerstars-among-delaware-lottery-bidders-optimal-payments-plots-us-return/&gt;

[5] iGaming Business North America. “State of the Union.” iGaming Business North America. Issue 05, February/March 2013.

[6] Vinicky, Amanda. “Quinn: Online Gambling Proposal ‘Problematic.’” NPR via WUISNews.org  March 2013.

<http://wuisnews.wordpress.com/2013/03/26/quinn-online-gambling-proposal-problematic/&gt;

[9] Collson, Brett. “Nevada Gov. Brian Sandoval Signs Interstate Online Poker Bill.”  Poker News Global. February 2013. <http://www.pokernews.com/news/2013/02/interstate-online-poker-bill-moves-forward-in-nevada-14377.htm&gt;

[10] The Associated Press. “Opposition to Internet Gambling Lessening in N.J.” DailyFinance.com March 2013. < http://www.dailyfinance.com/2013/03/20/Internet-gambling-opposition-lessening-nj-christie/&gt;

[11] iGaming Business North America. “State of the Union.” iGaming Business North America. Issue 05, February/March 2013.

[13] iGaming Business North America. “State of the Union.” iGaming Business North America. Issue 05, February/March 2013.

[25] iGaming Business North America. “State of the Union.” iGaming Business North America. Issue 05, February/March 2013.

[27] iGaming Business North America. “State of the Union.” iGaming Business North America. Issue 05, February/March 2013.

iGaming: More Joint Ventures, Strategic Alliances, and Mergers & Acquisitions Than You Can Shake a Stick At

We last blogged about the explosive developments that have followed the DOJ’s Wire Act Opinion.  States throughout the U.S. have been scrambling to install iGaming legislation and programs.  Just as the states have been doing, but far in advance to the DOJ’s Opinion, a broad range of companies in the gaming industry have been scrambling to be in the best possible shape for the hopeful explosion of iGaming opportunities in the near future.

It’s not just companies involved with existing iGaming markets in other parts of the world, but also major brick-and-mortar suppliers such as IGT and even brick-and-mortar operators such as Caesars Entertainment, preparing for iGaming in the United States.  iGaming is new and exciting here, and even companies rooted in the social media industry, such as Zynga, have taken steps to take full advantage of legal online poker in the U.S.  Briefly we’ll review some of the recent and notable corporate alliances, mergers & acquisitions, and joint ventures in the iGaming industry. (more…)

The Future of Internet Gaming in the U.S.: Notes from iGaming North America Conference

The bricks-and-mortar gaming industry wants in, the States want in, Native American Tribes want in, service providers want in . . . the list goes on.  But, what is actually on the horizon for Internet Gaming?  In the search for answers, I recently attended and participated in iGaming North America.  This is the first post in a series where I will discuss the future of Internet Gaming. (more…)

Upcoming Conferences

TMG Staff are active in their respective fields, regularly participating in industry conferences and continuing education programs.  Over the next few months, TMG staff will be coordinating, sponsoring, presenting at, or attending:

  • Louisiana Chapter of the American Planning Association 2012 State Conference: January 25-27, Lake Charles, LA
  • iGaming North America: March 4-6; Las Vegas, NV
  • Regional Modeling for Improving Public and Private Policy: March 12, Baton Rouge, LA
  • PARKING!  Can We Do Better for our Communities and Our Businesses?, presented by ULI Louisiana and TMG Consulting: March 13, New Orleans, LA
  • American Council of Engineering Companies Annual Conference and Legislative Summit: April 15-18, Washington, DC
  • Southern Gaming Summit:  May 8-10, Biloxi, MS
  • Airport Minority Advisory Council (AMAC) Diversity Conference: June 9-12, St. Louis, MO
  • ACEC/L Technical Visit and Study Tour: June 19-23, Panama Canal, Panama

G2E Conference Summary: iGaming Congress

This year’s G2E was as exciting and enlightening as any before it.  As an industry, gaming has been steadily recovering from the dramatic declines of 2008 and 2009, and new growth opportunities are presenting themselves.  Possibly the greatest potential for growth exists in the igaming sector. This blog post is a quick summary of the discussions and conclusions of igaming and legal experts on this emerging market.

How Big is the Market?

The worldwide online gaming market is currently around $32 billion annually, with approximately $13 billion generated in Europe, $9 billion from Asia, and the remainder from North America and the rest of the world.  Legalization in the United States will undoubtedly grow the total pot, but there is no widespread agreement on what those revenues will be.  Some experts have estimated that the U.S. poker market could result in tax revenues of $6-15 billion annually, creating 60,000 jobs in our economy.

Path to Legalization

Online gaming is flourishing worldwide, however poker is the most palatable game for legalization in the United States right now.  Much as last year, industry experts disagree on the route for its legalization – whether it will happen on the federal level, or whether individual states will take action first.  Were online gaming legalized on the federal level, a new regulatory body would likely have to be created.  If it were legalized on a state-by-state basis, existing gaming commissions cold oversee the operators.  This year’s panelists and experts believe that New Jersey will have online casino gaming soon, not just poker, and that Iowa could be the next state to legalize Internet poker.

Who Will Get Licenses?

Much discussion at this year’s G2E centered on who the potential licenses will go to – to those companies based outside of the U.S., or those that are U.S. based.  The general consensus was that U.S. based companies have a greater chance for licenses, but that European-based companies will play a key role in providing software and support for the legal sites.

What Can Licensees Expect?

Gaming operators and legislators are currently in negotiations on the details of any bills, but the gaming companies represented at G2E expect to pay around a 16% tax on net deposits or similar fees in exchange for the ability to advertise their sites.

Contributed by:

Suzanne P. Leckert

Director of Gaming, Feasibility & Land Use Analysis

suzanneleckert@tmg-consulting.net

Next G2E blog post:  Summary of new opportunities for land-based gaming in the U.S. and Asia

Disclaimer
The views, interpretations, or strategies expressed are those of the authors, and do not necessarily reflect the position of TMG Consulting. This site is meant for educational purposes only and does not constitute professional advice. TMG Consulting makes no representation as to accuracy, completeness, or suitability of any information on this site and will not be liable for damages arising from its display or use.