iGaming Goes Live in Three States

Since our last entry on iGaming, Nevada, New Jersey, and Delaware have become the first states with (legal) live online gaming websites within their boundaries.

In 2011, the U.S. Justice Department reversed its ruling on internet gambling. Today, legal internet gaming is gradually rolling out across the U.S. How much revenue iGaming will generate and exactly how smoothly iGaming websites will operate remains unseen.[1]

Nevada

Nevada became the first state in the U.S. to operate legal iGaming.[2] Currently, only online poker is allowed in Nevada, and the Nevada Gaming Commission has no plans to expand beyond this in the foreseeable future.[3] Two websites, UltimatePoker.com and W888.com hold licenses in the state with the express purpose for online gaming, launching their websites in April 2013 and September 2013 respectively.[4] The websites are only allowed to be accessed by players physically within the state of Nevada. Participants are subjected to an extensive identity verification screening that ensures that that they are of gambling age.

But how much is Nevada making off of this new source of revenue? Nevada’s gaming commission has indicated it will only report iGaming revenues in a separate category of monthly reporting once there are three online poker sites operating in the state.[5] With just two websites up and running, there are no official reports of online poker revenue to date.[6]

Chapter 463 of Nevada Revised Statue[7], not only authorizes iGaming within the state, but positions Nevada for interstate gaming, allowing Nevada to negotiate online gaming agreements with other states.[8]

Delaware

Delaware passed legislation on June 27th, 2012 authorizing online gaming within the state. In October 2013, Delaware rolled out the first “real money stakes” internet gambling games to selected users, and in November 2013, online gambling was made widely available to Delaware residents[9]. Users physically in Delaware are able to play not only online poker, but also blackjack, roulette, and slot games.[10] While online gaming is not expected to generate much improvements in tax revenue, the expectation is that younger gamers will be drawn to Delaware’s brick-and-mortar casinos.[11] After launching online gaming, gamers in Delaware who tried to play poker experienced connectivity issues due to location-based software issues.[12]

New Jersey

New Jersey became the third state to offer iGaming on November 26, 2013, after the New Jersey Division of Gaming Enforcement green-lighted six casinos licensed to operate statewide internet gaming. The six casinos approved are the Borgata Hotel Casino & Spa, the Tropicana Casino and Resort, Trump Plaza Hotel and Casino, the Trump Taj Mahal Casino Resort, Bally’s Atlantic City, and Caesars Atlantic City.[13] Registered gamers who are physically within the state of New Jersey can play blackjack, slots, and poker online.[14]

As of early December 2013, Atlantic City’s casinos are struggling with their verification systems. The general manager at the Tropicana Atlantic City, Steve Callender, said “about 75 percent of people who have tried to play on the resort’s online gaming website — TropicanaCasino.com — have been denied because the system could not verify they were in New Jersey.” This is due primarily to three reasons: technical problems, users not physically present in New Jersey trying to access these sites, and some major banks, PayPal, and American Express having policy to not process online gaming transactions.[15] According to Moody’s, iGaming in New Jersey stands to generate $250 million to $500 million within its first year.[16] Being an early mover in iGaming, New Jersey hopes to gain an edge over casinos in nearby states, such as Pennsylvania, that have caused Atlantic City’s land-based operations to struggle in recent years.

What’s Next?

According to the National Conference of State Legislatures, six states are working to authorize iGaming within their borders. California, Illinois, and Pennsylvania each have iGaming resolutions pending within the state legislative bodies. Colorado, Hawaii, Iowa, and Mississippi had iGaming laws which failed to pass in 2013.[17] With three states already conducting iGaming operations, it’s only a matter of time before the first interstate online poker games make their debut.

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] “So What is New Jersey’s Online Gambling Market Really Worth?” OP Report. Web. Online Poker Report. 23 April 2013.

[2] “Know When to Fold.” The Economist. Web. The Economist Newspaper Limited. 14 Sep. 2013.

[3] “Nevada Examines iGaming Changes.” Casino Connection AC. Web. Casino Connection Atlantic City. 31 Oct. 2013.

[4] “Nevada Poker Sites.” US Poker.com. Web. USPoker.com 2013

[5] “Poker Revenues Rise in June.” Las Vegas Review-Journal. Web. Stephens Media LLC. 2 Aug. 2013.

[6] “Nevada and New Jersey Jockey for Online Gambling Revenue.” The Pew Charitable Trusts. Web. The Pew Charitable Trusts. 11 Feb. 2013.

[7] “Chapter 463—Licensing and Control of Gaming.” State of Nevada. Web. State of Nevada. 2013.

[8] “In Nevada, Online Gambling Poised to go Interstate.” Marketplace Business. Web. American Public Media. 22 Feb. 2013.

[9] “Caesars, Partner 888 to Launch Online Poker in Nevada.” Reuters. Thomsonreuters.com. 17 Sep. 2013

[10] “Delaware Ups Ante with Online Gambling.” Delaware Online. Web. Gannett. 31 Oct. 2013.

[11] “Online Gambling to be Allowed in Delaware.” NPR. Web. NPR. 4 Nov. 2013.

[12] “Delaware Internet Gambling Facing IP Issues, Lack of Poker Traffic.” Pocket Fives. Web. PocketFives.com. 10 Nov. 2013.

[13] “Atlantic City, NJ – NJ OKs Statewide Internet Gambling For 6 Casinos.” Vos Iz Neias. Web. VINNews.com. 25 Nov. 2013.

[14] “Christie Signs Bill Legalizing Online Gambling.” Philly.com. Web. Philly.com. 2 Feb. 2013.

[15] “Online Gambling Issues persist into Second Week of Web Betting on N.J.” New Jersery On-Line LLC. Web. Advance Digital. 5 Dec. 2013.

[16] “Online Gambling is Good for New Jersey’s Credit Rating.” The Washington Post. Web. The Washington Post. 2 Dec. 2013.

[17] “2012 Legislation Regarding Internet Gambling or Lotteries.” National Conference of State Legislatures. Web. National Conference of State Legislatures. 7 Feb. 2013

Status of Internet Gaming in the U.S.

With all of the recent developments in online gaming and so much to sift through, we thought it was time to give our readers our version of the Cliff’s Notes.  First, there has been a lot of talk and a lot of movement toward legalizing online gaming in the United States, with much activity on the state level.  Second, many land-based and online gaming firms have been partnering-up in anticipation of legalization.  This blog entry is the first in a series and will briefly discuss what is happening on the state level.

The Department of Justice’s December 23 opinion opened the flood gates for states to consider online gaming, with many looking to get started with online lottery sales.  Those discussing sales of lottery tickets over the Internet are Connecticut, New York, Illinois, Maryland, and Massachusetts.  Still other states are discussing or are in the process of legalizing other forms of online gaming: Iowa, New Jersey, Ohio, California, Nevada, and Maine.

In Connecticut, where gaming is the exclusive right of Native American Tribes, those tribes have been in talks with the governor.  The Tribes have stated that a new agreement with the state would be necessary to allow Internet gaming, and it is still unclear whether the state lottery or the tribes would get the rights to it.  The sale of lottery tickets online is expected to come up for discussion in the upcoming legislative session.

Iowa is considering multi-state Internet poker, with legislation being considered this session.  The current plan would legalize online poker games within the state and with those in  other jurisdictions that have approved Internet gaming, including Washington, DC, Nevada, and possibly foreign countries.  The Iowa Racing and Gaming Commission has estimated the rake from these games to be between $13 million and $60 million annually, with the potential for $3-13 million in tax revenues annually.

New Jersey recently made news for legalizing sports betting, although the state will now have a fight with the federal government to overturn a law banning sports betting in all but 4 states.  The state is currently considering legislation to allow all casinos to offer online gambling including poker, blackjack, and other casino games.

Nevada has been the most pro-active of any of the states with regard to Internet gaming.  Nevada was the first state to legalize Internet gaming, with a law on the books for a decade that has not yet been implemented.  Recently, the Nevada Gaming Commission wrote online gaming rules and have also adopted online poker regulations.  Internet poker could go live in Nevada in as little as 9 months.

This is an exciting time for proponents of Internet gaming.  No one expected the recent DOJ opinion, and its effects will be realized in the near future.  How the states will react is still up in the air.  Right now, nothing is certain except that the online gaming landscape will be changing and soon.

Contributed by:

Suzanne P. Leckert

Director of Gaming, Feasibility & Land Use Analysis

suzanneleckert@tmg-consulting.net  or (504)569-9239 x 33

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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.