Sports betting fever is spreading in the U.S. with several states opening the books just one month after a historic Supreme Court decision that said the 1992 federal ban was unconstitutional. Some observers are wondering just what this new landscape will look like and what it will mean for most states that legislate their own regulation of the activity.
Our observation is that New Jersey online casino revenue will continue to grow modestly. That stream should not be adversely affected or cannibalized by too many sports bettors taking their chips off the blackjack tables to bet on football.
However, we don’t see much potential for anything truly robust or earth-shaking until full-service casino and betting sites like Betsafe Casino are launched to a wide-open U.S. market for states that wish to offer online gaming, without the encumbrance of intrastate betting border controls.
Without a single, unified gambling commission for all participating states, it’s impossible to compare apples to oranges, but we will look at UK revenue numbers later on – where there are over 8,000 in-person betting shops and online gambling generates more gross gaming yield than any other sector including lottery and land casinos.
The short answer to the first part of the question is that nobody knows for sure what the US gambling landscape will look like. This, because it’s unlikely that lawmakers in the nation’s capital will do anything about replacing the overturned Professional and Amateur Sports Protection Act of 1992 (sometimes known as PASPA or the Bradley Act) any time soon.
The answer to the second part, what will this new sports betting freedom mean to states that wish to regulate it, is more involved and lengthy, yet still has myriad unknowns. If there were a short answer, it would probably be that there is not likely to be significant positive impacts on most state revenues, and no federal tax dollars will be generated.
Lawmakers and pundits in New Jersey learned the hard way in 2013, that you can’t just pull a number out of your hat and expect it to become a rabbit that lays golden Easter eggs. Former Gov. Christie projected that legal online gambling would churn up over a billion dollars in first-year revenues with $180 million of that going to state coffers. Instead, total revenues were less than $200 million and the state took in about $10m of that.
Current Gov. Phil Murphy has projected $13 million in sports betting tax revenue for July 2018 – June 2019, and Fitch Ratings has stated that “Sports betting will not contribute substantially to either gross gaming revenue (GGR) or state tax revenue,” according to a May analysis by the firm.
The New Jersey projection may be very close to reality as it is based on the numbers of undisputed U.S. heavyweight champion sports betting state, Nevada which reported about “$4.9 billion in sports handle in 2017, with $249 million in GGR and about $17 million in associated state tax revenue,” according to Fitch Ratings.
While NJ online casino and poker revenues continue a steady upward trend, and online sports betting is authorized to begin before the middle of July, each of the states that have regulated online casino and poker games has chosen to interpret federal law, or craft into their own legislative language that makes it impossible to offer online gambling, except within their own borders.
This has been a mystery as the Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA) neither created nor modified any existing federal gambling law, and the DOJ opinion of September 20, 2011 (PDF) specifically states that the Wire Act of 1961 only pertains to sports betting. “…we conclude that interstate transmissions of wire communications that do not relate to a “sporting event or contest,” 18 U.S.C. § 1084(a), fall outside of the reach of the Wire Act.”
What this means is two-fold. Primarily, we will never see legal interstate sports betting without new federal regulations that modify or nullify the Wire Act.
The more important takeaway, assuming there is not something I have overlooked through years of studying the applicable laws, case law, and decisions, is that it just may be possible to launch online intrastate casinos, poker, and lotteries in the U.S. – and, if so, it has been possible since 2011.
What would this mean, sans sports betting revenues? The May numbers are in for New Jersey which saw nearly $2 million in poker revenue and over $22m from online casinos for a total monthly gaming win of $24,302,621.
Nevada had $0 online casino revenue and the paltry poker numbers are commingled with and effectively buried in commission reports. Legislation exists for online casino gaming in the state, however, regulations were only written for poker.
Each of the states with active legal poker sites – Nevada, New Jersey, and Delaware already share player liquidity. Players in Hoboken, NJ can play with people in Reno, Dover, and elsewhere. Pennsylvania and others may join the pools soon.
If even half the remaining states crafted their own online gaming legislation, created a compact, and accepted interstate play from any other participating state – legal US online poker would become a true industry again. If those sites were launched with casinos, we’d be halfway to freedom in a regulated market. If federal laws were changed to allow interstate sports wagers, the package would be complete.
Even with some states, such as Hawaii and Utah opting out, we would finally have a scenario that could be compared to the United Kingdom’s. Adjusting for currency exchange and populations, we would be able to take some of the following numbers along with others, and predict the US online gambling potential with some level of certainty.
The Gambling Commission has regulated the entire British online gambling market since 1 November 2014. It is now the largest regulated online gaming market on the planet. While growth has steadied, it still generates £4.7bn gross gambling yield (~US$6.24bn) yearly. All numbers are from the UKGC Review of online gambling published twice each year in May and November. Following are the most current statistics.
£13.9bn total gross gambling yield (GGY) for the entire Great Britain gambling industry.
£4.9bn total GGY for the online sector.
35% market share of the remote sector.
310 licensed operators that offer consumer-facing activities.
Online casinos are the largest producer and currently, account for 55% of total online GGY while betting accounts for 41%.
8,532 in-person betting shops.
106,366 people work in the industry.
152 land casinos in Great Britain