4 Takeaways From the 2014 US Online Gaming Forum

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The state of regulated online gambling in the United States was the primary focus of the 5th annual c5 Us Online Gaming Forum, held last week at Caesars Palace in Las Vegas.

View the program here.

Below find four of my major takeaways from USOG, with a few interesting quotes and facts thrown in at the end. You can also review my real-time coverage of the conference by searching the hashtag #USOG on Twitter.

4) Payment processing: help is on the way

Participants offered a few hopeful notes regarding payment processing for regulated online poker and casino sites in New Jersey:

  • PayPal was said to be planning a trial launch in New Jersey before year’s end, and a full launch (pending the trial) in 2015. This tracks with earlier reports regarding PayPal.
  • New merchant codes for regulated online gambling will be introduced by major credit card companies in Spring of 2015. The merchant codes are expected to have the most dramatic impact on VISA acceptance rates. One panelist estimated that the new codes would bring VISA acceptance rates into the 80% range.
  • New Jersey regulators and lawmakers continue to work with the federal government and banks to increase the comfort level surrounding payment processing for regulated online gambling.

Those improvements, coupled with the thought-to-be-impending entrance of PokerStars in New Jersey and continued gains in consumer awareness, could portend a significantly better year ahead for online poker and casino revenue in NJ.

3) Work on liquidity sharing continues

For players wondering when interstate online poker will become a reality in the United States, a few glimmers of hope emerged from panelists at USOG:

  • Delaware and Nevada are in the technical testing phase and expect to launch their interstate network in early 2015.
  • New Jersey and Nevada continue to have discussions surrounding the issue.
  • Regulators in NJ have had preliminary discussions with their counterparts in the UK.

The larger theme underpinning these comments: all involved in working on liquidity sharing are acting out of an abundance of caution due to the complex, somewhat uncharted nature of the issue, meaning that the pace of action on player pooling will likely remain sluggish in the near-term.

2) Geolocation: training wheels are slowly coming off

Geolocation continues to exercise some depressive force on participation in regulated online gambling, but quantifying that impact is difficult.

The bright side: it may soon not be an impact worth quantifying, if current trends continue:

  • Geolocation companies are working to pull in more data sources to help further refine the product.
  • Wireless carriers were said to be evolving into better, more understanding partners with an active interest in seeing the technology succeed.
  • Regulated online gambling is serving as a successful proof of concept for high-trust precision geolocation, which is drawing more talent and mainstream interest to the technology.
  • Operators remain very cautious regarding where they draw their geolocation borders, meaning there’s still upside as those borders are eventually relaxed.

1) The biggest threat to gambling is gaming

Perhaps no theme echoed across the various panels so much as this: the biggest threat to the survival of commercial gambling in the United States is gaming.

Now, I know the gambling industry prefers to use “gaming” as a descriptor when it can. But what I’m talking about here is gambling – risking money for the chance to win money or prizes – versus gaming – playing games that do not offer the potential for a financial reward.

In other words: blackjack at Caesars Palace versus Candy Crush. Or real-money poker at WSOP.com versus Zynga Poker.

To wit, the modern gaming industry …

  • Competes directly for the time and dollar of the casino consumer.
  • Utilizes many of the same mechanics of and produces a similar experience to the casino experience.
  • Enjoys a comparatively regulation-free environment.
  • Is populated by companies with deep pools of talent and access to public money.
  • Is enjoying rapid growth (see the latest projections for social casino revenue) with no obvious end in sight.

Panelist after panelist sounded the alarm: Casinos and other participants in the real-money gambling ecosystem must find ways to either integrate gaming into their offerings, or to draw consumers back from the competing options gaming offers.

Quotes and numbers of note

  • Regulated online gambling “is not the most efficient way to launder money” thanks to the “checks upon checks upon checks” inherent in the digital audit trail, noted Nevada Gaming Control Board Member Terry Johnson.
  • The top customer at PurePlay Poker has spent $250,000 – on chips with no redeemable value.
  • “Let’s be clear – Internet gaming grows” the larger gaming market, noted Deutsche Bank’s Andrew Zarnett. But some of the revenue from online gambling, Zarnett stressed, comes at the expense of land-based revenue.
  • $200mm is the number Zarnett sees NJ online gaming revenue hitting in Year 2.
  • “We’re not done” going after illegal online gambling sites, asserted Sharon Levin, Chief of the Money Laundering & Asset Forfeiture Unit (Criminal Division), U.S. Attorney’s Office.
- Chris is the publisher of OnlinePokerReport.com. Grove also serves as a consultant to various stakeholders in the regulated market for online gambling in the United States.
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