Takeaways From US Regulated iGaming's Pioneers

The First Wave Of Regulated iGaming In The US – What Have We Learned?

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Ed note: Matthew Katz is CEO and founder of CAMS (www.CentralAMS.com).

The 2015 legislative season is in full swing here in the United States and lawmakers in California, Pennsylvania and New York, among others, are making valiant efforts toward passing iGaming legislation.

Before the year’s end, we expect to see some states make considerable progress toward legalization and – for the high achievers – begin assembling a regulatory framework.

The so-called “second wave” of states coming online is truly exciting.

At present, New Jersey, Delaware and Nevada represent roughly three percent of the eligible player population in the US. If California and Pennsylvania come online, that number will rise to almost twenty percent.

Furthermore, we have a trove of industry experience to learn from. The launches in Nevada, Delaware and New Jersey were a success overall, but they weren’t without their problems. As an industry, we can learn a lot from each state’s experience and ensure that the next wave of state rollouts executes more efficiently than the last.

Based on the past two year’s experience, here are a few pieces of advice.

1) iGaming is not a get-rich-quick scheme for states

We can all agree that New Jersey’s first year projections were ambitious. While the state generated impressive revenues, it was not near what was originally forecast.

Many operators realized early on that “if you regulate it they will come” was not a viable marketing strategy. Yet, the most successful sites deployed focused marketing, public relations and advertising campaigns that attracted early adopters, built awareness and credibility statewide and drew players away from illegal offshore sites.

The lingering credit card acceptance issue is another hurdle.

Each week thousands of players visit licensed and regulated gaming sites here in the US and are prevented from funding their accounts via credit card. Many abandon their registration and migrate to unlicensed and unregulated offshore sites that, ironically, accept the very same credit cards through fraudulent coding.

The new merchant codes from MasterCard and Visa are a great first step, but we need to get the issuing banks onboard as well.

Simply put, iGaming is certainly lucrative, but it isn’t a quick way for a state to cover its deficits. States should expect to see a substantial return on their investment after three to five years depending on population, games offered, credit card acceptance and effective marketing and PR tactics.

2) Online poker hinges on liquidity

For many poker players, it’s win big or log off; no one wants to play for hours and collect a paltry bankroll.

States that allow online poker (we’re looking at you, California) should limit the amount of active sites – too many standalone sites will result in low payouts, fewer active tables and low player satisfaction.

In addition, states should encourage poker sites to pool their players. Doing so will raise pots significantly, produce more exciting gameplay and keep players onshore and logged into the state’s licensed and regulated sites.

3) iGaming isn’t an extension of land-based gaming

In some cases outdated regulations that were originally intended for land-based operations hobbled progress. A good example can be found in the testing and approval of slot machines where states routinely ran the same approval protocols for online and land-based machines.

Conventional land-based machines often need weeks to work out any bugs, while in the online world agile techniques can correct bugs through quick code pushes without scheduled interval. In most cases, problems can be fixed within a day or so. Requiring an online operator to work on a land-based schedule means many of us have to sit and wait for two to eight weeks.

As new states craft their regulations, they must work in conjunction with the industry to consider iGaming technologies and best practices.

4) But land-based casinos should leverage iGaming throughout their properties

We’ve seen a considerable amount of missed opportunity on this one. If land-based properties have the infrastructure in place, why not enable guests to play in restaurants and in their rooms via hotel tablets and interactive TV’s?

More importantly, guests should be incentivized to download and register for the online casino before they check out, enabling site operators to extend the relationship electronically and keep players playing after they unpack their bags at home.

Finally, it’s important to keep sight of our industry’s ultimate goal: to enable people to play for real money in a safe, secure and fun environment from the comfort of their homes.

The first wave of iGaming in the United States had a few growing pains, but it illustrated to us how to build upon past success and avoid missteps. With other states moving toward online lotteries, casinos and poker rooms, the second wave will be even more thrilling than the first.

- Matthew Katz is CEO and founder of CAMS (www.CentralAMS.com), a multi-tenant Software-as-a-Service (SaaS) solution for poker, lottery and online gambling operators. CAMS enables operators to monitor player activity, comply with internal and external regulations, facilitate payment deposit and withdrawals and enforce operator business rules.
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