PA online casinos will face competition from the black market

Lessons For New PA Online Casinos, Part 4: Highlighting The Legal Advantage

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Pennsylvania is gearing up to become the second major state with legalized online casino gaming. With a launch potentially months away, Online Poker Report has identified five lessons the Keystone State can take from the Garden State’s experience.

In this, the penultimate installment of the series, Online Poker Report will drill down on one specific aspect of the education issues raised in Part 3: Highlighting the legal, regulated market.

Showcasing the differences between legal and illegal sites

The last installment of this series looked at the lack of consumer education in the nascent New Jersey online gaming market.

One area in particular bears a closer look: differentiating between the state’s legal, licensed sites, and unregulated offshore sites offering similar products.

That was one area where New Jersey definitely didn’t do enough.

By not trumpeting the fact that they were licensed and regulated by the New Jersey Division of Gaming Enforcement, licensed operators gave black market sites an opening. And the black market operators jumped on it.

The black market operators did an excellent job of muddying the waters through search engine optimization and marketing gimmicks that made the sites appear legal.

There was no quick, simple way for customers to know what kind of online gambling site they were visiting. Early market research showed a significant number of customers gambling at black market sites believed they were gambling on legal sites.

What is legal and not?

As the picture below demonstrates, even though sports betting was illegal, 21 percent of respondents believed they were using “approved” sites.

Source: Commercial Intelligence 2014

That shouldn’t be surprising since potential customers were confronted with the same type of advertising whether they visited a white or black market site.

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There was little if any mention of legality. Customers had a hard time differentiating between an online gambling site licensed by the state and an offshore site operating in the black market.

It took roughly two years for the DGE to implement a policy requiring all sites to display an official New Jersey DGE seal on their homepage.

That simple fix helped customers identify what sites were legal, and what sites were operating without a license, and by extension, completely devoid of the NJ DGE’s oversight.

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PA should do that, and more

Pennsylvania regulators would be smart to copy New Jersey’s official seals from day one. And operators would be wise to go a step beyond an official seal in some remote corner of their homepage.

First, operators could place the seal in a more prominent position than most NJ operators do.

Additionally, the benefit of being a legal, licensed operator is one of, if not the key advantage these sites have over black market operators. So, rather than trying to outduel them with deposit bonuses or game offerings, PA operators should consider using the legality front and center on their homepage.

Differentiating themselves from illegal sites is important. Pennsylvania has handicapped its legal sites with an overzealous tax rate and heavy licensing fees. As such, legal operators are going to have a difficult time competing with the bonuses and RTP (return to player) rates offered at offshore sites.

The legal sites should focus on the robust regulations and consumer protections they offer.

Far more important than a 100 percent up to $500 deposit bonus are the phrases:

Licensed and regulated by the Pennsylvania Gaming Control Board!

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- Steve covers nearly every angle of online poker in his job as a full-time freelance poker writer. His primary focus for OPR is the developing legal and legislative picture for regulated US online poker and gambling.
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