Legalization, regulation needed for online casinos too

Legal Online Gambling And Sports Betting Were Meant For Each Other

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Legal sports betting is spreading across the nation like wildfire. Look no further than this map of sports betting bills for visual evidence.

Unfortunately, in many cases the end product falls short on a number of fronts, including projected revenue and consumer expectations. State legislatures rushing to cash in on the financial opportunity presented by sports betting have made a number of missteps.

The most serious gaffes include:

As the industry points out ad nauseam, these policy failings are destined to do one thing — constrain the market.

But the greatest mistake many states make is looking at sports gambling in a vacuum. Online sports betting shouldn’t be treated as a standalone product, and any legislature with the power to legalize online casino and poker alongside online sports betting should do so. If they don’t, they should be charged with legislative malpractice.

Here’s why.

Online casinos are the moneymaker

When it comes to revenue, online casino provides the real opportunity. And that opportunity increases greatly when an operator can offer the two products side by side. Locales that offer online sports betting in conjunction with online casino have seen the two verticals feed off of one another.

New Jersey provides the shining example.

Through the first half of 2019, NJ sports betting revenue has fluctuated between $12.8 million and $24.3 million. Over that same period, online casino/poker revenue has generated no less than $31.7 million — and as much as $39.1 million —  with growth hitting historical highs since online sports betting was added to the mix.

Sadly, legislatures are ignoring the evidence from the Garden State — not to mention the pleas from their gaming operators.

The industry knows better

Case in point: When lawmakers in Connecticut first broached sports betting, the state’s two tribes made it abundantly clear that online gambling was a better opportunity. Foxwoods and Mohegan Sun both told the legislature that online casinos were the bigger moneymaker for the tribes and the state alike.

In submitted testimony from March 2018, then-Foxwoods executive Seth Young said this:

“As we see it, the strongest opportunity for the state is in legalizing statewide iGaming, another activity that is currently operating for Connecticut residents in the black market today.”

Young’s counterpart from Mohegan Sun, Avi Alroy, echoed those sentiments in separate testimony:

“To clarify, I believe that the state of Connecticut will benefit from both online casino gaming and sport wagering as it will reduce unregulated bets that are done locally and off-shore, and increase state revenues.”

Somehow, though, everyone keeps talking about sports betting as the big opportunity.

Online casino and sports betting are symbiotic

Online casino and online sports betting only reach their full potential when they’re deployed together.

Once again, the evidence from New Jersey speaks for itself.

Since the inception of online sports betting, online casino revenue has accelerated rapidly. The industry was already growing, as the chart shows, but the introduction of NJ online sports betting in August 2018 has spawned unprecedented year-over-year growth.

The bottom line is simple: Online casinos and online sports betting go together like peanut butter and jelly.

Core regulations are similar

By and large, online casino and poker games require the same protocols as online sports betting. A regulatory body overseeing one form of online gambling can add another without incorporating a completely new set of rules.

Even though online gambling takes many forms, the base regulations have a lot of overlap.

  • AML safeguards
  • Responsible gaming policies
  • Geolocation and player verification checks
  • Game integrity and fairness
  • Segregated player accounts

That doesn’t mean state regulators have to roll out casino games, poker, and sports betting at the same time. However, legalizing one while leaving the others on the bench creates regulatory redundancy and forces operators to integrate additional products (at a higher cost) at a later date.

A black market for online gambling too

One of the most ballyhooed reasons for legalized sports betting is a supposed desire to stamp out the black market and provide consumer protections.

If lawmakers really cared about the issue, though, they’d acknowledge that a black market also exists to serve online casino gamblers and poker players. And a regulated alternative should be an option for them too.

If legalizing sports betting provides US gamblers with a safe, regulated alternative to offshore sites — and it does — than why shouldn’t those same protections apply to online casino and poker players? Why do we only care about protecting sports bettors?

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Online gambling underpins land-based gambling

One of the great lies about online gambling is that it cannibalizes land-based gaming. Nothing could be further from the truth.

The evidence from New Jersey is once again conclusive. Online gambling connects operators with new customers, reconnects them with old customers, and increases the value of their existing customers.

It surprised a lot of people to see online gambling emerge as an additive revenue generator for existing land-based operators. And a lot of people still refuse to accept the reality of the situation.

Whether due to the counterintuitive nature of revenue or the strong messaging from online gambling opponents, this myth has persisted and continues to guide legislation.

Online gambling is the future

Imagine if, instead of fighting to constrain online competition, entrenched industries embraced it.

Imagine if businesses like Blockbuster stopped rigidly sticking to their retail business model, peered into the future, and implemented forward-thinking policies to evolve with the times. What if big-box stores created Amazon instead of trying to compete after the fact?

National Geographic is a company that did just that.

The historic periodical was founded as a print magazine in 1888 before growing into one of the most successful multi-format publications over the next hundred years. Unlike its competitors, National Geographic didn’t ignore changes in the media industry. It became one of the first magazines to offer current and past issues in a digital format in the late 1990s and later branched out into television, launching the National Geographic Channel in 2001.

These early, proactive pivots allowed the magazine to remain relevant through continual reinvention.

If casinos truly believe that online gambling is the future, they should adjust their overall business model to leverage both land-based and online offerings. What they shouldn’t do is fight against it until it’s too late.

- 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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