Online casinos are still limited to PA, NJ and Delaware
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US Online Gambling Is A Bright Spot As Casino Industry Stalls; Will It Expand?

It’s no secret that online casinos have benefited from social distancing measures. People have few entertainment options and have been spending more time online in general.

However, the majority of Americans still live in states with no access to legal, real-money online gambling sites.

Those states which do have legal US online gambling have begun reporting revenue numbers for March and they’re quite impressive. That increased tax revenue is no doubt very welcome at a time when state economies are otherwise struggling.

Although revenue numbers are not available for illegal offshore sites, it’s probably safe to assume that they’re doing increased business from states without a legal option.

One probable long-term outcome of the pandemics is that more states will recognize the advantages in regulating and taxing online gambling, rather than forcing players onto offshore sites by denying them access to a legal option. In the shorter term, however, it has had the unfortunate effect of suspending most legislative efforts towards gambling expansion.

Gaming research firm Eilers & Krejcik has published a study called the Sports & Emerging Verticals COVID Companion. It provides a useful snapshot of the situation, both in terms of legislation and the short-term impact of the disease on the US online gambling industry.

Few states have legal online casinos

At the moment, only three states have legal online casinos:

  • New Jersey
  • Delaware
  • Pennsylvania

The market in NJ online casinos and Delaware online casinos is well-established, with their first ones having launched back in 2013. PA online casinos are a much more recent addition. Three online casinos went live there in July last year. Since then, four more have joined them.

All three of these states reported spikes in online casino revenue in March. Online poker is also available in all three and benefited to an even greater degree, although its share of total online gambling revenue remains small.

Since the federal prohibition on sports betting was lifted in 2018, many states have rushed to legalize it. In many cases, that has included an online component. There’s been far less enthusiasm from state legislators about other forms of online gambling.

That may change, however.

New Jersey figures highlight importance of the online sector

As the largest and best-established of the legal online casino markets in the US, New Jersey serves as a useful indicator of overall trends.

There, we see that online sports betting revenue tumbled 45% in March, yet combined revenue for online casino and poker surged 65%. Online casino was already the largest of the three verticals, so its gains made March a winning month for the online sector as a whole.

New players made up a large part of the added revenue. It’s impossible to say exactly how much in dollar terms, since that data isn’t available. However, downloads for casino apps went from an average of 8,166 per week in the state prior to the shutdown of brick-and-mortar casinos, to 14,051 afterwards. Weekly downloads for poker apps nearly tripled, from 1,591 to 4,474.

Prior to the shutdown, land-based establishments accounted for 80% of the state’s total casino revenue, while online sites accounted for 20%. Even with these increases for the online sector, the state’s total revenue has suffered. However, the situation is much better for New Jersey than states with no online option, as these have lost 100% of their gaming revenue.

Michigan attempting to accelerate its timeline

Aside from the four states with established online casino industries, there are also two which have passed online casino legislation but not yet authorized their first sites to launch. These are West Virginia and Michigan.

Both originally said that they expected their first online casinos to open in early 2021. That’s still the case for WV online casinos.

In Michigan, however, there’s an effort to get things off the ground sooner. The state’s first retail sportsbooks opened in March. That timing couldn’t have been worse, as casino closures forced them to shut down almost immediately.

Rep. Brandt Iden, the original sponsor of the Michigan online gambling bill, is trying to make the best of a bad situation.

“We’re working with regulators in hopes to have that mobile piece up and ready,” he told iGaming Business during a webinar, “and hopefully, very soon […] people are going to be playing. And the state needs to capture some of that revenue.”

Six online casino bills left in limbo

Before the COVID-19 outbreak reached the US, six states had online casino bills under consideration by their legislatures. These were:

  • Connecticut
  • Hawaii
  • Kentucky
  • Massachusetts
  • Nebraska
  • Washington

Most of these are now, if not entirely dead in the water, at least extremely unlikely to pass this year. Kentucky was an early favorite to pass its legislation, but its bill had already begun to stall by early March. Now, its legislative session has been canceled, so that bill is dead until next year.

Connecticut, Hawaii and Nebraska have all suspended their legislatures.

The earliest possible date for Connecticut to resume is April 23. Its bill has plenty of support, yet faces legal challenges that would have made it difficult to pass even under ordinary circumstances. The state’s tribes and a coalition of mayors petitioned the governor to sign an executive order to allow them to offer online gambling on a temporary basis during the shutdown. That proposal was quickly shot down, however.

Hawaii and Nebraska have suspended indefinitely, and their bills were looking even less likely to pass.

Washington’s legislature adjourned as scheduled on March 12. It managed to pass a retail-only sports betting bill before it did so, but its online gambling efforts failed.

The Massachusetts legislature has remained open, but it was a long shot to pass online casino legislation this year to begin with. Its lawmakers are now focused on the state budget and COVID relief, so its online casino bill is unlikely to get any further attention at all.

Online gambling during isolation has its risks

Despite the upsides in terms of jobs and tax revenue during shutdown, online gambling isn’t without its risks. Responsible gambling advocates both within the US and abroad have expressed concern about the combination of boredom, loneliness and easy access to gambling from home.

Spain, for instance, has tightened the restrictions on advertising of online gambling during its lockdown. Televised advertising is now only permitted between 1 a.m. and 5 a.m.

Portugal passed a bill mandating “partial or total limitations” on access to online gambling. The bill didn’t specify what those limitations should be, leaving that to the regulatory agency. It did, however, reference Spain’s policies as an example to follow.

The British Parliament has yet to pass such a law. However, a group of MPs penned a letter to gambling industry leaders. They urged the industry to implement limits voluntarily in order to prevent the need for legally imposed restrictions. The letter suggests a daily betting limit of £50.

At the moment, it doesn’t look likely that the US will see such limitations. That could change, however, depending on how long casino shutdowns remain in place and what trends are seen in player behavior.

Another important difference between regulated and unregulated markets is that the government can impose such limits on regulated operators if it deems it necessary. Offshore sites, already operating illegally, can’t be reined in as easily.

Will the value of online gambling be among the lessons learned?

One thing is for sure: Even once the pandemic abates, the world will never go back to doing things exactly as it did before. Governments will be under pressure to prepare for a possible repeat occurrence of COVID-19 or something like it.

The gambling industry won’t be a top priority. However, it’s likely that legislators will take note of how states with and without legal online gambling fared differently during casino shutdowns. They will have benefited in terms of jobs and tax revenue. They will also have access to the levers of regulatory control if they need them.

The suspension or cancellation of legislative sessions has temporarily delayed progress on gambling expansion in the US. The flip side of the coin, however, is that the crisis will end up highlighting the ways in which regulating online gambling is preferable to prohibiting it.

Hopefully, that lesson won’t be forgotten in years to come, as legislators seek to build a more robust economy to withstand future crises.

Alex Weldon
- Alex is a freelance writer and artist living in Dartmouth, Nova Scotia. He has been doing data-based analysis of the online gaming industry since 2016.
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