US Internet Gambling To Be Worth $3.5 Billion By 2017

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Friday, March 28th, 2014 | Written by Charles Washington

According to a revised forecast by Morgan Stanley, the US internet gambling market is now expected to be worth $3.5 billion by 2017, a 30% reduction compared to the groups previous prediction of $5 billion. Apparently, the Wall Street firm made allowances for worse-than-expected technical issues when revising its projection, although going forward the industry continues to look promising and is expected to generate $8 billion in revenues by 2020, just a little lower than its earlier estimate of $9.3 billion.

“While we remain bullish on the online gaming opportunity in the U.S., we are lowering our estimates to better reflect the insights we have gained following the first few months of operations in New Jersey, Nevada and Delaware,” Morgan Stanley stated in a research note.

New Jersey Internet gambling estimate lowered

The company also lowered its forecast for New Jersey‘s online gambling market to $203 million for its first full year of operation, down from an earlier forecast of $541 million. Morgan Stanley’s reassessment was based upon continuing geolocation technology and payment processing issues, resulting in Morgan Stanley revising downward monthly growth rates from 20% to 10% for the rest of 2014. The new figure is now in line with an earlier one of $200 million made by global rating agency Fitch Ratings for the whole of 2014.

In addition, Fitch Ratings sees an uptick in states introducing online gaming legislation, with a company statement explaining:

“Fitch believes an interstate online poker agreement signed by Delaware’s and Nevada’s governors on Feb. 25, 2014 will accelerate state-by-state proliferation of online gaming. Additionally, the momentum for passing an online poker bill in California picked up in 2014. Other large states, such as Pennsylvania, may again consider online gaming as they head into their regular legislative sessions.”

Morgan Stanley, on the other hand, said it believes California and Illinois may legalize online gambling this year, but said it didn’t hold out much hope for either Colorado, Louisiana, Massachusetts, Mississippi or Ohio doing so this in 2014.

USA’s land-based casino industry

Online wagering on unregulated offshore sites is currently estimated to be around $3 billion each year, and establishing a legal, taxed igaming industry is increasingly being seen as a vital link in setting up a viable, well-rounded US gambling industry.

In 2012, US casinos generated $37.3 billion in gross gaming revenues, representing a 4.8% increase over the previous year and the highest total since 2007, according to the American Gaming Association.

This week, The Indian Gaming Industry Report was also released providing data on tribal gambling revenues for 2012, a figure not included in the USA’s casino revenue results but typically accounting for around 40% of the country’s total gambling revenues. Impressively, the nation’s Indian casino industry reported a 2% increase in revenues to $28.13 billion in 2012, compared to $27.59 billion in 2011. Nevertheless, the 2012 growth rate was still slower than the 3.4% recorded the previous year, with economist Dr. Alan P. Meister, commenting:

“It was the third straight year of positive growth, which is a movement in the right direction.. While it was good to see Indian gaming continue to grow on a nation wide basis, the fact that it grew at a slower pace than 2011, its pre-recession pace, and other casino gaming segments in 2012 is cause for concern.”

Opportunities and challenges ahead

While the USA’s land-based casino industry continues to show signs of growth, igaming Stateside currently has the potential to expand rapidly and capture around 30% of the world’s online gambling market within the next four years or so. Nevada and Delaware, for instance, have announced their landmark interstate poker compact could be fully functional by Summer, and have invited other states to join them in combining player pools across the country. Nevada Governor Brian Sandoval has even offered to help other states establish their own internet gambling regulatory structure, explaining:

“If there are states that don’t have as sophisticated a regulatory structure as we have, that’s something we can offer. If your state doesn’t have the infrastructure, use our capabilities.”

In addition, New Jersey is also planning on introducing a foreign Internet gambling bill sponsored by Senators Raymond Lesniak (D-Union) and Jim Whelan (D-Atlantic), designed to allow the New Jersey Division of Gaming Enforcement to allow foreign firms to obtain licences and offer online gaming to other countries around the world, but not to US states.

On the flip side, however, anti-online gambling groups, such as Sheldon Adelson’s Coalition to Stop Internet Gambling, are determined to stamp out all online gambling in the US, with Senator Lindsey Graham of South Carolina expected to introduce a bill to enforce a complete ban on online gambling in the next few days.

“We support and applaud all efforts to restore the long-standing interpretation that the Wire Act prohibits Internet gambling. It’s common sense that putting a virtual casino in the pocket of every American with a phone is bad public policy,” explained a Coalition to Stop Internet Gambling statement.