The U.S. is approaching the one year anniversary of Ultimate Poker’s launch in Nevada. Revenue has not met expectations and the poker markets are already starting to show signs of maturity. One of the unexpected problems is that players in regulated states are still choosing offshore sites.
A recent survey by the Global iGaming Summit and Expo suggested that 38 percent of online poker players in New Jersey are still giving all of their action to sites that were available before November 2013. Presumably, this means sites that are offshore and not licensed in New Jersey. Some players, according to that study, wrongfully assume they are sports betting on regulated sites.
Some players may assume that since online poker is legal in a jurisdiction that all sites must be legal. The word has likely not spread to all potential customers. An information campaign may be in order. This could tell residents the sites that are licensed and maybe even go so far as to discuss the dangers of choosing an offshore site over a regulated one.
This is just one big issue hindering the growth of regulated gaming.
Why are players in regulated markets still choosing offshore sites?
Regulated sites require players to provide information that is not required by offshores. This includes a Social Security Number. Some players are not comfortable giving this information for privacy and identify fraud reasons. Others simply want to avoid paying taxes on winnings. This is a requirement that is not going to go away. Sites need this information to verify the age and identity of players.
Deposit acceptance is causing players to give up on the first try and keep giving action to offshore sites. A player that tries to create an account and has a deposit rejected may lose motivation to try making a deposit through another method. The introduction of ewallets should help this as it greatly increases the credit card acceptance rate.
Geolocation is another problem. A player that lives in a poor cell phone reception zone or in a rural area may not be able to get his location verified. Some players can at first and run into problems later. A player that repeatedly times out or cannot login to begin with is going to go back to playing at offshore sites where this is not an issue.
This appears to be less of an issue than it was six months ago. Anna Sainsbury, CEO of GeoComply, told a California legislative committee last week that the rejection rate for New Jersey players is down to just 1.5 percent. Many of these rejections are suspected of spoofing IP addresses or running remote desktop software.
Existing Offshore Traffic
Traffic is another concern for players in regulated states. According to PokerScout, four offshore networks that accept New Jersey players are larger than Party Poker. Six offshore networks that accept Nevada players are larger than WSOP.
Bovada, the largest U.S. facing poker site, is 8.5 times the largest New Jersey regulated site and more than 15 times larger than the largest Nevada site. This allows Bovada to spread action that makes it so that the regulated sites cannot compete.
Offshore sites have shown a magnificent aptitude for processing fast payments in the U.S., even in this incredibly difficult environment. Most are operated by sports books that are among the most well respected in the industry and have decades of experience. Many offshore sites process payments faster than most regulated ones. This is an issue that must be addressed by the regulated industry. If offshore sites can process a withdrawal in 24 hours, so can regulated ones. Some legal sites are already doing this with cash withdrawals.
Regulated sites do have one major advantage in this category. There are no withdrawal fees for most transactions. Offshore sites can charge as much as $100 for a cashout.
Poker players are often sports bettors. A Las Vegas poker table will have several players checking out the TVs during football games. Most offshore poker sites double as sports books. This gives many poker players a reason to continue playing at these sites since they will already have money there for sports betting. Unfortunately, barring a Supreme Court victory, New Jersey and other states are not going to be able to spread sports betting to players.
Nevada is the only state that will have this luxury. The current Nevada sports betting apps and websites are separate entities from the current regulated poker sites.
Affiliates are a topic that few seem to want to discuss. Google searches that involve “legal online poker”, “legal poker sites” and similar phrases, return top results from sites that promote offshore sites as legal ones, even in Nevada and New Jersey.
It is one thing to promote both types of sites. It is another to try and drive regulated traffic to unregulated sites, while describing those offshore sites as legal alternatives.
This is a tough issue that will be hard to address. Regulated sites need the exposure to traffic that these old affiliate sites generate. On the other hand, they are competing for this traffic with sites that are not licensed to operate in their states. Due to taxes, legal fees, regulations, royalties, and other operating expenses offshore sites do not have, they may not be able to offer competitive commissions.
This is likely just a symptom of the young age of the industry. As regulated affiliate sites grow, so will their authority in Google. Experienced regulated affiliates are producing large amounts of relevant content, while the typical offshore business model often relies on its age and years of generated content to maintain rankings.
Marketing spends by regulated poker sites, either by developing websites internally, or through investing in affiliates that are marketing the product with the best interests of the regulated industry, might be the solution to help get better exposure.