Online Poker Regulation Will Spread Much Slower Than Live Casinos

April 4, 2014
Online Poker Regulation Will Spread Much Slower Than Live Casinos

Online poker players across the U.S. are waiting for their game to become regulated.  The spread of live casinos in the past decade has some observers assuming the same will happen with online gaming.  There are several obstacles that will prevent that.

The spread of live casinos was fueled by the loss of revenue to neighboring states.  Nevada legalized gambling in 1931.  The first licensed Atlantic City casino opened in 1978.  It took 11 more years before South Dakota launched casinos in Deadwood.  By the mid 90’s, more than a dozen states legalized casinos or slots at racetracks.  Many of these states were in the Midwest along the Mississippi and Missouri Rivers and were an answer to losing gambling revenue and jobs to bordering states.  More than half of U.S. states now have commercial or tribal casinos.

This need to keep up with the neighbors will not materialize for the online poker industry.’s Dan Stewart noted during the Poker Track panel at iGaming North America that there is some poker tourism, an opinion based on peak traffic occurring on weekends in regulated U.S. markets, as opposed to weeknights in the rest of the world.  These numbers may be due to the higher occupancy rates in Atlantic City and Las Vegas on weekends. It may also be attributed to large weekend tournaments.  While this poker tourism may add players on a percentage basis, the actual number of players traveling to play online poker is insignificant in terms of tax revenue lost.

The fact is that online poker is only generating about $1 million a week in cumulative rake between Delaware, Nevada and New Jersey.  New Jersey reported about $3.1 million in poker revenue in February.  Delaware posted just $74,000 in February rake, while Nevada posted $824,000 in rake during the month.  These are hardly numbers that will concern states that border regulated iGaming markets. It may actually slow the rate of growth due to lower than projected tax revenue.

There are several reasons for the low revenue.  Geolocation and credit card acceptance are two problems that have been acknowledged by operators.  Geolocation providers are gaining more experience daily.  This helps improve the holes in the system.  Regulated sites are working with banks to help the payment processing situation.  The introduction of ewallets in New Jersey is getting more credit cards approved.

Some states may be unwilling to move forward until location and payment processing services are perfected.  That could be months or even years away.

Another issue is that there are some players in regulated states that continue to patronize offshore sites.  This may seem unbelievable to players in states without regulation, but it is occurring.  Some players in regulated states cite the larger player pool and tournament prizes for this decision.  Others prefer to play with tracking software, something not supported by most regulated sites.  Payment processing and geolocation problems may be keeping other players away.

The players that still support offshore sites do not understand the damage that they are doing to the industry’s potential growth.  Not only is their action lost, adding a few players to the system will help it grow over time as more join due to the larger game selection.  The player pool would snowball if these players would crossover to legal sites.  That revenue growth could help convince other states to act.

Online poker regulation is going to be a slow process.  The topic has not made it out of any committee in any state during 2014.  That leaves the industry pessimistic about more states joining the regulated industry this year.

Unfortunately for poker players, we could be years away from adding any more states to the system.

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