For Online Gaming, Slow and Steady’s Just Right

In the three U.S. states where it’s legal, there’s been no bonanza yet—and no big scandal either

Illustration by Jon Estrada

Illustration by Jon Estrada

Beyond the neon of Nevada and Atlantic City, gaming used to be something the nation spoke about in either whispers (like that cousin who never made good) or screams (like that cousin who never made good and was coming to town to spoil your sister’s wedding). Now, though, online gaming is the subject of serious—and generally calm—discussion. Some bemoan its potential negative effects; others lament the meager trickle of revenues to date. Still others offer both, seemingly contradictory, reactions. But the real news is that there hasn’t been much to either complain or crow about: The rollout of online play has been largely uneventful—and that’s a good thing.

Online gaming isn’t new. People have been betting real money online for nearly 20 years. In the United Kingdom, “remote” gambling (which includes sports betting, bingo and casino gambling) accounted for 16 percent of total gambling win last year, up 11 percent since 2009. Comparing the U.K. to the U.S. isn’t apples to apples—casinos account for 16 percent of all U.K. gambling, while they make up about two-thirds of all American gambling. But the U.K. provides some insight into what kind of behaviors the United States could expect to see if more states legalize online play.

Online or interactive gaming is legal in only three states: Nevada, New Jersey and Delaware. In Nevada, it’s legal to use a computer to play poker, or a mobile device to bet on sports; in New Jersey and Nevada, it’s legal to play poker and casino games online. To play online, you don’t have to be a resident of the state in which you are gambling, but you do need to be physically present in that state. This means that, unlike in Britain, our legal online gaming market is tightly constricted.

How is Nevada faring? With play restricted to poker, it was not expected to see a windfall. In general, poker represents a small percentage of overall casino gaming: Last year, Nevada poker took in about $124 million, which was 1.1 percent of the state’s total gambling win.

In 2014, online play has consistently represented about 9 percent of total poker in Nevada, which is about where it should be right now. It takes time for new technologies to gain popularity: For decades, slot play was a small part of total casino win. Eventually, though, slots came to dominate American gaming.

Delaware, with a total population of less than 1 million, has seen small returns on its online games: Through May, the state’s three online casinos had generated $935,000—slightly more than Nevada online poker rooms made in March alone. So New Jersey, with an established (though beleaguered) casino gaming industry and a population of nearly 9 million, might be a better place to look for evidence of how a wider rollout of online gambling might fare.

Compared with Nevada and Delaware, New Jersey is an online titan. For most of this year, online revenues have been in the $11 million range each month. What’s interesting is that, in this overall-declining market, online revenues have averaged just less than 5 percent of total casino win—which may mean that the market has room to grow.

The legal online market in the U.S. is still young; Nevada has had poker online since April 2013, and Delaware and New Jersey have been online since November.

But the real accomplishment of the first few months of American online gaming may be its very existence: Three states have enacted regulatory controls that have allowed players to bet online with no major snafus. That’s not a headline-grabber, but that’s the whole point of regulation. If online gaming in the U.S. is to have a future, it may be best for a “slow” rollout that’s unmarked by either sky-high revenues or major compliance issues. Right now, online operators are proving that they can work within the same regulatory box as terrestrial casinos. That, in and of itself, is a worthy accomplishment.

David G. Schwartz is the director of UNLV’s Center for Gaming Research.