Morgan Stanley released a report this week which suggests the online gambling industry in the United States might hit $5.2 billion by the year 2020. Morgan Stanley's numbers stipulate that 20 U.S. states would have to legalize the activity by that time.
Presently, only three states have legal and licensed online gambling: Nevada, New Jersey, and Delaware. If one too the revenues from these three states alone and extrapolated them to 20 states, it would not come close to reaching $5 billion. Yet one of the most respected financial institutions in the USA believes five billion is a reachable goal in a little over 5 years.
Industry Could Grow by 4000%
New Jersey collects about $120 million in online gaming revenue each year. Nevada collects about 1/10th of that: roughly $12 million. Delaware's top month as been $240,000. If one takes those three numbers, they only would equal $135 million per year.
That represents a small market with a lot of potential. Morgan Stanley expects exponential growth, instead of the kind of 1-to-1 revenue growth one might expect. Interstate online poker and wide-area progressive slots are the ways that exponential growth can happen.
Interstate Online Poker Compact
Already, Nevada and Delaware have an interstate Internet poker compact. The two states have the ability to tap each other's player database, so a gambler in Nevada can play in a Delaware card room and vice versa.
Why Large Poker Communities Are Best
That's important because of the need to build larger poker communities. In an online poker room, players have the option to gamble on a variety of games, like Texas hold'em, Omaha hold'em, and seven-card stud. Players also have the option to play in large freezeout events, re-buys, turbo events, and other sit-n-go style contests. A good card room also needs these events to be offered at several different betting limits, for low rollers, mid-stakes players, and high rollers.
Also, some gamblers don't want to enter tournament-style events, but would prefer to play in "ring games"--cash games in which you can cash out chips on any given hand. All this variety of poker playing needs to be offered regularly throughout the day, often even 24/7. Finally, each table needs 9 players to fill it out, unlike an online table game or slot machines, which works well enough for one player at a time.
In other words, a good online poker site needs a huge and loyal pool of poker players. The more gamblers it has only at any given time, the more events and options it can offer. The more playing options a site can offer, the more popular it becomes and the bigger their prize pools can be, and this builds upon itself. If a dozen or two dozen U.S. states were sharing player communities, then the resulting interstate iGaming network would be powerful and profitable. It's a potentially huge windfall, but many states legalize online gambling and then organize around a compact.
Interstate Linked Progressive Slots Jackpots
Wide-agree progressive networks are a little less complicated, but they also build buzz and prize money. Internet linked jackpots in a slots network work similarly to a multi-state lottery jackpot. The more people that are paying into the jackpot, the quicker the pot builds and the bigger the ultimate prize can be.
When a progressive jackpot builds to a certain point, the size of the jackpot starts to spread through word of mouth and media reports, just like a big Mega Millions or Powerball jackpot starts to create buzz. Once more, at a certain threshold, the amount of money involved starts drawing in the mainstream players, while still remaining highly profitable for the game's operators.
The end result is a potential $5 billion windfall for states, without raising taxes. Morgan Stanley predicts that, once state lawmakers understand the advantages of widespread regulated gaming networks, more states will come aboard in rapid succession. That comes with one major caveat, though.
Online Gambling Could Be Banned
The numbers from Morgan Stanley may not materialize at all. Federal legislators and their wealthy lobbyists are seeking to ban all online gambling in the United States. Senator Lindsey Graham of South Carolina and Representative Jason Chaffetz have introduced the Restoration of the Wire Act bill to both houses of the U.S. Congress. This legislation has the backing of Sheldon Adelson, the land-based gambling executive who amassed a fortune of $35 billion off the gambling losses of others, but who has vowed to spend whatever it takes to ban all online gambling in the USA.
If the Restoration of the Wire Act is passed in Congress, then all licensed gambling at the state level in the US will cease, and the puritanical view of gambling held in South Carolina and Utah will be imposed on the other 48 U.S. states. If that happens, then the predicted $5.2 billion in revenues will disappear. The gambling will continue. The same amount of money won't be wagered, but hundreds of millions of dollars likely will go to offshore gaming operators, instead of the US states.
