US online gambling to be worth NZD$6.38 billion by 2020

Us online gambling
Publish: September 22, 2014

A new report issued by Morgan Stanley on the future on online gambling in the US has predicted that revenue from the sector could reach USD$5.2 billion (NZD$6.38 billion) by the year 2020. However, as impressive as this figure may sound, it does nevertheless represent a mark down of previous estimates as to how much revenue the industry would generate.

The Morgan Stanley report is predicated on twenty US states legalizing online gambling within their jurisdictions in the next five to six years. The report notes that should that number increase to 50 states, then the likely revenues would be in the region of USD$10.7 billion (NZD$13.14 billion).

In the little over a year since online casinos were legalized and regulated in three US states—New Jersey, Nevada and Delaware—the expected boom in online casino participation has not materialized, and revenues have fallen well short of predictions. However, this latest report is more bullish about the future than was the case as little as six months ago.

The failure of online casinos to hit predicted revenue targets, in New Jersey in particular, has been attributed to a number of factors, not least the reluctance of US financial institutions and banks to process credit card payments for online casino accounts, due to some confusion regarding the precedence of state or federal law in relation to the Wire Act. However, the proposed re-entry of PayPal into the online gaming market could well mark a significant shift in the banks’ approach and lead to them loosening their restrictions, and this can be seen to have had a significant influence on the most recent forecasts.

Morgan Stanley’s predictions are also based on there being no further federal intervention in laws regulating the online gaming market. Presently, it is a state matter as to whether they allow online casinos to operate within their jurisdiction, but pressure is mounting in the US from anti-gambling lobbying groups and land-based casinos to return to an outright nationwide ban. Arguments being put forward are that online casino technology does not have sufficient safeguards in place to prevent minors playing, and that they will ultimately damage the profitability of their bricks and mortar counterparts.

However, a return to the Wire Act and the banning once again of online casinos won’t of course mean that US players stop playing online. Instead, they will simply return to offshore sites, as is currently the case in most of the US, with the concomitant loss in potential revenue for the states’ economies.

The lure of this potential lost income may in fact be the strongest argument for more US states regulating online gambling and allowing its residents to play at online casinos. State legislators may well find it hard to wave goodbye to the income that could be generated for their depleted coffers by sending online gambling offshore again.

Last Updated May 20, 2015