Now that state-regulated online gambling and poker is in its third year of operation, little has changed since the first year.

In 2013, three states took advantage of the opportunity — Nevada, Delaware, and New Jersey — and as of mid-2016, the option is still available in the same three states and no others. While New Jersey and Delaware both offer players a choice of casino gambling or poker, Nevada regulated online gambling is limited to poker only.

How state-run online gambling is faring in the U.S. so far

New Jersey, the last of the three states so far to launch online gambling, continues to lead the other two big time both in number of sites and total revenue. (Here are May’s numbers, for instance.)

In New Jersey, five operators (Borgata Hotel Casino & Spa, Caesars Interactive Entertainment – NJ, Golden Nugget Atlantic City, Resorts Casino Hotel, and Tropicana Casino & Resort) are currently offering a total of 12 online casinos and five online poker rooms.

These numbers are in striking contrast to online gambling in Nevada and Delaware. In Nevada, two operators, WSOP.com and Real Gaming, each have a poker site, with WSOP accounting for about 99 percent of the business.

In Delaware, all online gambling is under the control of the Delaware State Lottery in partnership with 888 Holdings. Each of the three licensed racinos in the state — Delaware Park, Dover Downs, and Harrington Raceway and Casino — offers online gambling for both casino games and poker.

Even though the initial revenue generated by online gambling fell far short of the projections in all three states, there has been a steady growth — demonstrably in New Jersey, and to a lesser extent in Delaware.

During its first full year of operation, NJ online gambling took in a total of $122 million. During the calendar year 2015, NJ iGaming generated $148.8 million in revenue, 21 percent higher than the total for 2014. The figures so far for 2016 suggest continued growth, up an impressive 29 percent from last year.

The first full year of online gambling in Delaware generated $1.4 million, followed by an increase to $1.8 million in revenue for the calendar year 2015. As for 2016, the most recent figures released by the Delaware Lottery show that total iGaming revenue has established new records for three consecutive months (March, April, and May).

A major contributing factor to the growth in online gambling revenue in Delaware in both 2015 and 2016 has been the combined poker player pool with Nevada online players.  Previously, there simply weren’t enough players to make the Delaware online poker games an attractive option.

Nevada stopped issuing separate reports for iGaming revenue at the end of 2014, but the relative contribution of online poker to the state’s total gambling market, which is estimated at $11 billion, is believed to be negligible. But in fairness to both Nevada and Delaware, there is no way that either of these states could have come close to achieving New Jersey’s success because the Garden State has about triple the population of Nevada and Delaware combined.

Meanwhile several other states are currently offering online lottery ticket purchases but have not made the decision to offer online casino gambling or poker. The states to keep an eye on as the most likely next group for the second wave of legalized state-run online gambling in this country are Pennsylvania, New York and California.

Casino online gambling doing very well in NJ, poker not so well

When online gambling was still in its infancy, the primary focus was on poker, with full-scale online casino gambling not taking off later.

However, despite NJ online players now having a choice of five poker rooms, the newest of which is the Resorts-run PokerStars, online poker has proven a tougher sell. In comparison to online casino gambling, which NJ players can’t seem to get enough of, the revenue coming in from online poker is lackluster.

This trend is apparent in the figures reported for 2015. Total online casino revenue in New Jersey for 2015 amounted to $125 million, up 33 percent from 2014, while poker revenue actually fell 18 percent to $23.8 million.

On the other hand, during its first month of operation — March 2016 — the long-awaited return of PokerStars.com to the U.S. resulted in tremendous traffic on that site. But now that the novelty has worn off somewhat, the extent to which PokerStars can keep up the momentum is uncertain. Meanwhile, the other NJ online poker rooms need to do a lot more to generate more traffic to their own sites to remain competitive.

Another notable but not surprising finding is the much stronger contribution of slots as compared to table games to online casino revenue.

At the NJ online casinos, approximately 70 percent of the revenue comes from slots, compared to 30 percent from table games. Just like in the Atlantic City land-based casinos, the online casinos have consistently offered many more slot games than table games. And when new games are being introduced online, those are also much more likely to be a slot game.

Furthermore, slot play earns comp points at a much faster rate than table games, and the wagering requirements to clear bonuses are much lower for slots than for table games (and sometimes table games don’t count at all). Accordingly, there is little incentive to play the latter.

At the Delaware online casinos, the recently reported increases in revenue come from increased play on the video lottery terminals and also from poker, with the combined Delaware and Nevada player pool making that option more attractive. However, table game revenue has declined.

Unlike many online casinos run by offshore operators, neither the New Jersey online casinos nor the Delaware online casinos offer any live dealer games. This feature, perhaps more than any other, adds an element of fun and excitement to online table game play, making it a highly entertaining social experience closely resembling playing the same table games in a real casino.

The addition of this option in New Jersey and Delaware could go a long way towards generating increased interest in online table game play.

Online and mobile gambling are bringing more players to Atlantic City

According to Stephen Sweeney, president of the New Jersey State Senate and a keynote speaker at the East Coast Gaming Congress & iGaming Institute, “Atlantic City is on the rebound.”

Even in the face of increased competition from casinos in other states, and elsewhere in New Jersey, if the referendum to expand casino gambling to two casinos in North Jersey gets passed, he is optimistic about Atlantic City’s future.

Another speaking at the conference, Luisa Woods, Executive Director of Online and Internet Marketing at Tropicana Atlantic City, aid that previously inactive players or players who had never come to the property in Atlantic City are now coming due to their online and mobile gambling.

Also, many people who are coming to the casino to play are now playing online as well. At the Golden Nugget Atlantic City, according to Vice President of Online Gambling Thomas Winter, 80 percent of those who play at the Golden Nugget Online Casino are also coming to the Atlantic City casino, where play has increased 20 percent as a direct result.

Ongoing concerns and challenges facing state-regulated online casino operators

The reluctance of other states to go full speed ahead in trying to push legalized online casinos and poker rooms is probably due in part to the recognition of the difficult challenges facing them. These are the same kinds of challenges which New Jersey, Delaware and Nevada have had to face from Day 1, including all of the following:

  • Geolocation
  • Underage gambling
  • Dealing with fraud and duplicate accounts
  • Problems faced by players when trying to use credit cards to fund their accounts
  • Need to get the word out to more people to keep attracting new players
  • Keeping away illegal foreign operators trying to infiltrate the market

Tight regulation is key

All three states where state-regulated online gambling is now legal impose a minimum age requirement of 21. All three states also require that at the time of play, the individual must be physically located in the applicable state, and Delaware requires in addition that the player must reside in Delaware.

Geolocation can get tricky at times. For example, initially, geolocation was causing a lot of problems in New Jersey with individuals who were very close to state borders, but the system is working much better now.

All three states use Know Your Customer (KYC) programs to verify customers’ identity, age, location and eligibility to play. Some players might be annoyed by all the checking and double checking, but the tight security system ultimately works for the benefit of the casinos and players alike.

According to New Jersey law, players whose age and identity cannot be verified by means of a standard KYC check must submit two forms of ID, one of which must be government issued with a picture and signature. In addition, all online players in New Jersey need to enter a PIN and answer two security questions in order to be permitted to log in to a site and play online for real money. Penalties for violators can range from exclusion to fines, forfeiture of winnings and jail time.

The New Jersey Division of Gambling Enforcement (NJDGE) is also concerned about infiltration from unauthorized foreign operators NJDGE Director David Rebuck wants to impose huge penalties to put fear into these operators.

Rebuck, addressing East Coast Gaming Conference and iGaming Institute attendees, stated that that New Jersey has a great working relationship with other jurisdictions that may offer online gambling in the near future. He believes that they are equally interested in making sure that the foreign operators are shut out of their own potential market.

Account funding shouldn’t be a hassle

Gamblers are by nature impatient, so whenever making deposits and withdrawals to one’s account becomes too much of a hassle, they will be inclined not to bother.

Payment processing problems are still occurring due to the continued lack of acceptance of legalized online gambling by some credit cards and banks. However, the frequency with which players are reporting this problem is gradually decreasing.

Initially in New Jersey, players were having a tough time using their credit cards to fund their accounts. However, MasterCard is now approving 70 percent of all transactions, and Visa about 62 percent. Players can also use their PayPal account.

Surprisingly, a lot of NJ players still don’t know that they can gamble online

All in all, Rebuck said he is very pleased with the performance of online gambling in New Jersey. He is so pleased, in fact, that he thinks other states should look to its program as a model for what they need to do themselves to establish and maintain a well-regulated online gambling industry.

However, even in New Jersey, there is plenty of room for improvement. Surprisingly, a lot of people in the state are still unaware of the online gambling option. So states and operators need to get the word out to more potential players. One recent trend that should help is the increased use of cross-promotions that encourage Atlantic City casino players to also play online, and vice versa.

Barbara Nathan

About

Barbara Nathan takes a deep interest in the NJ legal online casino business - so much so that she moved closer to Atlantic City to be nearer the action. A seasoned writer covering many facets of the regulated Internet gambling industry, Barbara lives in Absecon, New Jersey and devotes her free time to volunteer work.