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Foot In The Door

Gaming became legal in most U.S. states gradually, step-by-tentative-step.

Foot In The Door

Anyone who has followed the expansion of gaming in the U.S. down through the years understands the pattern very well. Gaming became legal in most U.S. states gradually, step-by-tentative-step.

In the riverboat states, the boats had strict regulations. Most of them had to cruise or at least simulate a cruise. As an astute gaming observer once said, “as if 6 feet of water would somehow cleanse the state of allowing the evils of gaming.” Other states permitted slot machines at racetracks, ostensibly to bolster the sagging racing business. Ironically, it was often hard to find the grandstand once you got into the trackside casino. And still other states morphed from lottery tickets to video lottery terminals, which were, of course, merely slot machines called something else.

Meanwhile, Native American tribes used paper bingo games as a springboard to Class II slots and eventually full gaming.

Today, of course, most of these states and tribal properties host full casinos with the full complement of real (or reel) slot machines and a full slate of traditional table games. This was all accomplished by negotiations with state representatives that fed the gluttonous appetite for more tax revenue and fees.

That same pattern is about to be repeated with online gaming. The first three states to legalize iGaming have each gone about it in a different manner. Nevada legalized just online poker. Delaware legalized full online gaming but it is run by the lottery with help from contractors. And in New Jersey, online casinos must be linked to the Atlantic City casino licenses, but are run by traditional online gaming companies for the most part.

Since Delaware and Nevada have such a small population base, we have to turn to New Jersey to try to determine what lessons other states will learn when they consider the legalization of online gaming. Of course, the lesson we learn from Delaware and Nevada is that we’re going to need interstate compacts that pool the player bases in order to make online gaming in small states possible and profitable.

In New Jersey, however, the first month of online gaming produced more than 150,000 accounts in 13 up-and-running online gaming websites. Most of those accounts were acquired with little or no marketing (although that is changing rapidly), so the future looks bright once the glitches and hurdles can be overcome.

But those glitches, at this point, are still pretty formidable.

Thankfully, the geolocation challenge hasn’t been that much of an issue. The ruling of the state’s Division of Gaming Enforcement that requires multiple methods of geolocation has been very effective. Sure, there are 10 percent of players inside the state who may get barred, but to date there have been no cases of out-of-state gamblers being permitted to play. Compare that with Nevada, where experts say 35 percent of players are wrongly rejected, even though they are far from the border.

Payment processing remains the thorniest issue, particularly since most banks and credit card companies refuse to participate. There are a lot of other options, but they are somewhat confusing and it’s not clear how to use them. This will remain a problem until there is some legal clarification the banks can trust.

Licensing in the U.S. will be required of all participants. In fact, licensing requirements were stiffened in New Jersey at the last minute, causing some confusion in how the online casinos can market themselves and utilize affiliate partners. This is a fact of life in the U.S. that European players will have to consider.

Other issues in New Jersey include a difficult process to set up accounts and then to sign in. One online casino insists on sending a four-digit code every time you sign in. Others have problems with the Mac-vs.-PC issue, and still others aren’t up to speed with mobile devices at this time (neither Delaware nor Nevada currently uses mobile devices at all).

So you can see that online gaming is still a work in progress in the U.S. There aren’t many parallels with the European industry because licensing, geolocation and payments aren’t really an issue there. The U.S. industry is going to evolve and grow on a different track, so anyone who wants to participate is going to have to pay close attention.

But the foot is now in the door, so the potential for iGaming in the U.S. is limitless at this point.

Roger Gros is publisher of Global Gaming Business, the industry's leading gaming trade publication, and all its related publications. Prior to joining Global Gaming Business, Gros was president of Inlet Communications, an independent consulting firm. He was vice president of Casino Journal Publishing Group from 1984-2000, and held virtually every editorial title during his tenure. Gros was editor of Casino Journal, the National Gaming Summary and the Atlantic City Insider, and was the founding editor of Casino Player magazine. He was a co-founder of the American Gaming Summit and the Southern Gaming Summit conferences and trade shows. He is the author of the best-selling book, How to Win at Casino Gambling (Carlton Books, 1995), now in its fourth edition. Gros was named "Businessman of the Year" for 1998 by the Greater Atlantic City Chamber of Commerce, and received the Lifetime Achievement Award from the American Gaming Association in 2012.

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