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Thursday, July 21, 2016

More US States Considering Legalized Online Gambling

We continue to see more states in the US  floating legislation to legalize online gambling. Poker continues to be in the spot light as opposed to casino style slots or blackjackMichigan and Rhode Island are the latest states to join the fray. Essentially, the states are looking for more revenue sources and online gambling appears to be an option. The new states  considering legalized online gambling intend to impose licensing fees on the online gambling operators. Both Michigan and Rhode Island have land based casinos thus following the trend of other US states (Nevada, Delaware and New Jersey) with land based casinos to be the only states where online gambling is either legal or being considered.

Michigan -  Michigan has a population of 9 million people similar to New Jersey's population. Michigan also has land based casinos. However, Michigan's casino are  native american tribal owned and operated.  The  legislation is poker focused only  and does not include any  table  or slot games.   The  proposed Michigan  online gambling proposed licensing fee is 5 million USD with an additional  annual gross revenues tax of 10%.  Certainly, Michigan's population should be able to support a robust poker community.  However, a full casino offering would make for a much better business model and ultimately a better revenue source for the state. 

Rhode Island -   With a population of 1 million residents Rhode Island is following the lead of Delaware as a state with relatively few residents offering legal online gambling. It appears that the Rhode Island online gambling legislation  will be poker "only".   However, this could change with Rhode Island adding casino games mirroring Delaware online gambling options.   Delaware is quite pleased with the revenue it has garnered from online gambling leading Rhode Island to believe it can also benefit from legalized online gambling.  However,  poker may be a challenge given to relatively small population of the state. It is most likely that Rhode Island will poker poker players across state lines and with UK players.  

Population Density -  If Michigan and Rhode Island join the other states that currently offer legal online gambling  the  combined  total population of  the states that will be offering legal online gambling  is 23 million. Of course, one has to be 21 years of age to gamble so the total gambling population is lower. However, if we presume that the adult population of these states is 75% the  eligible gambling population is 17 million.  This is not a trivial number of potential online gamblers.  If poker is the only gambling option in Rhode Island  the population may not be able to support a robust poker community.   With this said it appears that poker is "working" in Delaware which has a similar population.  

Poker Player Liquidity And Players - Providing online gambling legislation is passed in Michigan and Rhode Island the result will be a meaningful population of US based gamblers. Poker appears to be the current focus for US based online gamblers. However, liquidity is always an issue  with poker as it requires a significant amount of traffic to make for a viable poker community. We have witnessed this as New Jersey has teamed with UK online poker sites to improve its own liquidity.

Poker License Barrier -  We will also have to see how many operators will be able to pay for the up front licensing  fees. The Michigan license fee is non-trivial at a 5 million USD starting point. This fee will certainly prune the candidate pool of potential online poker businesses operating in Michigan  and how many operators can coexist in the state. It will also be interesting to see how many non-US based poker rooms will participate launch in these newly added states. The Israeli based poker businesses(Pokerstars, 888, etc.)  have and are active in the other US states and will most likely extend their presence into the new states.

The recent announcement by Michigan and Rhode Island that their state governments are interested in legalizing online poker  demonstrates a growing trend on the part of US states with land based casinos to add online gambling as a regulated activity. Ironically, poker as opposed to  the real land based money makers like slots and other table games being launched online. Certainly there will be a gestation period to determine how online poker is working in individual states and how pooling players across state lines is perceived. We might see the US Justice department step in as cross state line online gambling becomes more prevalent. However, for now it appears all systems are a go and the US online gambling is a growing business sector.

Kevin Flood is the CEO of Gameinlane, Inc. Gameinlane  has developed, launched and operated Internet gambling sites in Europe,  social casino,   freemium and subscription gaming in the US.   The company engages with land based casino  operators, online gambling operators, social casino operator and game developers to assist them in determining their strategy and implementation  of game content in an online context.   Kevin has worked for and with US land based casino operators helping them evaluate social casino and iGaming platforms for the purpose of joint ventures and acquisitions in addition to launching online gambling operations in Europe. Gameinlane is also startup "friendly" understanding the unique value new gaming companies bring to the marketplace.  Kevin frequently speaks at gaming conferences around the world providing him with a unique perspective on this very interesting business sector. Kevin can be reached at kflood@gameinlane.com  and or twitter  at @kflow1776.

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