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Friday, July 15, 2016

The Paradoxical Case Of Legalized Online Gambling In The United States

Given all of the experience that can be garnered from legal online gambling in European countries where online gambling, especially in the United Kingdom, has been very successful it is shocking that the US states have not taken advantage of  that experience and knowledge when launching or considering  launching online gaming businesses in the US.  Having personally spent time in the UK launching online gambling sites in the UK for US based casinos taught our teams a lot about what it takes to make an online gambling business work. Of course, the US and European markets are different in terms of size, history and gaming content  preferences. However,  certain lessons are transferable from the UK market and recent events may accelerate that process.  

Population Size,  Liquidity, Lead Generation And Poker - The UK has a population of 65 million people and capable of supporting liquidity dependent games such as poker and blackjack. In Europe. sports wagering  has been the primary source of  liquidity dependent online gambling as opposed to poker. However, poker  has become very popular in the UK.   This works because  of the size of the participating audience.  In the US  online sports wagering ,for the most part, is illegal. Thus eliminating that as a source  of leads for online gaming companies and especially those launching liquidity dependent game content. The lack of a liquidity pool requires US poker operators to become more creative in their approach to creating "liquidity".

Consolidation To Create Liquidity -  Pokerstars recently announced  it will combine it's UK poker players  with it's New Jersey players indicating how important "liquidity" is to making poker a viable commercial proposition. This "inter" country move is both creative and bold challenging regulators on both sides of the atlantic on how to regulate game play  and impose taxes across jurisdictions.     This will likely lead to a consolidation  with Rhode Island  (population 1 million), Nevada (population 2.8 million ) and Delaware  (population 1 million) creating a viable US and  enhancing the UK online poker market. Will blackjack be the next liquidity based game proposition that will witness intra country player sharing. 

Online  Casino Games - In contrast to poker and perhaps blackjack most casino style games  are "solitary" experiences and in many ways the money makers for online  and offline casino operators. The average slot machine  produces $240 dollars a day.   In June of 2016 New Jersey online casinos generated 14 million in gross revenue from slots.  In contrast poker produced 2 million in revenue. Paradoxically, the popularity of poker does not translate to significant revenue for either land based or online operators. However, "casino" style slots are not popular amongst European players. This dichotomy  is most likely another  reason why the we are seeing a consolidation of poker players across countries. 

Online Gaming Impact On Land Based Casinos - Clearly, consumer trends to experience gaming as an online activity as opposed to a land based activity is exerting  pressure on  regulators and land based operators on how gaming and gambling is managed in the US.   There is no denying that the land based gaming experience is becoming subservient to the online experience.  The Atlantic City situation is a primary example of this trend. It is difficult to say how Vegas is reacting to this shift in consumer preferences as they have withdrawn from poker as an online offering and have refused to consider consolidating online poker plays across state lines or launch online games other then poker.

The need for liquidity in an online poker environment and the contradictory signals that US land based casinos have conveyed  in relation to online gambling has truly created a paradoxical situation that can only be understood if one studies the history of gambling in the US and the role that land based casinos play in terms of  online gaming regulation.  Unfortunately, the current situation leads to US player confusion as to what is and is not legal. This unfortunate paradox has lead to a flourishing  illegal online gaming business sector taking advantage of the mixed messages conveyed by regulators and land based casino operators. It has also lead to a Euro based intrusion to acquire US based poker players sapping the US from a potentially robust, large and successful interstate poker offering.

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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