Oren Cohen Shwartz, CEO at Delasport, reflects on the huge growth for online gaming across the United States, and why – for operators eyeing the ‘gold rush’ – choosing the right partner might just be the key to the brightest future.
In the United States, it is fair to say that online gaming has boomed in popularity over the last year. For the purpose of this article, let’s define online gaming as the combination of igaming (internet casino and poker) and online sports betting. The market is now valued at $2bn and forecast to reach $8.5bn USD GGR by 2025, representing a compound annual growth rate (CAGR) of over 15%.
Circa one-third of states have already legalized at least one form of online gaming and others are in the process. It is clear the growth potential is massive after the pandemic put the entire online industry on steroids. Struggling brick-and-mortar organizations realized that online presence is not just good, but a must-have.
It is estimated that the portion of the online gaming revenues from the total gambling revenue in the US is now 20%, which is predicted to double by 2023 on account of additional skins going live, enlarged customers base and more states legalizing online gaming.
In 2020, total GGR from online gaming in the United States reached over $2.5bn, representing 200% year on year (YoY) growth – of that figure, New Jersey accounted for almost $1bn while Pennsylvania reached more than $500m.
New Jersey is currently the largest market for regulated online gambling in the United States. In March this year, the state’s operators scooped up $113.7m (+21% month on month).
Pennsylvania, meanwhile, is the fastest growing market in the US even despite its penal tax rates – video slots 54%, table games 34% and poker 16%.
Enjoying the politician’s support, giving additional state tax revenues from GGR and licensing, increasing in-state employment and decreasing illegal betting through a regulated framework, the online gaming market will continue to thrive.
Yet we must recognise that online gaming holds broader potential than the immediate market operators and providers. There is an entire ecosystem of providers in many fields like KYC automation, Anti-fraud and AML systems, AI and machine learning systems, CRM, BI, gamification tools, payment processors and many more.
In other words this means more indirect taxation and more jobs. Seeing the potential, operators can also take advantage of the growing interest of venture capital organizations and investment banks which have started investing time, effort and money in the industry.
Apart from Tennessee, the regulator has given advantage to the brick-and-mortar establishments, which should remove some of the fear of losing revenues. As online regulation will cannibalize land based establishment revenues, mainly from the younger demographic (under 50 years old), going online is a necessity. Not doing so would simply mean that potential online customers will seek to do business elsewhere.
The potential to boost land-based establishments with online revenues comes from the fact that online availability is 24/7, richer products and betting options. It is also easily accessible on mobile devices and extends the business to customers living further away from the casino.
The 12 years between the Unlawful Internet Gambling Enforcement Act (UIGEA) of 2006 and the supreme court ruling in New Jersey in 2018 have created an online gaming knowledge gap that US gambling professionals are steadily catching up with by self-learning or/and M&A deals with European technology companies which already have the know-how.
The Black Friday in 2011 has left a strong impression that things have changed and being compliant is crucial. Land-based establishments who wish to go online are required to close the gaps regarding online gaming products, as well as having better understanding of the regulatory framework requirements of each state and implement technologies which are quite different from the land-based ones.
As the payment processing options are richer, with various player acquisition and retention techniques, customer service divisions will also need to be brought up in line with the changes. Unlike the players in Europe who were gradually introduced to new services, products and functionalities over the last decade, the US players are getting almost a complete product in one step.
While the potential is clear, the road to success is not without hurdles, starting with skin licensing, liquidity allocation and financing. A crucial challenge on hand is to identify the right provider to partner up with.
Some casino owners will look for complete control over the new B2C operation, while others may be reluctant to obtain the know-how and would like to hand the operation to a trusted and experienced 3rd party to run it for them, or to “sell” one of their skins – if multiple skins are allowed. Some states allow just one skin per license, while others do not specify a limit.
For instance, PGCB in Pennsylvania offers unlimited skins for igaming licenses, but only one for sports betting licenses. Seven jurisdictions are now allowing igaming and 22 legalized online sports betting. The multi-skin approach is crucial to maintain the diverse and healthy competition.
At Delasport, we’re helping our clients navigate the complexities of the US sports betting and gaming industries. For land-based organisations partnering with the right sports betting and casino partner, we seek to create the best possible position for capitalizing on the US opportunity.
But as the online space continues to grow, we’ve also been making sure that we support our clients in the online space. We support both strategies of turnkey solutions, allowing operators to run their brand and fully managed solutions while we run the day-to-day operations.