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Online Casino Gaming Is Legal in Several US States, but Restrictions Apply

30 Apr 2018 Developer News
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Fascinating Technology Used by US Online Casinos

At the time of writing, there are 4 US states that permit online gambling of one type or another. This includes sports betting, online casino, and online poker. Currently, New Jersey, Delaware, Nevada, and Pennsylvania have regulated online gambling. Various challenges exist for US states, notably the prevention of underage gambling, and limiting online gambling activity to residents of specific states.

One of the most ingenious technological innovations used by online casinos is geolocation-based services. Simply put, this technology identifies the user’s IP address and location and only grants access to players within the state. All of this is done when you agree to share your location with the online casino. Your location is central to the smooth functioning of online casino activity in the US.

According to US law, states have authority to determine much of what happens within their geographic borders. While federal law acts in an overarching capacity, state law has significant clout. One way that states exercise their authority is through regulatory measures such as online gambling legislation. Federal law does not allow banks to process transactions for online gambling activity, but states can limit online gambling to their own geographic domain.

Back in 2013, New Jersey regulated online gaming – online casino, sports betting, and online poker – and it became the benchmark for all other US states that are interested in licensing and regulating online casinos. The goal of geolocation technology is to verify a player’s location. If the player is located in New Jersey, he/she is legally allowed to gamble online for real money. Of course, the proviso is that the player is of legal age.

PC, Mac and Mobile Are Fully Supported at US Online Casinos

Geolocation tracking is dependent upon the specific device being used – PC, mobile, smartphone, tablet, or phablets. In New Jersey, you can gamble on any device, and all these devices must be set up to allow geolocation tracking. A player’s location must be pinpointed with precision to avoid any mix-ups such as people living in outlying areas along state lines, or immediately across state lines. Your web browser will utilize your IP address and your Wi-Fi (3G, 4G or hotspot) to accurately locate you.

On mobile devices and mobile apps, it works a little differently. Each device has a GPS (Global Positioning System) chip installed within it that identifies the location of the user and transmits it. If the GPS configuration on a mobile smartphone or tablet is unable to connect with a satellite, it will reroute to the nearest cellphone tower, and that will allow the user’s location to be pinpointed. Anyone wanting to gamble in a fully regulated online gambling state should always ensure that location sharing is allowed.



US States Enter into Online Gaming Compacts

The US online gaming market is nowhere near as developed as the UK online gambling market. Given that the US only started regulating online gambling in 2013, there is significant room for growth and expansion. Currently, the UK’s online gambling revenue stands at £4.5 billion, or $5.8 billion. That figure grew 7% from the figure generated between April 2015 and March 2016. In the US, the state of New Jersey generated $200 million in 2017 through October 31. With 2 months to go and an estimated $20 million per month in gambling revenue, New Jersey is on track to record $240 million + in online casino, online poker, and online sports betting revenues.

New Jersey, Delaware, and Nevada are relatively small markets for online gaming activity. Pennsylvania recently came on board, and has an estimated 10 million legal age gamblers in the state. This will dramatically boost player numbers and revenues for online gambling. In October 2017, New Jersey entered into an online gambling compact with Delaware and Nevada. The reason for this legal agreement is expansion. By pooling player numbers and jackpots, a more interactive, engaging and rewarding gaming milieu can be generated. But an even bigger deal is on the cards: the state of New Jersey is currently negotiating with the United Kingdom about sharing players. This would be a dramatic development for New Jersey, and US online gaming.

The UK currently generates approximately 10% + of all EU online casino gambling revenues. There are an estimated 2 million online gamblers in the United Kingdom, relatively small given the population. In New Jersey, the population is approximately 9 million people, but only a fraction of them are engaged in online gambling activity. Currently, US officials at the DGE in New Jersey and UK officials at the United Kingdom Gambling Commission are working hard to try and hammer out a deal whereby both parties could benefit from a compact.

Will Pennsylvania Detract from the Profitability of US Online Casino Gaming?

The inclusion of Pennsylvania into the US online gaming market has ruffled the feathers of Atlantic City casino owners to a degree. Pennsylvania is currently ranked as the second biggest state for casino activity in the US. Gambling is now legally permitted at truck stops and airports in PA. There are currently 10 land-based casinos in Pennsylvania, and they have now been given the green light to register for licenses for online casinos, establish gambling parlors at airports, and place video gambling terminals at truck stops. Atlantic City struggled in recent years as out-of-state casinos sapped players.

Pennsylvania will be allowing upwards of 10 casinos to open with the passage of the new gambling bill. Fortunately, there are multiple restrictions in place to limit where these casinos can be built. This will likely not affect Atlantic City casinos and the New Jersey online gambling market. Philadelphia’s suburban population will not have access to any casinos, meaning that Atlantic City will remain a top tourist destination for these players. The state of Pennsylvania is looking to inject $200 million into coffers to plug gaping holes in the budget. It will do this by levying high license fees and high taxes on Pennsylvania online casinos. Currently the highest taxation rates will be on online slots, at well over 50%.

High Taxes in PA will Help NJ Operators

Many Pennsylvania casinos will not be enticed by the high taxes and operator fees that date lawmakers are requiring. Currently, NJ generates 90% of its online gaming revenues from slot machine games. Taxes on slot machine games are less in New Jersey than they are in Pennsylvania. This will certainly be a major disincentive to Pennsylvania casinos from offering these types of services. Moody’s credit ratings agency assessed the state of Pennsylvania’s newly legalized online gambling market, and is concerned about the 50% + taxation on online gambling.

Perhaps the biggest benefit of legalizing online gambling activity in Pennsylvania is that it increases the overall size of the US online gambling market. Now, there are an estimated 26 million US citizens that could potentially enjoy online gaming (online poker, online casino, and online sports betting). When legal age residents are taken into account, that figure is significantly less, but it is quickly rising and reaching what analysts call critical mass.

Rather than working against one another, it is more likely that Pennsylvania, Delaware, New Jersey, and Nevada will collaborate, to increase player numbers, jackpot prize pools, and promotions in interstate gambling compacts. When international regulatory authorities are included – such as the UK – there is tremendous potential for growth in the US online casino market.

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