Americans have been gambling via the Internet for a long time now. They’ve been doing it legally with pari-mutuel wagering for many years – in fact, the racing industry relies heavily on account wagering these days. More recently, residents of a handful of states have been allowed to purchase lottery tickets on the Web, some through subscriptions and more recently with individual play. And make no mistake, Americans have been gambling illegally through offshore casino sites.
So it’s not quite a new era we are entering, but rather one that simply takes things a few steps further. Perhaps a lot of steps, if the early adopters do well. It has been legal for residents of Delaware to play casino games online since October 31, when the Delaware Lottery’s new system became operational through its three racetrack casino websites. This week, Atlantic City’s casinos begin testing their systems in preparation for a full launch November 26. And of course, Nevada began offering online poker earlier this year, but the Delaware and New Jersey programs are much more comprehensive.
It remains to be seen just how much revenue these operations will generate. A recent estimate calls for about $400 million in New Jersey. Given the decline in bricks-and-mortar casino revenues in Atlantic City due to competition from surrounding states, I’m not convinced that the convenience factor of an Internet option for New Jersey residents only will bring in significant incremental revenue. If governments really want a major new gaming revenue source, I think sports betting is the way to go, as it is in the rest of the world.
Casino gaming is no doubt more attractive online than traditional lottery games, especially those drawn daily or every few days, which have thus far been the extent of American lottery experience on the Web. And the revenues have been minimal – only a fraction of a percentage of total lottery sales have come through online sales in Illinois and Georgia. It has certainly not been the big business feared by the retail industry.
But even in Canada, where several lotteries have years of online experience with traditional lottery games, sports betting products and in some cases casino games and poker, Internet sales have only reached a few percentage points of total sales at best. Generally speaking, interactive gaming has provided incremental sales and numerous cross-channel promotional opportunities, all aimed at making wagering on any platform more convenient for the customer.
We’ll know more about the revenue potential of various forms of online gaming soon enough as Delaware and New Jersey develop. On the lottery front, the Georgia Lottery will introduce online keno later this year, and plans to offer instant-win games next Spring. The latter are also on the radar in Minnesota, where the Minnesota Lottery recently enhanced its online subscription sales program with the ability to purchase same-day tickets as well.
One limiting factor at the moment for any of these operations is the reluctance of banks and credit card companies to fund player accounts. Some players in Delaware (and also Nevada) wishing to use credit cards to fund their accounts have run into roadblocks. Certain banks do not currently allow gambling purchases with their cards, and VISA has always been a tough nut to crack for legal online gaming operations. American Express also prohibits gambling purchases, as does ubiquitous payment transaction provider PayPal. Lotteries which allow credit or debit cards for the purchase of online products (either subscriptions or individual purchases) have generally relied on MasterCard or Discover cards.
The banks’ policies made sense in the past where online gambling was not deemed legal in this country. But now that jurisdictions are legalizing, regulating and taxing the practice, so it's just another online purchase, the banks need to change with the times or face a potential loss of business.