Goodwin Gaming
January 15, 2014

Online Gambling Expansion Holds Potential Profit and Pitfalls

LexisNexis and Spectrum Gaming hosted a Jan. 8, 2014 webinar to discuss the legalization of online gaming in Nevada, Delaware, and New Jersey, and how this might shape the future expansion of the industry.

Just a few years ago, the United States Internet gaming industry appeared to be pretty bleak; there was uncertainty regarding the 1961 Wire Act, and the U.S. government seemed to be taking an aggressive posture on Internet gaming.

The picture changed, however, when the Department of Justice released an opinion on December 23, 2011, stating that the 1961 Wire Act applies only to sporting events. The industry is now gearing up for expansion, with states expressing interest in online gaming.

The presentation began by covering the state lottery competitions, acknowledging that they are very well positioned to enter into online gaming, as they are already existing operators with government partnerships.

In addition to state lotteries, other potential online gaming market entrants include commercial casinos, tribal casinos, offshore operators, casino gaming equipment manufacturers, lottery equipment suppliers and social media platforms. While the industry is just at the beginning of its development process, these entities may all be involved, in some way or another, down the road.

While online gaming offers opportunity and potential profitability, it also carries risks and issues that must be addressed. There must be a rigorous registration process in order to verify player identity; furthermore, there must be some way to ensure that players are within jurisdictional boundaries.

As more states legalize online gaming, it is likely that the state lotteries will compete with gaming commissions for the regulatory responsibilities.  Regulators will need to educate themselves on online gaming issues and invest in i-Gaming technologies. These regulators can look to European models of Internet gaming.