The state of online gambling in the US

March 20, 2019 3:00 AM
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The state of online gambling in the US

As a US citizen it can be hard to grasp the laws and legality of online gambling. To confuse matters further, each state has its own gambling laws or sometimes lack thereof, leaving many bewildered. In this article we take a look at the legality of online gambling in United States today, touch on some important factors when regulating a market, and check some commonalities and differences compared to how things are done in Europe.

The legality of online gambling in the US right now

Online gambling laws are a minefield, and there a million and one things that need to be taken into consideration before legalizing online gambling activities. That’s likely part the reason why different US states have tackled online gambling regulations so differently. And while online gambling is illegal to a bigger or lesser degree in most US states, some few have chosen legalize and regulate it.

At the time of writing there are three US states offering legalized online gambling in one or more ways, with Pennsylvania planned to join the list mid-2019. These states are:

  • New Jersey (online casino, poker- and sportsbetting)
  • Delaware (online casino and poker)
  • Nevada (online poker)
  • Pennsylvania* (online casino, poker- and sportsbetting) - *Launching summer 2019

Pennsylvania is set to hit the ground running when they legalize online gambling mid-2019: Among the first vendors to get a Pennsylvania license was Scandinavian iGaming giant NetEnt. They are one of the leading game providers in the European online gambling market, with a huge presence in many European online casinos.

Managing Director of NetEnt Americas LLC, Erik Nyman says the following about the recent Pennsylvania license in a press release on the company's website:

“We are very pleased to be in the first round of approved vendors to conduct online gaming in Pennsylvania. This fits well with our strategy to be live with our products at the first day of market opening,”

The dilemma: legalize or prohibit

Whether to prohibit or legalize online gambling is a big and complex question that does not have a simple answer. However, we can still look at some factors as to why legalizing online gambling is and isn’t a good idea.

Stevie Watson and colleagues identify in their article “The Legalization of Internet Gambling: A Consumer Protection Perspective”, four main reasons to regulate instead of prohibit online gambling:

  1. Prohibition of online gambling leads to more illegal activity than does regulation
  2. There are existing technologies that protect youths and problem gamblers from gambling
  3. Regulated, legal online gambling will replace illegal gambling through competition
  4. Attempting to control illegal gambling through the control of money transfer mechanisms, such as credit cards and electronic fund transfers, will ultimately fail

As you can tell from the 4 statements above, reasons to legalize online gambling are more complex than just mitigating illegal gambling. If done correctly, legalizing online gambling might create a safer, more controlled environment, where youths and problem gamblers will not be able to partake. It might also give back to the society, by creating more jobs, as well as creating tax benefits for the states that chose to legalize it.

On the other hand, legalization might bring its own problems. For one, it is likely that more people will start gambling if it is legal to do so, which in turn might create more problem gamblers than before - in which case we would have to trust that the technology in place is good enough at recognizing these players.

Furthermore, taxation rates and other regulatory constraints, if too strict, might create a difficult business environment for the online casinos. In a worst case scenario, this might push the operators towards the more grey area-approach, running their businesses from abroad. Not a given, but something that needs to be considered when legalization and regulation is decided upon.

A brief look at the online gambling market in Europe

In Europe the situation is not too different from the US when it comes to legalization. Some European countries, like the UK, Denmark, and most recently Sweden, have all chosen to legalize online gambling. And while it’s still illegal in most European countries, the trend seems to be going in a more liberal direction. Much like in legalized US states, this gives the respective countries much greater control over the gambling operators when it comes to regulation. Furthermore, strict rules are put in place to ensure the safety, legality and fairness for the players.

On the other hand, other European countries like Norway are in a bit of a limbo. It is per se not illegal to play at online casinos in Norway. In fact, new online gambling operators constantly direct their efforts towards Norwegian players, as evidenced by this list of new casinos from casinoer.com.

However, all these operators are run from other European countries, forcing players through some hoops, especially when making deposits and withdrawals to the online casinos. That is because the only legal online gambling operator in Norway is the government owned organization Norsk Tipping. This is similar to the fragmentation in the US, where only certain states have chosen to legalize online gambling, making it hard (and most likely illegal) to make use of said sites if you live outside the legalized state borders.

What does the future hold for online gambling in the US?

It is hard to predict what the future holds for online gambling in the United States as a whole. It is not unthinkable that we won’t see a fully legalized and regulated North America in our lifetime. However, on a state level, we can likely expect more regulated markets in the years to come. Surely, America is watching as New Jersey, Delaware, Nevada (and soon Pennsylvania) are doing the testing for the rest of us. And only time will tell if other US states decide to follow suit.

What are your thoughts on online gambling? Do you think a regulated market would make more sense than prohibition? And what are the most important factors to consider in your opinion, when states choose to legalize online gambling?

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