States Start Regulating Online Gambling

The State of Nevada became the first U.S. state to successfully regulate online gambling in 2013, winning the race with fellow state New Jersey in being the first to not only approve online gambling, but have an operation up and running and taking bets.

Unlike New Jersey, who were in the process of putting together a scheme to allow their land based casinos to offer both online poker and online casino play, Nevada took the more conservative road of just offering regulated online poker, which remains to be the case today.

So even in a state that is known historically as the country’s most permissive state when it comes to gambling, the home of Las Vegas which still is the land based gambling capital of the world in many respects, there still is room to grow here, and New Jersey has actually picked up the ball as the most progressive online gambling state with both casino and poker action available online.

Still though, having the country’s first regulated poker sites is certainly an achievement Nevada should be proud of. The journey though wasn’t exactly as smooth as some had hoped though, and although online poker is still very much alive and well in Nevada, it hasn’t flourished to anywhere near the extent that was hoped initially.

It’s not that the much more modest performance of the online poker market in Nevada was all that much of a surprise to those very familiar with the online poker industry, and some even questioned whether Nevada was even big enough to support a domestic industry, one where players were relegated to playing just against other players in the state.

Online poker sites need their player base to be of a certain size to be even viable, and while one may think that having a population of almost 3 million people in a state that is very gambling savvy and very gambling oriented would be way more than enough, this may actually be pretty close to the minimum for a single viable site.

So some expected the market to consolidate as time went on, where one single site would emerge as the survivor, and that’s exactly what ended up happening. Almost out of the gate, two main sites captured almost the entire market, and over time, this shrank to just one, WSOP Nevada, and they are the sole online operator today.

The market just isn’t big enough for more than one, although after the consolidation, where the two major sites merged, they are now the busiest regulated online poker site in the country, averaging about 170 cash game players at any one time according to Poker Scout, with a peak of 334.

This actually makes them the fourth most popular online poker site that offers play to Americans, with the top 3 being all offshore sites, and all significantly busier, but this is enough to keep the operation running smoothly as they figure out a way to grow the business further.

Revenue from online poker has been respectable though, and has averaged about a half million a month since things began, and did break the million mark during one particularly good month. This is a far cry from the pie in the sky predictions that legislators had hoped for, but the online poker business continues on here and there’s no reason to expect this will change anytime soon.

Delaware Joins the Battle

Delaware became the second state to regulate online poker, and this one really raised some eyebrows, as Delaware has less than a million people, and well below what we’d normally expect an area to be able to support even a single online poker site.

Things were so bad here though that Delaware became the laughing stock of the online poker industry, with some even calling it “cute” due to its smallness. The main problem here is that they did not even have enough of a player base to get a meaningful quorum going, and if new players go to a site and see very little or nothing going on, they aren’t going to want to stay, and what you end up with is a whole lot of window shopping.

So back when Delaware was still trying to make a go of this alone, there were times where no cash games were running, and other times where you might find a table or two, with the cash game player count often in the single digits.

Something like this could not survive for all that long, and the Delaware online poker industry, if you could call it that, was rescued by Nevada, who built into their legislation the ability to enter into compacts with other states.

So this was a perfect situation for that and the two states combined forces and Delaware online poker players now can access the WSOP Nevada site. So one site supports two entire states now.

The most interesting thing about this arrangement is that WSOP Nevada/Delaware is clearly engaging in interstate commerce, the sort of thing that the Wire Act was at least purported to render illegal, although the Wire Act never did apply to online poker though and the government eventually admitted it. So there’s actually no federal legislation prohibiting online poker actually.

New Jersey Makes it a Threesome

New Jersey got into the online gambling business in 2013 as well, only a little behind the other two states, and unlike Nevada and Delaware, they went all in with online casino action as well.

New Jersey is quite a bit bigger than these other two states combined, and has a market size that both online poker and especially online casino action can thrive in, although the traffic at the online poker sites wasn’t anywhere near as big as some had predicted.

One of the things that did benefit the domestic online poker sites in the U.S. is that most of the offshore online poker sites chose to stand down and no longer accept players from the regulated states, otherwise things would probably have been tougher to get off the ground, as these offshore sites offer much bigger player pools, and the size of player pools is hugely important to online poker players, to allow them to choose to play the games and stakes they wish, and preferably at several tables at once.

New Jersey ended up being a big of enough of a market to support 3 online poker operations, as well as two more that just offer casino only. Not surprisingly, most of the revenues here come from the casino side, and casino gambling is not only bigger than poker but doesn’t involve concerns about player liquidity, so this isn’t surprising at all.

Comparing with Nevada’s half a million a month average from poker, New Jersey is averaging about 2 million a month these days, but it also taking in over $16 million in casino revenue, which is where the real money is here as you can see.

Other states are in various levels of discussion as far as joining the party at some point, and the expectation was that by now we’d have several more states involved, but thus far the process has been longer than expected. However it’s just a matter of time before we see more states involved in the business of online gambling.