2016 – A Year of Massive Developments for US Casinos

by Jim Hall

USA Casino Industry 2016As anyone who is even the slightest bit familiar with the state of online gambling in the United States is already well-aware, there is no such thing as a normal year. More or less from the time online gambling took shape, it has been the center of controversy and legal battles month after month, year after year. Recently, however, the waters seem to be clearing a bit, and things seem to have reached a relative level of normalcy. With regulated online gambling operations happening in Nevada, New Jersey, and Delaware, there is hope that the tide is finally turning, and that online casinos, poker rooms, and lotteries will finally be put into place once and for all.

How the US Casino Industry is Performing

When you talk about the performance of the US casino industry, you really need to break it down into online and brick and mortar segments. The reasons are numerous, but if nothing else, the brick and mortar industry has had a massive head start than the online industry has. With gambling having taken place in Las Vegas and Atlantic City for many decades, it is not fair to compare brick and mortar with regulated online networks that have been running for less than 5 years.

If we can use one word to describe the brick and mortar industry in the United States, it would be “promising.” Though the story might have been different around 2010, things are really beginning to look up. With an increasing number of states in dire need of additional revenue streams, legalized gambling was thrust into the picture. In 2004, Pennsylvania was like many other states in that it had almost no casino footprint whatsoever. Then, a bill was passed that allowed for the existence of slot games. Flash forward to today, and the state has more than 10 full-scale casinos and a number of other locations for wagering on horse races and to play video poker. Now, the industry in Pennsylvania—in terms of annual revenue—is worth in upwards of $1 billion. It is this type of growth that has caught the eye of other states who are now looking into creating a massive brick and mortar network at home.

If we take a closer look at things, the overall expansion of brick and mortar casinos in the United States is great, but for certain areas this greatness is taken with a grain of salt. Places like Las Vegas and Atlantic City, which are both amongst the most popular gambling destinations in the world, are seeing revenues slump to an extent because people are finding a similar casino atmosphere much closer to home. The allure of a trip to Vegas is detracted from when a large, state of the art casino has moved in within 20 miles of your home.

It is really a two-sided coin, the brick and mortar industry in the United States, because while the overall industry is growing, some of the very places that have helped build the industry are beginning to struggle. For example, this past August saw Atlantic City’s gambling revenues decline by 4.9% year over year according to The Washington Times.

What’s more, the historic Trump Taj Mahal recently announced that it will be closing its doors imminently. On the other side of the coin, however, is Maryland. Maryland only recently began expanding its brick and mortar casino operations, and that short period of time has realized exceptional growth. From late summer 2015 to the same time a year later, Maryland brick and mortar casino revenues were up 11% according to bizjournals.com. When you look closer, you will see that the state’s casinos combine to bring in nearly $100 million each and every month. For a state that is struggling to create revenue, taxing an industry that rakes in in upwards of $1.2 billion annually seems like a great place to start.

While the brick and mortar casino story is one mixed with good and bad, the online story in the US is mostly a good one. Even though only three states have legalized networks by which people are able to gamble online, all three of those states are seeing what can best be described as instant success.

The Online Boom

NJ StateNew Jersey moved to legalize gambling online in 2011 and became the first state to setup a fully regulated online casino industry. Since then, it is the online casinos, not the brick and mortar establishments that have been keeping the holistic casino industry in the state alive. Above we touched on the fact that revenues in Atlantic City are moving downward at a fairly consistent rate. While this is true, online casinos in New Jersey are seeing month on month growth that reaches to and above the 30% mark. Admittedly, the online casino industry in the state is dwarfed by that of the brick and mortar, but the growth potential is there, that much has been proven. A fun fact about the New Jersey online casino industry, brought to you by pokernews.com, is that, since regulated online casinos came to be, there has not been one month where online casino revenues have been smaller than the month before. Month after month, and now year after year, the online sites are raking in money at a sweltering pace.

The Future of the US Casino Industry

Though it is safe to say that the current state of the US casino industry is a healthy one, analysts and experts alike feel as though the future is extremely bright. In fact, according to the research group Technavio, the online gambling market alone could grow by up to 50% on an annual basis from now until 2020. As far as what that means for annual revenues, Technavio says that the online casino market in the US might account for $4 billion in annual revenue by 2020.

Part of the reason behind the projected boom on the part of the online casino industry in the US is the easing of regulations both by the Federal government as well as the governments of individual states. Back in 2006, the Unlawful Internet Gambling Enforcement Act was signed into law, effectively outlawing any and all forms of online gambling. In 2012, however, a new law was passed that made it legal for individual states to determine the legality of online casino play within their borders. In the immediate wake of this, 3 states moved to legalize and set up intrastate networks. Rumors has it now that up to 5 more states will do exactly the same thing by the end of 2020.

Another reason we think that the casino industry in the US is going to continue to grow is due to the increasing amount of tax dollars being generated by casinos. When it comes to land-based operations, casinos pay 25% or more on all of their earnings, while winners pay taxes to the tune of 10% on any and everything they bring home with them. Up to this point, these figures have accounted for roughly $13 billion in annual tax revenues. If online gambling is expanded like so many people believe it will be, that $13 billion could grow to $20 billion and beyond. This is an excellent source of much-needed revenue for the country in general, and states specifically.

The online industry is definitely going to grow, too, because it attracts a younger audience that may not be comfortable venturing to a casino, but would be more than comfortable to sit in front of their computer and play casino games online. Ujwal Doshi, who analyzes these types of trends for Technavio, was quoted as saying that:

Ujwal Doshi Quote

The story is not all good with regard to online gambling in the United States, however, because there are plenty of opponents who are working ceaselessly to ensure that gambling for real money online is once again outlined.

Unlikely Opponent for Legalized Online Gambling

Sheldon AdelsonSheldon Adelson is a name gamblers should become familiar with right here and now. Adelson is a billionaire owner and operator of many brick and mortar casinos, and huge backer of Senate Majority Leader Mitch McConnell, of Kentucky. Conveniently enough, Adelson recently dished out in upwards of $20 million to a Super PAC that is regularly working in favor of McConnell’s initiatives, most of which are conservative and, by extension, anti-gambling in nature.

Even more conveniently, perhaps, was the fact that shortly after Adelson’s generous donation, a bill was introduced by 3 GOP senators that would, in essence, revert online gambling back to what it was in the wake of the passing of UIGEA back in 2006. The recently introduced bill would not attack the online casino industry itself, but rather the financial companies that the industry so heavily relies upon. If passed as it is written now, the bill would make it extremely illegal for US financial institutions (and any foreign institution doing business on US soil) to process, hold, or pay out any funds relating to online gambling, whether it be slots, sports betting, or anything else. This is the second time in as many years that a bill of this nature has been introduced, but up to this point neither has gained all that much traction.

You might be wondering why Adelson, someone who is so entrenched in the casino industry, might want to back a bill that would make online gambling illegal. The answer to this is pretty obvious when you think about it. Being that online casinos effectively take money away from brick and mortar operations, Adelson is hoping that the out and out banning of all online gambling will help give the struggling brick and mortar industry a much-needed boost. Unfortunately for him, it is slowly but surely being realized that not only is online gambling not the source of problems many had originally thought it might be, it is a great source of additional tax revenue; a source of tax revenue that requires very little intervention on the part of the government. At this point, government entities are simply sitting back and collecting the tax money relating from online gambling operations. You can bet that if this Adelson-backed bill gains any bit of traction, it will receive plenty of opposition from states like New Jersey and Nevada, which are seeing online revenues boom.

With online casino mobile applications just beginning to take shape, the industry seems to be growing at a pace that cannot be stopped. In New Jersey, for example, gambling is so prevalent that you are able to play your favorite casino games at brick and mortar sites in Atlantic City, in front of your computer at home, and on your mobile device no matter what part of the state you are in.

The past few years have been as turbulent as they come as far as it relates to the holistic online casino industry, but it does seem as though things have taken a turn in the right direction. An increasing number of states are pondering the idea of intrastate networks like what you will find in Delaware and New Jersey, all the while members of the federal government are working on legislation that would make online gambling completely and totally open to anyone all over the country. Just like the casino landscape in the US now is nothing like what it was like in 2010, we can safely say that, by 2020, it will look nothing like it does now. The US government, being the giant beast that it is, make sure that nothing is put into place without taking an insane amount of time. So while bills are in the works now, there is no saying just how quickly they will be voted on and, if they are passed, there is no saying how quickly they will be put into effect. Slowly but surely, however, the restrictions surrounding online gambling and brick and mortar gambling in the US are being lifted. This is a trend we hope to see continue.