State of US Online Gaming in 2015: Where It’s Legal

legal-pokerIn 2010, at the behest of the New York and Illinois lotteries, the U.S. Department of Justice looked into its interpretation of the 1961 Wire Act in regards to the pre-Internet law’s application to online gambling.

On September 20, 2011 (but not officially released until December 23, 2011), Assistant U.S. Attorney General Virginia Seitz issued a new opinion on the scope of the 1961 Wire Act, limiting it’s scope to sportsbetting, undoing a 2002 opinion by the DOJ with a much broader interpretation that made online gambling illegal under the Wire Act.

Seitz’s opinion instantly changed the online gaming landscape in the country.

Within two years, three states would pass online lottery bills and three other would pass intrastate online gaming bills, with many others looking to join the ranks.

This four part series will cover the state of online gambling in all 50 states, including:

  1. The seven states where online gaming is legal or approval is imminent
  2. The eight states currently thought to be considering online gaming expansion
  3. The reasons why nine states may consider expanding into online gaming in the near future
  4. The reasons why 26 states are unlikely to pass online gaming laws

Nevada was already prepared

In June of 2011 the Nevada legislature passed a bill allowing the Nevada Gaming Commission to regulate online poker in the state. The new law was meant to be a preemptive move, setting the state up to be among the first to launch legal online poker in the U.S. should a federal iGaming bill be enacted, or, as ended up being the case, the DOJ changes the way it interpreted current laws.

In February of 2013 Nevada amended its law further, adding a Bad Actor clause and allowing the state to enter into interstate agreements. In February of 2014 Nevada and Delaware signed an interstate agreement, but have yet to combine their player pools at this point.

On April 30, 2013, Station Casino’s Ultimate Poker became the first legal online poker room in the United States. Ultimate Poker would eventually suffer the same fate as many first movers, closing its doors on November 17, 2014, after quickly becoming second fiddle in a very small market to WSOP.com when Caesar’s launched their site, WSOP.com, in September of 2013.

Delaware’s state run model

Delaware became the second state to pass an online gaming bill in June of 2012, and became the second state to launch online gaming sites on October 30, 2013. The state may have been second in those categories, but Delaware was first in one respect: Delaware was the first state to launch online casinos, beating New Jersey to the punch by mere weeks, as their online gaming law allowed for both online poker and online casino games.

Delaware’s online gaming industry differs from Nevada (and also New Jersey) in another key way. Delaware’s online gaming sites are run through the state lottery, and all three sites (operated and branded by the states racinos: Delaware Park, Dover Downs, and Harrington Raceway) use the same software (powered by Scientific Games and 888 Holdings) and combine their player pools.

The New Jersey experiment

New Jersey was the last of three states to launch, doing so on November 21, 2013, but the Garden State was seen as the most important by analysts due to its population of nearly 9 million.

It took New Jersey a couple years to pass an online gambling bill (thanks in part to a Chris Christie veto of a bill passed by the legislature in 2012) but once the law was passed in early 2013 the state used an accelerated timeline to launch their online gaming industry, with a mere nine months passing between the bill becoming law and the sites launching.

So far New Jersey’s iGaming experiment has been hit and miss. Revenue has fallen well short of the ludicrous early revenue projections, and regulatory caution has led to stripped down software, much to the dismay of online poker players, but from a regulatory standpoint the industry has been running near flawlessly.

Online lottery sales spread across the U.S.

Three states are already offering full online lottery sales online, and several others are expected to approve online sales in 2015.

A number of states offer some form of online lottery (usually in the form of second chance drawings and subscriptions) but the three states mentioned above are selling lottery tickets online.

Along with New York (which despite the DOJ memo by Seitz still only offers online subscriptions), Illinois was the impetus for the 2011 DOJ opinion on the Wire Act, and the state wasted little time in rolling out online lottery sales. Illinois had passed an online lottery law back in 2009, and started selling lottery tickets online in March of 2011, even before the DOJ opinion was issued.

Georgia was the first truly Red state to expand into online gaming when it began looking at online lottery sales in the summer of 2011. Georgia’s involvement demonstrated that online lotteries were not a regional issue, and could be adopted by other cash-strapped southern states without a backlash.

Minnesota joined Illinois and Georgia in November of 2011, when they passed a law allowing the sale of online lottery tickets, as well as at the pumps of gas stations. One part of the new law has turned out to be a very contentious issue, online scratch cards, which the state began offering in early 2014, which to the naked eye look and play an awful lot like online slot machines.

Additionally, another state is already preparing to go online in 2015.

Michigan is the latest entry into the online lottery business, even though the legislature is not on board with the decision.  The Michigan Lottery plans to start selling online lottery tickets sometime in 2015, despite the legislature stripping the funding for the program out of the budget. The Michigan Lottery has already launched online instant win (scratch) tickets and Keno, including free demos of the games available.

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