U.S. iGaming Boom Leaves Europe In The Shade

Both New Jersey and Pennsylvania now figure among the top five regulated online casino markets in the world, having together emerged as the fastest-growing sub-segment of the visible global gambling industry, according to VIXIO GamblingCompliance research.

The two neighboring Northeast states, for whom 2019 was primarily characterised by the expansion of online sports betting in the first full year of the post-PASPA era, will enter the second half of 2020 as true global heavyweights in the parallel arena of iGaming.

With sports-betting volumes hit by a significantly depleted sporting calendar in the early months of the coronavirus pandemic, soaring online gaming revenue has helped to fill the gap for online specialists in the smaller handful of states to have launched the activity since 2013.

New Jersey and Pennsylvania, in particular, have seen remarkable online casino and poker growth since mid-March, due in large part to a channel shift in gaming spend arising from the shutdown of terrestrial casinos in Atlantic City and across Pennsylvania.

In the Garden State, overall iGaming revenue in the first five months of the year climbed 88 percent year-on-year to $337.8m on broadly similar growth in casino revenue to $320.9m and poker revenue to $16.9m.

That compares with full-year growth of 62 percent in 2019, when successful sports-to-gaming cross-sell following the launch of regulated sports betting accelerated momentum in a segment which failed to surpass $300m in market size during its first five years of operation.

 

On a trailing three-month basis, New Jersey has now emerged as the world’s third largest regulated online casino market behind the UK and Italy, despite a local population of less than 9m versus 60m+ in the two European countries.

Although inflated by increased play from housebound consumers seeking entertainment during quarantine, New Jersey’s rolling three-month online casino revenue of $217.4m comfortably exceeds the first-quarter regulated market total of European iGaming stalwart Sweden and annualizes to an eye-catching $870m.

Perhaps more surprisingly, VIXIO GamblingCompliance estimates that Pennsylvania, with a larger population of 12.8m, has now broken into the top five online casino markets globally, less than a year since the launch of internet gaming last July.

Online casino revenue in the Keystone State ramped significantly from $21.1m in March to $37.8m in April and $51.2m in May. As a result, trailing three-month gross gaming revenue (GGR) of $110.2m from casino games alone has likely surpassed equivalent totals in the eight-year-old regulated online casino markets of Denmark and Spain, although first-quarter data has yet to be published for the latter.

The blockbuster iGaming growth observed in the year-to-date has accentuated an already sizeable revenue advantage of online casino over sports betting in New Jersey, an advantage which has long-existed in the UK and Italy, Europe’s most mature regulated markets.

Moreover, a clear shift in consumer spend in the post-coronavirus months will likely have reminded stakeholders and lawmakers in states yet to regulate online casino games of their value as a substitute for COVID-impacted traditional gaming, as well as an enabler of sports-gaming cross-sell.

West Virginia and Michigan last year became the fifth and sixth states to legalize iGaming products, although casinos in the two states have yet to go live with online games as of mid-June.

Having approved emergency rules in May, West Virginia is set to launch iGaming to complement already-operational online sportsbooks in July, while Michigan has yet to adopt specific regulations and is anticipated to follow later in the year or in early 2021.

The comparatively glacial state-by-state regulation of iGaming across the U.S. relative to sports betting has meant that sports wagering has figured more prominently in industry coverage and the value propositions of online betting and gaming specialists seeking to capitalize on the highly-prized U.S. market.

An emerging theory posits that states will be more willing to embrace online gambling in the post-COVID era and the early performance of Pennsylvania in particular suggests that U.S. online casino could become a multi-billion-dollar opportunity in its own right even with a more limited rollout than sports betting.

The mix of urban and more remote casinos scattered through Pennsylvania are more closely aligned with typical regional U.S. casino markets outside Nevada and New Jersey, where casino-resorts are clustered in Atlantic City and rely on out-of-state visitors for a significant chunk of their gaming custom.

 

 

That Pennsylvania’s heavily-taxed online casino market is already approaching 20 percent of the monthly pre-coronavirus run-rate of the state’s $3bn+ land-based commercial casino segment is significant, especially when considering that the overall U.S. commercial casino market generated gaming revenue of more than $42bn in 2019.

Uncertainty persists regarding the extent of re-substitution to land-based venues exiting devastating coronavirus-induced shutdowns. Still, the performance of New Jersey and Pennsylvania means industry stakeholders can be forgiven a bullish outlook when piecing together the medium-term U.S. iGaming opportunity.

 

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