The online gaming industry has grown rapidly since inception in the 1990s. At the time, barely a handful of online casinos and sports betting sites were available. Dial-up Internet, slow connectivity, and poor audio-visual content characterised the games. As broadband Internet, wireless Internet, 3G, 4G, and cellular communications improved, so too did the quality and pervasive of online gambling.
The online gambling industry is dominated by a handful of industry leaders, including Playtech, Cryptologic, and Microgaming. These software developers shaped the industry by creating award-winning games, powerful gaming platforms, and cutting-edge technology. While estimates vary widely, it is generally assumed that the online gambling industry now exceeds $60 billion annually, with significant upside potential.
Many of the barriers to online gambling growth have now been addressed. These include credibility, licensing, and regulation. Complimentary systems, frameworks and agencies now work in unison to ensure player safety, security, and compliance with regulatory frameworks. The industry is now entering a mature stage in many markets, where key players dominate the scene and maintain a sizeable market share. According to Statista, the online gambling market is expected to grow from the 2017 market capitalization of ($45.8 billion) to the 2024 market capitalization of $94.4 billion. This indicates a virtual doubling of the current market size within the next 5 years.
The growth of the online gambling market is a product of the increasing liberalization of the industry across the United States, Europe, Australasia, and beyond. While online casino is perceived to be the mainstay of the online gambling market, it’s actually online sports betting which far outstrips the value of online casino gaming globally. Other subcategories include online bingo, online poker, lottery tickets and scratch cards. As mobile technology evolves, increasing numbers of players are registering and playing on their iOS and Android smartphones and tablets.
A watershed moment occurred in 2018 when New Jersey successfully petitioned the Supreme Court of the United States to overturn PASPA and allow individual states to regulate online sports betting. New Jersey initiated the change and this has been followed up by multiple other US states which are now pushing their own online sports betting legislation. The world’s biggest online gambling companies include 888 Holdings plc, William Hill plc, Ladbrokes Coral Group, Paddy Power Betfair, and others.
The statutory frameworks for online gambling activity are always changing. It’s difficult to track each market and sub-market, based on the bureaucratic complexities and nuances ofindividual regulatory systems. However, it’s easier to evaluate the current state of the online gambling market by assessing the current regulated markets of gaming developers like Microgaming which offers casino software to market-leading operators like 888casino. This leading software provider is now operational in 20+ licensed jurisdictions worldwide.
Microgaming does not operate in unlicensed jurisdictions. Players can enjoy services in the UK, Spain, Italy, Bulgaria, Romania, Hungary, Czech Republic, Germany (Schleswig-Holstein), Lithuania, Latvia, Estonia, Denmark, and others. In South America, Microgaming is in the process of entering Colombia which has recently approved regulation.
The United States has the potential to become the biggest online gambling market in the world, provided lawmakers from individual states fast-track the passage of bills through state legislatures. Each state now determines for itself whether it will permit online gambling (online casino, online poker, sports betting, lotteries et cetera) which can be signed into law by the respective governor.
Plenty of controversy remains about the legality of online gambling at federal level, with laws like UIGEA (Unlawful Internet Gambling Enforcement Act) which says nothing about the act of gambling, but rather addresses the issue of payment processors to online gambling sites. There are 50 states across the US, and online gambling is regulated in only a handful of them. Two states do not permit any form of gambling activity, notably Utah and Hawaii. The waters become a little muddied when online poker legislation is brought into the equation since poker combines elements of skill and luck.
To date, several US states including New Jersey, Nevada, Pennsylvania, and Delaware permit some or other form of online gambling activity. The biggest online gambling market is currently New Jersey, since states like Nevada limit gambling activity to online poker alone. Pennsylvania has the potential to become the biggest online gambling market, with a large population of legal-age bettors. Legal online sports betting went into effect recently, and has already been generating substantial returns.
According to Online Poker Report, there are currently 4 US states with fully regulated online poker, including Delaware, Nevada, New Jersey, and Pennsylvania. Online gambling bills are currently active in multiple East Coast and Midwestern states including the following:
In Michigan for example, lawmakers have been trying to push through online casino legislation, however the Governor Gretchen Whitmer is working against lawmakers to prevent online gambling from passing. Recall that in January 2019, the US Department of Justice issued an opinion on the Wire Act. It declared all types of online gambling activity to be illegal, but state lawmakers are petitioning against this ruling.
One of the most active online gambling advocates in Michigan is representative Brandt Iden. His bill from 2017 made its way through both chambers of the state legislature but were struck down by then Governor Rick Snyder. It appears that the current governor is equally determined to prevent its passage.
Online gambling legislation in the European Union is determined by individual EU countries. However, they are required to act within the broad framework of the TFEU (Treaty on the Functioning of the European Union). Many European countries permit some or other form of online gambling activity. Certain countries like the United Kingdom allow all forms of online gambling (lotteries, scratch card tickets, online casino, online poker, online bingo, sports betting) while others are more limited in their offerings such as Germany (Schleswig-Holstein).
Many European countries have instituted monopolistic systems which permit limited access to the online gambling market. In certain cases, private operators have exclusive access to the online gambling market. On November 27, 2018, the European Gaming and Betting Association(EGBA) released important figures on online gambling activity. At the time of writing, 134+ online gambling licences were provided across 19 EU states. This translates into approximately 7 licences for each state. A total of 12 million players are licensed with affiliated EGBA companies.
Online gambling comprises approximately 21% of all EU gambling activity, with 79% of revenues generated through casinos, bookmakers, and lotteries. The value of online gambling in the EU is expected to rise from €19.6 billion in 2017 to €24.7 billion by 2020. The biggest component of online gambling activity in Europe is sports betting at 40.3%, followed close in tow by online casino games at 32.1%, lottery games at 13.3%, poker at 6.1%, and bingo at 4.6%. EGBA-affiliated companies processed over 354 million payments, averaging 1 million payments daily.
Australia recorded a 0.5% decline in total gambling expenditure between 2015/16 and 2016/17. Gambling revenues decreased from $23.804 billion to $23.694 billion. The average adult in Australia gambled $1251.39 in 2016/17, compared to $1277.83 in 2015/16. Electronic gaming machine expenditures in Australia totaled $12.136 billion in the latest study, while sports betting increased to $1.062 billion. There were declines in total casino expenditure from $5.195 billion in 2015/16 to $4.790 billion in 2016/17. The information provided by the Queensland Government Statisticians Office has yet to tabulate statistics for later years.
In November 2018, the South African Parliament implemented new gambling legislation. The National Gambling Amendment Act of 2018 addresses three key issues, notably the transfer of power to the National Gambling Regulator from the National Gambling Board, improving the management and governance of gambling activity, and enhancing the National Central Electric Monitoring system. While online gambling is currently a hot topic item, this was not addressed in the current legislation.
At the time of writing, the South African government allows online sports betting and race betting activity. It takes a dim view on overseas operators trying to peddle their products to South African players. If players are found gambling at these unauthorized online casinos and poker rooms, their winnings can be confiscated. Many of South Africa’s land-based casinos have fought against the liberalization of online gambling activity. This is the reason why online casino and online poker remains on the backburner in South Africa.
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