Seizing the American Day: Beyond Real-Money iGaming in 2015 (Part One)

While forecasting the when and the where of the fourth regulated US market is important, it’s not the key question facing US-focused operators. This is the real question: given that the market will take time to emerge state-by-state, how can operators maximise their revenue in the short-term and prepare for regulation down the road?

The answer is threefold, involving online horse-racing wagering, daily fantasy sports and social casino gaming. These three alternative US opportunities will enable operators to seize American gaming’s today and prepare for tomorrow. To do so, however, it’s vital that they develop a sophisticated marketing strategy that balances their offline and digital channels.

State of the Union: Real-Money iGaming

In 2013, three states – New Jersey, Nevada and Delaware – regulated iGaming. By contrast, 2014 was a year of promise and consolidation rather than tangible developments. In California, the most populous US state with nearly 40 million residents, three different bills were introduced to legalise online poker, the most recent tabled in December. The legislature of another highly populated state, New York, also considered online poker legislation in 2014, while neighbouring Pennsylvania released a favourable study on the financial impact of regulating online gaming.

Despite all these promising signs, no new states regulated iGaming last year. Similarly, analysts forecast that it’s unlikely that another market will go live in 2015. Chris Grove of Online Poker Report predicts that only California will possibly regulate online poker this year, though he believes that it will take until 2016 at the earliest for play to commence in the Golden State. 

If iGaming is unlikely to go live in California, Pennsylvania and New York, the focus returns to the regulated markets of Nevada, Delaware and in particular New Jersey. Offering both online poker and casino, the Garden State is also the most populated of the three markets with 9 million residents. After a year of consolidation in 2014, New Jersey’s iGaming revenue is set to increase by approximately 10% this year, according to Eilers Research.

While it’s more populated than both Delaware and Nevada, New Jersey’s population still amounts to just 2.6% of the entire US. An iGaming strategy that focuses exclusively on the real-money markets of New Jersey, Nevada and Delaware risks leaving operators unprepared for the eventual launch of the Californian, New York and Pennsylvanian markets, and also limits their revenue.

Online Horse-Racing Wagering 

There is, however, more to online gaming in the United States than real-money online casino and poker. Online wagering on horse-racing is a powerful rival to these two verticals and forms a far larger market in the US than both combined.

Unlike online casino and poker, betting on horse-racing over the internet was not included in the US federal government’s Unlawful Internet Gambling Enforcement Act (UIGEA) of 2006.  This left it up to individual states to decide whether they’d legalise the vertical or not. 

At present, a sizeable majority – 37 out of 50 US states – allow their residents to wager online on horse-racing events, as well as offer the alternative of greyhound racing. The states that have legalised the vertical include some of the most highly-populated regions of the country, including California, New York, Florida, Illinois, Ohio, Pennsylvania and Michigan. The total population of these listed states alone adds up to 125 million people or well over a third of the population of the entire country.   

The vertical’s market size is more than just potential. Horse-racing in the United States is deeply ingrained in the country’s culture and heritage. There are over 100 thoroughbred and harness-racing tracks across the continental US, while races like the Triple Crown, which includes the Kentucky Derby, the Preakness Stakes in Maryland, and the Belmont Stakes in New York, are national events in the country. If operators consider that over $130 million is bet on the Kentucky Derby alone each May, they’ll realise the vast potential of launching an online horse-racing wagering brand that covers not just that race but events across the country.   

Online horse-racing wagering is not just about acquiring an additional revenue stream. The vertical also provides operators with the ability to build and segment a player database in states like California, New York and Pennsylvania that are currently considering regulating online poker. Once one of these three markets goes live, operators will be able to convert their horse-racing wagering players into poker players.