Fitch Shows that US Online Gambling Legalization Likely

April 18, 2011 | News Category: Gaming Law

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Fitch Ratings, the business and credit ratings independent company has released a report regarding the likelihood of online gambling becoming legal in the United States.

The report has looked into the issue at length. An article appeared in the Boston Herald which quoted the company as follows: "Multiple states have been considering intrastate online gaming proposals, new federal proposals are being discussed, and the budget outlook at both state and federal levels remains strained. Companies have been ramping up online initiatives and/or entering into alliances, such as Wynn-PokerStars and Caesars-888 Holdings."

There have been a number of moves by various states to legalize and regulate online gambling, and even though these attempts have not yet succeeded, there seems to be a definite desire by many to move in the direction of legalization of online gambling.

At this time, the Fitch report estimates that there is around $5 billion to $6 billion in annual revenues from US online gambling that is going to offshore companies. It is expected that if the industry was regulated and legalized, that this amount would grow quite significantly.

Land based gambling in the United States brings in around $60 billion at this time. This number includes both racetracks, and also the gambling offered by Native Americans.

One of Fitch's gambling industry analysts, Michael Paladino said that there are still many questions that need answering as far as online gambling is concerned in the United States.

Paladino posed the following questions: "The question is, is it just poker? Is it broader than poker? Would it be just affiliated with interstate? Or is it a federal proposal? There's a lot of influences that could affect that equation. If it is interstate, does it go through the lottery commissions? Those are all questions that we have as well."

Lotteries are particularly concerned that they will lose large amounts of revenue should online gambling be legalized. Steve Grossman, the Massachusetts State Treasurer, and chair of the Massachusetts Lottery Commission said: "There is reason to be concerned about some developments that are taking place nationally. The demographics of lottery players is changing, it is aging."

He also noted: "Internet gaming is becoming a major competitive threat. If the Congress decides to go in the direction of Internet gaming, which is a federal issue, why wouldn't Massachusetts, the most successful lottery in the United States with all kinds of technology here in Massachusetts, why shouldn't we be able to put together a Massachusetts-based or a regional Internet gaming product that would protect our lottery revenues?"

The question of whether online gambling should be prevented in order to protect the land based revenues of current gambling facilities is an interesting one. Perhaps the land based gambling industry should simply become more proactive in ensuring that it has a product that can go online, rather than trying to prevent the US federal government from allowing legalized online gambling.

It certainly seems that some Nevada casinos are preparing themselves for this eventuality, and it would be best for the rest of the land based gambling industry to do the same.

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