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Online Gaming

How, Where, and When Americans Can Gamble Online

How, Where, and When Americans Can Gamble Online

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New Jersey on Feb. 26 became the third U.S. state to legalize online gambling, after Nevada and Delaware—but that doesn’t mean Americans can log on and start playing online poker just yet. I talked with Jennifer Webb, an analyst for Gambling Compliance, which tracks the global gambling industry, about the state of play.

When can I start gambling online?
“Until online gambling goes live, it’s definitely still illegal,” says Webb. States still need to sort out their implementation, a process that will hinge on issuing gambling licenses and testing online gambling platform technologies. Nevada, where only online poker is being legalized, will probably be the first to open the gates, likely in early 2013. Delaware, where online gambling will be overseen by the state’s lottery, intends to go live before Sept. 30. And in New Jersey, if all goes well, online gaming may start before the end of November, Webb says.

How can you place state boundaries around online activity?
The laws all require gamblers to be physically within each state. Industry regulators and experts say this can be verified using technology that tracks your location.

What about the feds?
Although there are still gray areas, federal laws likely won’t pose any problem. “Conventional wisdom now is, as long as online gaming is intrastate—within the state—and has proper geolocation and age verification, that it’s in compliance with federal law,” says Webb. Interstate gaming may also become legal in the future, she adds. “If it’s legal in New Jersey and legal in Nevada, and they have an agreement, then you could have pooling between the states.”

Who’s running the show?
In Nevada and New Jersey, online gambling licenses will go exclusively to land-based casinos. Some casinos are forming partnerships with online gambling sites to get hold of their software. Online gambling giant PokerStars, meanwhile, is taking a different route. The company, which is based on the Isle of Man among the British Isles, is in the process of buying a struggling Atlantic City casino to gain a foothold in America’s burgeoning online gambling market.

What do the states get out of it?
Tax dollars, naturally. Revenues in states that legalize online gambling could be substantial. “The revenue estimates [for New Jersey] have ranged between $175 million and $1.5 billion” a year, says Webb. The tax rate on online gambling in New Jersey will be 15 percent. Other states are already lining up to get in on the action. Online gambling bills are currently pending in California, Hawaii, Massachusetts, and Iowa.

Winter is a reporter for Bloomberg Businessweek in New York.

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