eGR NA examines H2 Gambling Capital data to understand the potential of the market in Delaware, the only US state to legalise online slots and table games
Historically Delaware has generally been supportive of land-based gambling. However the emphasis has always been on raising funds via the state owned lottery rather than a competitive commercial market, with the exception of horse racing. In addition it is one of the four states which is exempt from the federal Professional and Amateur Sports Protection Act (PASPA) ban on sports betting. The current sports product offering is run by the lottery under a contact with Scientific Games and BrandyWine.
Prior to 2010, residents could gamble on lottery games including sports, video lottery terminals (VLTs), harness/thoroughbred racing and simulcasting. In 2010 casino tables were permitted at racetracks under ownership of the lottery. The lottery is state owned but management is contracted to Scientific Games.
The Delaware Gaming Competitiveness Act of 2012 was signed into law in 29 June by Governor Jack Markell. Delaware is the first state to legalise online casino gambling and the second to allow poker after Nevada. The law allows the state lottery to retain its monopoly on traditional lottery and allows for the lottery to expand into online gaming products alongside the three privately owned racetrack casinos. The new law expressly allows compacts for pooled liquidity with other legalized jurisdictions. The tax structure for the commercial casinos is effectively 50% of GGY.
Delaware is the sixth smallest state in America with population of just over 907,000. Due to its size it is a long way from having a large enough population to reach a critical mass in terms of games where pooled liquidity is a driving factor, such as poker, bingo, casino jackpots and exchanges. Due to this, H2 expects a large proportion of players and gross gambling yield to remain offshore, as the attraction of larger sites offering bigger prizes and game level variety will be too much for many to resist.
H2 forecasts the combined size of poker and casino under a commercially regulated market could reach US$19.2m by year three, growing to $20.9m by the fifth year. However under the current anti-competitive monopoly structure the market will be unlikely to reach 70% of this, with a reduced overall market potential due to the lack of a supplier lead demand, and some further loss of players to offshore sites without the competitive nature of a commercial market to keep them onshore.
It should be noted that as other states such as New Jersey look to legalise online gambling, state compacts might emerge allowing for pooled liquidity. Under this scenario it would be an obvious choice for Delaware, along with other surrounding states, to enter into a compact with New Jersey due to the proximity. This would improve the onshore market size through increased prize funds and game level availability, though lack of commercial competition would still limit overall gross gambling yield.
Should all products be available online in the future, H2 forecasts, assuming a fair and balanced market, sports betting would account for 53% of the market gross gambling yield followed by casino with 22%, poker with 19% and bingo with 6%.
H2 has built up an in-depth state-by-state and product-by-product model which values the market potential of the 50 US states under a number of scenarios taking in to account a large number of factors such as GDP, technology penetration, taxation and products. In addition to the gross value of the market it has a number of other key KPI’s – users can run any permutation of states and products. A similar model is available for the Canadian provinces.
Our recent report, ‘The Land of eGaming Opportunity’ has a comprehensive look into the issues surrounding the opening of an interactive market both at state and Federal level. Furthermore H2 currently tracks dotcom poker operators in depth using its proprietary software and will look to include California operators as and when they go live.