Online gambling in the United States has experienced a remarkable transformation over the past two decades, evolving from a niche activity into a major sector within the broader gambling industry.
The US online gambling sector has seen extraordinary growth and increasing consumer interest. For instance, in 2019, it was valued at approximately $1.9 billion, with a notable contribution from states like New Jersey, Pennsylvania, and Delaware.
Despite the COVID-19 pandemic impacting various sectors, online gambling flourished in 2020, with revenues exceeding $2.5 billion in New Jersey alone.
The online gambling industry in the US witnessed revenues surpass $4.5 billion in 2022, with notable contributions from newly-regulated states.
The industry’s growth trajectory continued in 2023, with projections indicating that the market could exceed $7 billion by the end of the year.
Early Beginnings and Legal Milestones
The development of online gambling in the United States has been marked by a series of critical legal and regulatory milestones:
- 1996: The first online casino, InterCasino, launched. It marked the beginning of the online gambling era, regardless of the existing legal uncertainties.
- 2000: The Internet Gambling Prohibition Act was introduced in the US Congress but failed to pass.
- 2006: The Unlawful Internet Gambling Enforcement Act (UIGEA) was enacted as part of the SAFE Port Act.
- 2009: The Department of Justice issued a legal opinion that the Wire Act applied only to sports betting and not to other forms of online gambling.
- 2011: The Department of Justice’s reinterpretation of the Wire Act allowed states to legalize and regulate online poker and casino games.
- 2013: Nevada became the first state to regulate and legalize online poker, followed by New Jersey and Delaware.
- 2018: The Supreme Court of the United States struck down PASPA in May, allowing states to legalize sports betting.
- 2019: Indiana, Iowa, and Oregon launched legal online sports betting platforms.
- 2020: The COVID-19 pandemic accelerated the adoption of online gambling as states sought additional revenue sources amid economic disruptions.
Land-Based Casinos Enter the Digital World
The integration of land-based casinos with online gambling platforms represents a major evolution in the gambling industry.
This transformation has been driven by strategic investments, partnerships, and technological advancements that have redefined the market.
The Beginnings of Digital Expansion
The journey toward digital integration began in earnest in 2011, following the Department of Justice’s reinterpretation of the Wire Act.
This change allowed states to regulate online poker and casino games, providing land-based casinos with an opportunity to explore the digital realm.
In April 2013, Nevada became the first state to launch online poker, signaling the start of this new era.
New Jersey quickly followed in November 2013, establishing its online casino market.
Major operators like Caesars Entertainment and Resorts Casino Hotel were among the first to venture into online gambling, laying the groundwork for future growth.
Strategic Acquisitions and Partnerships
In 2014, Caesars Entertainment made a strategic acquisition of WSOP.com, capitalizing on the World Series of Poker brand to attract online players.
This move allowed Caesars to integrate its online poker operations with its existing land-based casino offerings, setting a precedent for others in the industry.
The following years witnessed significant partnerships that further strengthened the link between land-based casinos and online platforms.
In 2015, MGM Resorts partnered with GVC Holdings (now Entain), leading to the creation of BetMGM. This partnership combined MGM’s extensive customer base with GVC’s technological expertise, resulting in the launch of online sports betting and casino games across several states.
Similarly, in 2016, Penn National Gaming acquired a 36% stake in Barstool Sports, positioning itself to capitalize on the growing sports betting market. This partnership culminated in the launch of the Barstool Sportsbook app in September 2020, offering a seamless experience between land-based and online betting.
Here, Jackpot Sounds exemplifies another case: DraftKings also expanded its reach through a strategic partnership with Resorts Casino in Atlantic City, launching its online sports betting platform in New Jersey in August 2018.
Technological Advancements and Market Impact
Technological innovation has been crucial in merging land-based casinos with online platforms.
The introduction of live dealer games in 2016 provided a hybrid experience that combined the convenience of online gambling with the interactive nature of physical casinos.
Companies like Evolution Gaming and Playtech were at the forefront of offering live dealer services, significantly enhancing user engagement.
The COVID-19 pandemic in 2020 accelerated the shift to online gambling, as land-based casinos faced closures and restrictions.
Operators invested heavily in their digital platforms to meet the surging demand. New Jersey’s online casino revenue reached a record $970 million during this period, highlighting the growing importance of online offerings.
Partnerships Between Online Platforms and Land-Based Casinos
The partnership between online gambling platforms and land-based casinos is a cornerstone of the U.S. gambling industry, driven by both legal requirements and strategic considerations.
This collaboration has played a significant role in shaping the online gambling landscape, ensuring that digital platforms are closely tied to established physical entities, thereby enhancing trust and regulatory oversight.
Legal Requirements for Partnerships
When online gambling began gaining legal ground in the United States, states like New Jersey and Pennsylvania introduced regulations mandating that any online casino must partner with a licensed land-based casino within the state.
New Jersey: The Internet Gaming Act of 2013
New Jersey was one of the first states to legalize online gambling, setting a precedent for other states to follow.
The state’s legal foundation for online gambling is the New Jersey Internet Gaming Act (A2578), signed into law by Governor Chris Christie on February 26, 2013.
This law made it mandatory for online gambling operators to partner with one of Atlantic City’s existing land-based casinos.
Under the Internet Gaming Act, the key requirements for these partnerships include:
- Licensing: Online gambling platforms must operate under the license of an Atlantic City casino. This means that the casino is ultimately responsible for the online platform’s compliance with state regulations.
- Server Location: All servers used to run online gambling operations must be located in Atlantic City.
- Revenue Sharing: The law stipulates that a significant portion of the revenue generated by online gambling must be shared with the partner land-based casino.
Pennsylvania: The Gaming Expansion Act of 2017
Pennsylvania followed New Jersey’s lead with the passage of the Gaming Expansion Act (HB 271), signed into law by Governor Tom Wolf on October 30, 2017. Its main provisions include:
- Licensing Requirement: Like New Jersey, Pennsylvania requires that any entity wishing to offer online gambling services must do so in partnership with a licensed land-based casino in the state. The online platform needs to obtain an Interactive Gaming Certificate from the Pennsylvania Gaming Control Board (PGCB).
- Application Fees and Licensing Costs: The law outlines specific fees associated with obtaining a license to offer online gambling. For instance, an Interactive Gaming Certificate can cost up to $10 million, depending on the type of games offered (e.g., slots, table games, poker).
- Geolocation and Server Requirements: Similar to New Jersey’s laws, Pennsylvania mandates that all online gambling servers be located within the state.
Michigan: The Lawful Internet Gaming Act of 2019
Michigan entered the online gambling arena with the Lawful Internet Gaming Act (HB 4311), signed into law by Governor Gretchen Whitmer in 2019. Its key elements comprise:
- Partnerships and Licensing: Online casinos must be affiliated with a licensed land-based casino in Michigan. These casinos apply for internet gaming operator licenses, allowing them to offer a range of online gambling services through their digital partners.
- Taxation and Revenue Sharing: The law imposes a tiered tax structure on online gambling revenue, with rates ranging from 20% to 28%. A portion of this revenue is shared with the partner land-based casino.
- Regulatory Oversight: The Michigan Gaming Control Board (MGCB) is tasked with overseeing all online gambling operations, ensuring that the land-based and online components of the business comply with state regulations.
Compliance and Monitoring
In all these states, the partnership requirement is more than just a legal formality; it involves ongoing compliance and monitoring.
State gaming boards—the DGE, the PGCB, and the MGCB—play a crucial role. Their responsibilities comprise
- regular audits,
- technical inspections,
- financial reporting, and
- maintaining the integrity of the gambling industry.
By mandating partnerships between online platforms and traditional casinos, states have created a system that supports both industries, ensuring that they can coexist and thrive in a rapidly evolving market.
Early Partnerships and Their Impact
One of the first and most influential partnerships emerged in New Jersey in 2013, following the state’s legalization of online gambling. The law required online operators to collaborate with Atlantic City’s brick-and-mortar casinos.
Borgata Hotel Casino & Spa, for instance, partnered with several online platforms, including BetMGM and PartyPoker. This partnership allowed Borgata to leverage its established brand and extensive customer base, while the online operators gained access to a regulated market with a built-in trust factor.
Pennsylvania’s Model: Integrating Digital and Physical Casinos
In Pennsylvania, similar regulations mandate that online casinos operate under the license of an existing land-based casino.
This requirement led to notable partnerships, such as the collaboration between Penn National Gaming and Hollywood Casino. Under this agreement, the online platform launched under the Hollywood brand, enhancing its credibility and ensuring that Pennsylvania’s strict regulatory standards were maintained.
This model provided a stable revenue stream for physical casinos and allowed online platforms to establish a foothold in a highly competitive market.
Examples of Partnerships
| Online Casino | Land-Based Partner | Year Launched |
| Caesars PA | Harrah’s Philadelphia Casino & Racetrack | 2020 |
| Hollywood Casino PA | Hollywood Casino at Penn National Race Course | 2019 |
| DraftKings PA | Hollywood Casino at Penn National Race Course | 2020 |
| BetMGM PA | Hollywood Casino at Penn National Race Course | 2020 |
| PlayLive! PA | Live! Casino Philadelphia | 2020 |
| Fanatics Sportsbook and Casino MI | Northern Waters Casino Resort | 2021 |
| Internet Casino Games & Poker: PokerStars MI | Odawa Casinos | 2021 |
| Golden Nugget Casino MI | Ojibwa Casino | 2021 |
| Eagle Casino & Sports MI | Soaring Eagle Casino & Resort | 2022 |
Strategic Collaborations and Mutual Benefits
These partnerships often involve intricate agreements where land-based casinos provide licensing and regulatory oversight, while online platforms contribute technological expertise and digital marketing capabilities.
Technological Integration and Customer Engagement
The partnerships between land-based and online casinos have also spurred technological innovation within the industry.
One of the most significant advancements has been the development of integrated loyalty programs, which reward players for their engagement across both online and physical platforms.
For instance, players can earn points through online gambling that are redeemable for
- hotel stays,
- prizes,
- meals, or
- other perks at the partner land-based casino.
This integration encourages cross-platform engagement and strengthens customer loyalty by offering a cohesive gaming experience.
The Future of Online and Land-Based Casino Partnerships
As online gambling continues to expand across the U.S., the model requiring partnerships between online platforms and land-based casinos is likely to persist.
This approach ensures that online gambling remains closely tied to the regulatory frameworks that have governed physical casinos for decades, providing a layer of security and trust for operators and players alike.
Moreover, these partnerships underscore the ongoing relevance of brick-and-mortar casinos in an increasingly digital world, as they remain central to the legal and operational structure of the online gambling industry.
Current Development and Market Trends
The online gambling industry in the United States has undergone significant growth and transformation lately, driven by advancements in technology, evolving consumer preferences, and regulatory changes.
This section explores the latest developments and market trends, highlighting the key factors that are shaping the future of online gambling.
Expansion of Legalized Online Gambling
The expansion of legalized online gambling in the United States has been one of the most significant developments in the industry.
As of 2024, over 30 states have legalized some form of online gambling, including sports betting, casino games, and poker. This represents a substantial increase from just a few years ago.
States like New Jersey, Pennsylvania, and Michigan have been at the forefront of this expansion. New Jersey’s online gambling market, which launched in 2013, has consistently been one of the largest in the country.
In 2023, New Jersey reported over $1.8 billion in online gambling revenue, a 21% increase from the previous year. Pennsylvania, which legalized online gambling in 2017, generated $1.3 billion in online gaming revenue in 2023, marking a 15% year-over-year growth.
Michigan, a relative newcomer to the online gambling scene, has quickly established itself as a major player.
After launching online gambling in January 2021, Michigan’s market saw rapid growth, with online casino revenue reaching $1.6 billion in 2023.
This growth was fueled by a combination of strong consumer demand and the state’s decision to allow a wide range of online gambling activities, including sports betting, casino games, and poker.
Technological Advancements and Innovation
Technological advancements have been a key driver of growth in the online gambling industry, enabling operators to offer more engaging and immersive experiences to players. One of the most significant trends in recent years has been the rise of mobile gambling.
As of 2024, over 80% of online gambling revenue in the U.S. is generated from mobile devices, reflecting the growing preference for on-the-go gaming.
The development of mobile apps and responsive websites has allowed online gambling operators to reach a broader audience and offer a more seamless user experience.
For example, DraftKings and FanDuel, two of the largest online sports betting platforms in the U.S., have invested heavily in mobile technology, resulting in apps that offer live betting, real-time updates, and personalized recommendations.
Virtual reality (VR) and augmented reality (AR) are also starting to make inroads into the online gambling market.
While still in the early stages of adoption, these technologies have the potential to revolutionize the way people gamble online by creating fully immersive environments.
For instance, PokerStars VR offers players a virtual poker room where they can interact with other players in a 3D environment, enhancing the social aspect of the game.
In addition to VR and AR, artificial intelligence (AI) is increasingly being used to personalize the online gambling experience.
AI algorithms analyze player behavior to offer customized game recommendations, bonuses, and promotions, helping to increase player engagement and retention.
Companies like BetMGM and Caesars have been at the forefront of integrating AI into their platforms, using it to optimize their marketing strategies and improve customer service.
Mergers, Acquisitions, and Market Consolidation
The online gambling industry has seen a wave of mergers and acquisitions recently, as operators seek to expand their market share and capitalize on the growing demand for digital gaming.
One of the most significant deals in recent history was the merger between Flutter Entertainment and The Stars Group in 2020, creating one of the largest online gambling companies in the world.
The combined entity, which owns brands like FanDuel, PokerStars, and Betfair, generated over $7 billion in revenue in 2023.
Another major acquisition was Caesars Entertainment’s purchase of William Hill in 2021 for $3.7 billion. This deal allowed Caesars to strengthen its position in the U.S. sports betting market, particularly in states where William Hill had a strong presence.
The acquisition also enabled Caesars to integrate William Hill’s technology and expertise into its own online platform, enhancing its overall offering.
In addition to these large-scale deals, there has been a trend toward consolidation among smaller operators.
For example, Rush Street Interactive, a leading online casino, and sports betting operator, acquired Run It Once Poker in 2022 to expand its presence in the online poker market. This acquisition allowed Rush Street to offer a more comprehensive gaming experience to its customers, further solidifying its position as a key player in the industry.
The trend toward consolidation is expected to continue in the coming years, as operators seek to achieve economies of scale, reduce costs, and expand their competitive advantage.
As the market becomes more competitive, smaller operators may struggle to keep up with the larger, more established players, leading to further mergers and acquisitions.
Emerging Markets and Future Prospects
As online gambling continues to grow in the U.S., new markets are emerging, offering opportunities for further expansion.
States like California and Texas, which have not yet legalized online gambling, represent significant untapped potential.
California, with a population of nearly 40 million, could become one of the largest online gambling markets in the country if it chooses to legalize.
Texas, with its large and passionate sports fan base, also has the potential to become a major player in the online sports betting market.
In addition to geographic expansion, the online gambling industry is likely to see continued innovation in terms of product offerings and technology.
The integration of blockchain technology, for example, could enhance the transparency and security of online gambling transactions, while advancements in AI could lead to more personalized and engaging gaming experiences.
The future of online gambling in the U.S. will also be shaped by ongoing regulatory developments. As more states consider legalizing online gambling, the industry will need to navigate a complex and evolving legal landscape.
However, with the continued growth of mobile technology, the increasing popularity of sports betting, and the potential for new markets to open up, the prospects for online gambling in the U.S. remain strong.
Regulatory Challenges and Future Prospects
The online gambling industry in the United States is rapidly expanding, but this growth is accompanied by a complex and often challenging regulatory environment.
Navigating the legal landscape has proven to be a significant hurdle for operators, as the patchwork of state-by-state regulations creates numerous challenges.
State-by-State Regulation: A Fragmented Landscape
One of the primary regulatory challenges in the U.S. online gambling market is the fragmented nature of state laws.
Unlike other countries where online gambling is regulated at the national level, in the U.S., each state has the authority to create its own laws governing online gambling. In 2024, over 30 states have legalized some form of online gambling, but the specific regulations vary widely from state to state.
For example, New Jersey, one of the first states to legalize online gambling in 2013, has a well-established regulatory framework that allows for a wide range of online gaming activities, including sports betting, casino games, and poker.
In contrast, states like Utah and Hawaii have completely banned all forms of gambling, including online gambling.
This disparity creates challenges for operators looking to expand their services across multiple states, as they must navigate different licensing requirements, tax rates, and consumer protection laws.
Licensing and Compliance: Navigating Complex Requirements
Obtaining a license to operate an online gambling platform in the U.S. is a rigorous process that involves meeting a wide range of legal and financial requirements. Each state has its licensing authority, such as the NJDGE or the PGCB, which sets the criteria for granting licenses to online gambling operators.
The licensing process typically includes background checks on key personnel, financial audits, and the submission of detailed business plans. In addition, operators must demonstrate their ability to implement robust security measures to protect player data and ensure fair play.
The cost of obtaining a license can also be prohibitive, with some states charging substantial fees. For instance, Pennsylvania requires a $10 million licensing fee for online casinos, making it one of the most expensive states for operators to enter.
In 2022, BetMGM was fined $500,000 by the NJDGE for failing to adhere to advertising guidelines, highlighting the importance of strict compliance in the U.S. market.
Federal Oversight: The Role of Federal Law in Online Gambling
In 2011, the U.S. Department of Justice (DOJ) issued a legal opinion stating that the Wire Act applies only to sports betting, effectively allowing states to legalize other forms of online gambling.
However, in 2018, the DOJ reversed this opinion, arguing that the Wire Act applies to all forms of online gambling. This reversal created uncertainty in the industry, with operators and state regulators concerned about potential legal challenges.
In 2021, the U.S. First Circuit Court of Appeals ruled that the Wire Act applies only to sports betting, reaffirming the 2011 DOJ opinion. However, the potential for future federal action or changes in interpretation continues to create uncertainty for operators.
Challenges in Payment Processing and Banking
Another significant regulatory challenge in the U.S. online gambling market is the issue of payment processing and banking.
Due to the federal government’s strict anti-money laundering (AML) regulations and the UIGEA of 2006, many banks and payment processors are reluctant to work with online gambling operators.
The UIGEA prohibits financial institutions from processing transactions related to illegal online gambling, leading to a cautious approach from banks even in states where online gambling is legal.
In 2023, only 60% of transactions involving online gambling were successfully processed by traditional banks, highlighting the ongoing challenges in this area. To address these issues, some operators have turned to cryptocurrency as an alternative payment method, although this approach brings its set of regulatory and legal challenges.
