Examining the Impact of Online Casinos Across the United States

1. Introduction

With the rapid development of the internet, the popularity of online casinos has increased significantly. Unlike land-based casinos, online casinos have begun to operate within the United States. Several Native American tribes have opened online casinos based on their established sovereignty, and in 2013, New Jersey became the first American state to allow casinos to legally run online games other than poker. Since then, Delaware and Pennsylvania have also approved the operation of online casinos by land-based casinos. Now, a majority of states and more Native American tribes have given the go-ahead for the legalization or consideration of both their Native American and land-based casino establishments, with some states seeking tax revenues through regulation and others pushing for social and public claims.

With the steady opening of internet casinos by American states, it is necessary to study the social problems caused by casinos. There are several streams of literature discussing the social problems associated with physical casinos. The online casino, as the upgraded version of the physical casino, also has the characteristics of causing social problems such as crime, bankruptcy, and lack of security. However, compared with the existing research on physical casinos, online casino research is rarer. Most previous studies have focused on gambling addiction, economic impact, and the role of the legal casinos owned by Native American tribes or land-based casinos, interpreting the changes in regional economic variables and employment status. Few studies have been conducted on how social issues develop under online casino legalization. Therefore, this research intends to fill a gap in the literature by examining the determination of online casino legalization in the United States.

2. Historical Context of Online Gambling

Online gambling has been around almost as long as the Internet, and the numbers involved are staggering. In 2015, the United States generated approximately $8.4 billion in gross gaming revenue from Internet gambling. Revenues from regulated online gambling are on the rise, and free money poker has grown in respect to the popularity of real money online poker. The first state to actually legalize online casinos was Delaware, which led to online poker being legalized, and the first online gaming sites were launched in California in the late 1990s. The profits from online gambling were primarily derived from customers in the USA. On the federal level, the United States Courts of Appeals have held that the statute makes it illegal to use the Internet to operate an online casino, even if the casino is operated in a jurisdiction where online gambling is legal. Dozens of states have now either presently or in the past offered casino gaming; state-licensed online casinos are now legal and are all operated by either DraftKings or FanDuel.

3. Legal Framework Governing Online Casinos

The regulation of online gaming has only achieved a few high points in the United States. On the federal level, the 1961 Wire Act has been judicially interpreted to prevent the advent of online sports gambling, which is banned in all but a few states. In 2006, the Unlawful Internet Gaming Enforcement Act enacted a partial prohibition on financial transactions involving online gaming, but the law did not openly proscribe the gambling activity itself, and it did not achieve universal coverage of payment systems. Twelve states attempted at some point to permit online gaming, mostly in the form of online poker. These attempts largely failed, either legislatively or operationally, and no state has adopted online gaming since 2013, although much state legislative discussion has continued. During 2017, positive projections spread through the gaming investor community that the threat of a new, stricter federal anti-gaming law might stimulate states to expand their gaming offerings before Congress imposed a national solution. Instead, the U.S. Supreme Court in 2018 struck down as an impermissible invasion of state sovereignty the Professional and Amateur Sports Protection Act, the ban on sports betting that it housed, and the closely related provision of Nevada’s monopoly on the activity.

3.1. State Regulations

Incongruent or uncertain state regulations for online activities are just two of the reasons proposed to account for the failure of the U.S. to generate significant player revenues through online betting. Indeed, revenue from all forms of online gaming in 2008 was estimated at $5.9 billion, with just 4% of this coming from the United States. Many states have chosen not to place particular restrictions on online gaming, with poker in particular finding a number of supporters in some state capitals. After a period of confusion and uncertainty, it was clear in late 2009 that several states were actively discussing the possibility of legalizing online poker. The Governor of New Jersey at the time signed a law in early 2010 that permitted land casinos in the state to offer online gaming to its residents. Several states have taken steps to protect their lotteries from the effects of online direct-to-player sales of lottery tickets. Certain federal laws are designed to hold online betting to a minimum.

3.2. Federal Laws

The Constitution of the United States does not grant the federal courts jurisdiction to decide what is and what is not a crime, except where defined and described by the federal Constitution or statutes. The exceptions – treason, piracy, counterfeiting, and crimes committed on the high seas – have been known and recognized as criminal offenses since long before the founding of our government. But, with these few and narrowly worded exceptions, the federal government does not have power that is broadly derived from the people to make up new federal crimes. However, the power to regulate and license commerce between the states was both thought to be so necessary and was so logically connected with our federal system of government that the people gave Congress the specific authority to regulate interstate commerce. For the most part, the meaning of interstate commerce has always been left to be defined through the legislative process.

Criminal law is a power reserved for the states by the people through the 10th Amendment to the Constitution of the United States: ‘The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.’ Gambling laws were defined by the states and for the most part, gambling regulation was left to be a state issue. Even the few acts of gambling that were recognized as federal felonies were criminalized because they were fraudulent, or committed in violation of a state gambling law, or inflicted some other legitimate federal interest. And online gambling was not addressed at all in the pre-Internet statutes and case law.

4. Economic Impact of Online Casinos

The era of the online casino began in the late 1990s. The first online casino was established by a gambling enclave within Antigua and Barbuda. There were soon bets being taken from citizens around the world. Since that time, online gaming has exploded all over the world and become a blossoming business. By 2008, worldwide online gambling revenue was estimated at approximately $21 billion. That year, the U.S. House of Representatives and the U.S. Senate passed nearly identical bills providing for regulations for the online gaming industry but did so under the stress of finding a way to fund port security. The House and Senate bills were both included within port security measures, but after Senate Majority Leader met with the governor of Nevada, he led the charge to have the bills removed. Since that time, non-U.S. companies have forged ahead and become dominant, despite the fact that the United States is potentially the largest market in the world since the U.S. government cut off its citizens but not the rest of the world in response to the passage of the Unlawful Internet Gambling Enforcement Act.

The bulk of online gaming has been casino games and slots. The U.S. online gambling market was estimated to be worth $5.42 billion in 2020, which made the U.S. market 24 percent of the worldwide market. The U.S. market value is expected to reach approximately $15 billion by 2025, which would make the U.S. the single largest online gambling market in the world. Growth has been projected at 15.4 percent between 2020 and 2025.

4.1. Job Creation

Since their introduction, gaming establishments have been lauded by local business owners and policymakers as important sources of economic development. Given the political and social climate of many parts of the country, less controversial projects with the potential for job creation are infrequent. This feature of the industry is particularly important given the federal government’s decision to close many military installations across the country. Over the past 10 years, U.S. states with gaming have created more than 500,000 new jobs in areas ranging from construction and manufacturing to professional services and retail trade. Proponents of gaming often emphasize local economic development as an important reason for authorizing gaming.

Given the increasing pressures of tourism and state and federal efforts to manage public lands, rural communities in particular face declining economic opportunities. Local economic developers often find secondary benefits of Native American gaming, such as investments in water and sewer systems, improvements in local roads, ambulance services, community centers, and health facilities. Because gaming operations are also located near metropolitan areas scattered across the country, gaming has successfully functioned as a regional economic development tool.

4.2. Revenue Generation

Analyzing the generation of gaming and related tax revenue over time reveals a very different detail. While all casino revenue is affected by economic cycles to different degrees, the long-term trend is much more important to the bottom line of both the operators and the states in which they operate. By expanding the number of casino licenses or increasing the number of games available, a state can increase the immediate revenue generated, but doing so would have long-term negative consequences. As time passes, the efficiency of the investment would decrease as the increasing supply would degrade the value of the player’s need to travel. In the case of a large-scale expansion, the multiple increases in the number of games available in domestic markets would eliminate the sector’s previous efficiency, resulting in negative revenue investment.

In this respect, online casinos are more effective in generating gaming tax revenue because entry barriers are quite high and self-restricting regions can exist. The only location decisions that online casino operators make involve costs. Their games are not limited by existing physical space, employees, or any operational constraints, and most countries allow internet gambling without limit.

4.3. Tax Contributions

Taxes are one of the economic benefits that online casinos offer to a state. The tax contribution of online casinos in other states ranges from tens to hundreds of millions of dollars. In some jurisdictions, the amount of taxes collected from online casino game revenues even surpasses the total value of taxes on racing, betting, and lottery gross incomes. Some states impose a higher tax rate on the online casino industry compared to land-based casinos. As long as state legislators provide a fair and reasonable policy in contrast to traditional tax rates, it is possible to believe that high tax revenue can be raised from the online casino market.

However, online casino operators will disagree with the two tax rates because it is the state that studies the taxation model and determines which is better. The perpetual argument about tax competition fades. Market players will not always agree with all the tax policies established in the area of the Internet, including the online casino market. However, to enable the normalization and healthy development of its gambling markets, countries considering re-regulating their online markets will have to listen to market players. It is essential to study the gaming market in more detail and consider the tax rates imposed on the states in jurisdictions with varying levels of taxes. The correct methodology for setting the tax rate is to balance the interests of the various elements.

5. Social Implications of Online Gambling

This section reviews some of the more pertinent social costs of gambling, particularly illegal gambling, which online gambling could exacerbate. The need for money to fuel addiction is also likely to increase the social costs of problem gambling. The likely increase is explained by considering the pathology typical in cases of gambling addiction. The financial needs of such pathological gamblers create spillover social costs in several forms, including increases in both personal and public crime. Online gambling could increase these negative externalities because it makes gambling possible in secluded homes or private locations rather than in public places such as social gambling clubs or casinos. The latter facilitates tax collection and the prevention of underage gambling and premises-based crime. This privacy facilitates money laundering and the financing of terrorism. Even if the money spent on gambling is obtained legally, zoning restrictions on casinos, the distances some people would have to travel to reach a casino, and the negative social stigma thought to be associated with gambling prevent some people from gambling. However, abetting people against gambling who wish to gamble would be socially wasteful, so we can view the privacy sites offer – at least to a point – as removing these costs. Such cost reductions in fact form the basis of the argument that the U.S. ought to legalize and regulate an activity that is practiced by millions because doing so would increase social utility. We now turn to discussing research that has attempted to quantify the social costs associated with various levels of gambling.

5.1. Problem Gambling

One of the main concerns opponents of online casinos have is whether the large number of online casinos will lead to an increase in problem gambling on a national basis. Studies have reported that 0.7 percent to 1.6 percent of the population demonstrated a gambling problem. Works examining the specific issue with the introduction of online casinos appear to show that countries with unregulated online gambling have higher numbers of gambling-related problems. Unfortunately, access to specific data on problem gambling within the United States that could give an indication of how online casinos could impact these numbers on a national basis does not exist.

The first problem with the examination of potential problem gambling and the growth of online casinos in the United States is the gestation and length of time needed to pass this type of legislation through each state. There is little data specifically collected or publicly available to the research public. This is in spite of predictions of a disastrous aftermath of improved access to gambling with a strong increase in compulsive gambling behaviors. Moreover, family breakdowns, bankruptcies, and even suicides related to problems were predicted.

5.2. Community Effects

Some commentators have suggested that neighborhood effects derive from an interconnection between high demand for illegal drugs, loan sharking, robbery, or burglary at the casino and subsequent criminal activity in the community. These events boost the demand for drugs and other illegal activities and establish chains of camaraderie and trust among people engaged in the illegal activities. This is an important issue for anyone who is studying policy and community impacts. In our case, because we assume that crime incidence increases as distance to the casino declines, the studies must carefully control for any such standard market-area and distance variables. While it may seem that dealers and other casino workers are the most likely to be negatively influenced by casino exposure, the evidence is ambiguous and inconsistent. A number of major meetings and conventions occur only inside Atlantic City, and casino workers may earn more or be less affected by temporal variations in demand than people working at more traditional establishments such as fast food and prep food places. It should be noted that many people in Atlantic City are employed in the small but growing high-technology industry. Therefore, the question of who will be the most adversely affected is really an empirical question that merits close scrutiny.

6. Technological Advancements in Online Casinos

The rapid and acceptable nature of the market’s adaptation to online casinos, particularly in comparison to other forms of technological advancement, especially regarding access and telecommunication technologies such as mobile phones, iPads, Wi-Fi, and the latest generation of communication networks, has become a crucial element that has stimulated, empowered, and reinforced this relatively recent phenomenon. The quick and massive appropriation of these technologies has made the physical gathering of money in places such as lottery collection points an artificial dilemma, mainly due to improved software and encryption. However, technological advancements have also been instrumental in the success of other gambling activities, including football betting, horse racing betting, card games, and slot machines, thus appeasing public resistance to the politicization of gambling conservation.

In the United States, the Department of Justice’s decision on the Wire Act underestimated the broad implementation of its opinion. Currently, thanks to the technological potential of these tools, which more often than not extends to the social integration of the marketing strategies themselves, the consideration and consumption conditions of these opportunities are, nevertheless, nurtured with a growing ethical skepticism. The virtualization of gambling activities also brings additional challenges to public authorities, as it enables the narrowing of the physical limits that governments seek to implement more responsibly. It further dilutes the more reasonable ethical and moral control that society should still foresee, even if it has been declining significantly due to the normalization of new communication and financial tools. The fact that, for example, people can now play slot machines and place their bets using electronic equipment while sitting inside a casino or in the comfort of their home, on a work break, or in any other public space, has generated negative reactions among those who opposed this market.

6.1. Mobile Gaming

The pervasion of mobile gaming-driven online casino and sports betting platforms represents a significant challenge for existing conceptual frameworks. These platforms represent a major departure from the traditional approach, seeking to offer a very fast-paced, easily usable interface for wagering. We thus need to be very careful in their study, for if we consider all such behavior as a negative impact, we could drive these markets into the hands of those we seek to regulate against, and away from regulated entities. Ultimately, this might result in fewer harm mitigation tools for existing users and reduce the amount of beneficial contributions given back to the communities.

However, the onus is on the mobile providers to live up to the spirit of the host communities from which they draw significant economic profit, and to recognize that critical stakeholder perception failure in this space can and does have significant financial consequences. Uniform defamation laws should be created or stamped as suitable when gaming pages have to be deleted. Banks should be incentivized to remove internet access for certain financial transactions. Nudges towards suitable customer end signs on returning to the country of origin are key. Third-party algorithms trialing GEO IP tracking should be enabled, providing a risk signature that regulatory authorities can follow. National licenses are a necessity in this space.

6.2. Virtual Reality

Virtual reality offers a technological possibility with potential for providing experiences resembling those normally occurring in real environments. This may have applications across several domains, including virtual gambling. The aim of the current study was, first, to examine the behaviors of players in VR online gambling contexts to provide input for health organizations and, secondly, to explore gender differences as a possible means of explaining known gender differences in offline gambling behaviors. Being male and gambling involvement predicted past gambling problems. To summarize, the present data provide insight into how players’ behaviors in VR gambling might extend beyond the reality of traditional online casino simulation. Nowadays, a new form of online casino, the virtual one, is growing. In this study, we analyzed the games available on virtual reality casino sites and found a significant relationship between the presence of female dealers, attractive waitresses, and the type of game offered. These results underline the importance of considering the broader environment in promoting gambling risk factors prevalence assessment and health, especially in VR. This work has some limitations. The most crucial is that the obtained results refer only to a specific virtual reality casino sample. Due to the massive increase in virtual casino services because of the pandemic, these findings are still significant because they can help demonstrate the issue to global health organizations.

7. Consumer Behavior in Online Gambling

The decision process in gambling is particularly interesting for a number of reasons. The disorders following its compulsive use and the decisions taken when confronted with choices of future, uncertain, and risky outcomes are of interest to many in the psychological and economic literatures. Therefore, there is much to learn from the gambling industry. As with any technological change, betting services were the likely starting point of the online gaming industry, and its positive demand response highlights its potential welfare improvement.

Importantly, gambling companies have expanded their services across goods and services, in virtual and actual destinations, and across consumer populations. The distribution of savvy arbitrageurs, involved in both brick-and-mortar destinations, the capacity of consumers to change these destinations, and the idea that the gambling industry is interested in diverting consumption from non-casino services such as cinema or restaurant services to casinos favor the hypothesis that gambling companies are aware of the possible consumer behavior in their services. However, while disparities in race and income help account for disparities in behavior, the multivariate relationships between economic aspects and decisions that may lead to more or less gambling are virtually not analyzed in the literature.

7.1. Demographics of Online Gamblers

Demographics of online vs. offline gamblers were compared for the 12 states where at least some distribution of personal Internet use data was available. Demographics for online gamblers were available for seven states: three through general population studies that provided prevalence rates and four through specialized surveys of Internet and/or online gamblers. Of the three states with general population surveys, online gamblers were more likely in each to be male, white, 25-50 years of age, have some college education or higher, be employed full-time or self-employed, and earn a household income exceeding $35,000 (blacks excepted for the household income portion). Results suggest that online gambling appeals to a more affluent, white, and male population than the more disadvantaged constituency found among land-based casino visitors.

However, examining findings for the full sample of 12 jurisdictions, the typical Internet gambler in the past year was actually more likely to be female, younger than 30, black, Asian, or Native American, have some college education or be a college graduate, be employed, and earn a household income of between $15,000 and $35,000 each year. It has long been assumed that the Internet primarily appealed to a high-income audience; however, the finding that online gamblers were more likely to be poorer (i.e., relatively young and non-white populations earning $15,000-$35,000 annually) raises implications for future gambling studies and for the development of responsible gambling strategies. At the time the surveys were undertaken, general population studies conducted in four states indicated the demographic profile of offline gamblers (a total of 10,842 respondents) was less concordant with that profile.

7.2. Spending Patterns

Despite not accounting for any socio-economic trend, spending patterns remained exogenous, driving gaming-related income on casino proximity. My findings appear to be consistent with either individual characteristics or with the non-preferences model of consumer behavior. There is a large amount of speculation, conflicting numbers, and very little from a national perspective on the topic, yet some of the most critical conclusions were based on within-state population figures to infer national and regional spending trends.

The k-means clustering found that spending at the casinos ranged from an average of 7% for adventure seekers to 100% by high rollers. The leisure spending rate, which is made up mostly of low rollers, was linked to fabricating primary, secondary, and other jobs at the international resort casinos level. Income, k-means clusters, and spending groups were not linked, and adjusting state and month-related casino clusters may overstate growth through market expansion. The difference is due to changes in both state casino spending patterns and the composition of each spending cluster’s Christmas and New Year’s Eve weekend spending. Therefore, as the number of proposed casinos increases, one could expect nationwide residential exposure to casinos to rise, as we did, even if only international resort casinos exist.

8. Marketing Strategies of Online Casinos

To play any casino games that accept only real money, you’ll need to sign up and log in to a real money online casino. With popular game titles, the greatest promotional activities, and the finest customer service, these websites will gladly accept any personal banking options. It only refers to sites that provide a social gaming platform without any legal risk for American-based bettors when talking about poor capital online casino sites. Moreover, if you come from one of several prohibited areas, we do not advise such subscription membership-based websites. The online casino sector embraces the positive force behind casino advertising strategies. A vital key to the commercialization of online gambling sites has created an everlasting demand for game activities. The online gaming business provides various casino games, with new gameplay titles and competitive marketing tactics continuously associated with the general ratings. Providing unique services and implementing various game types, exciting marketing trends, and promotions are necessary for the evolution of a successful online casino enterprise. Firms in the industry try hard to leave an incomparable impression on clients. The corporate world’s job focuses on fulfilling customer desires and broadening the niche sector of business. Decimalization has created a possibly infinite and general necessity for online gambling stimuli.

8.1. Promotional Offers

Online casinos will provide a number of promotional offers that may include sign-up bonuses to the client for opening an account, inviting friends to open an account, and continuously depositing money into the account. These offers act to entice the client to also deposit more money and to be active on the internet. The presence of simple brick-and-mortar-like ‘free beer’ and ‘casino-induced rush’ incentives that online casinos use in an attempt to entice potential customers to open an account and to continuously visit and gamble is notable. We discuss these types of incentives below.

The ‘free beer’ incentive is basically similar to giving away free beer at a Jai Alai fronton, horse race track, or Jai Alai. Specifically, internet casino firms provided a number of ‘free beer’ incentives to clients whether or not they opened an account with a gambling stake. The intensity and frequency of the incentives are enhanced if the potential customer agrees to provide additional information to the online casinos. The ‘casino-induced rush’ incentive is basically similar in nature to capitalizing on the desires of the drinks, handicapping guides, programs, and bad touting advice or tips that traditional Jai Alai frontons and horse race tracks market to potential clients in an attempt to entice them to deposit their gaming stake with online casinos after they have opened an account with any of these sites and, more importantly, with gambling stakes.

8.2. Affiliate Marketing

It’s been well over a decade that revenue generated through the use of affiliate sites has seen growth. This business model’s popularity can notably be seen throughout the online gambling sector. Though it’s not only in companies such as gambling where you can detect such growth, most businesses assess this topic and wonder if this kind of partnership can be put into play and affect them all similarly. So let me explore if the effects recorded throughout the online gambling community can be unique to this industry or if the assessment results are generalizable to similar business models.

Both the duration of the partnership at hand as well as a set of fixed effects were employed in investigating affiliate site impact. In addition, significance to both firm baskets as well as firm time trends was added to the specifications. The application of these specifications helped in producing analyzable sets of comparisons. The aim of this exercise was to determine if the results produced were specific to the online gambling sector, or if they also applied to many other different business models. Upon making comparisons throughout different industries, it is noted that the online gambling industry isn’t unique, for other industries are equally affected.

9. Comparison with Traditional Casinos

The growth of online casinos, via the development of new online technologies and a specific legal status given to that kind of growth, raises questions about the interaction or correlation of those businesses with a more traditional business model—established land-based casinos. In our analysis, we show that the number of jobs in the surrounding area of a new land-based casino grows when an online casino establishes in New Jersey. We may say that those two kinds of casinos are not correlated. Even though we perform additional tests in this study, this could be explained by the fact that land-based casinos and online casinos target different markets. Our study underlines how regulations are important for the development of online gambling activities, but also how society could be affected by those new possible restrictions by creating jobs in a small neighborhood where a new land-based casino is coming.

9.1. Customer Experience

Numerous tools provide gambling or gaming potential across the country online. In brick-and-mortar situations, there are no corresponding data centers for operators. However, views of portal websites specializing in satisfying different groups, mostly the serious gambler and the less serious one, exist. Some data were available for a multi-terminal situation that is shown below. It is not unreasonable to assume that the use is proportional to the potential customer base.

Promotion is essential for a gambling environment. The extent of advertising and promotion suggests the possible percentage of the increase in descriptive numbers above, as it is in the promotions that entice more participation. Even without data, one can assume that a marketing department would make certain, and then do careful testing, that a promotional offer was advantageous for the site. There are just too many choices available to the Internet gambler for an error to go unnoticed. The synthesis of results unknown to the customer, possible but negative to itself, is at the core of failure being magnified during promotions. The word is spread by sub-population enthusiasts who spend great amounts of time reading and writing on the Internet. Their interest extends deep involvement into such things as comparative site technical game features like cut or pick ’em, blackjack number of decks and rules, number of wheels… In doing so, they gain sophistication in the marketing of offers because they accumulate experience at an exceptional rate due to the volume of promotions going back and forth among promoters.

9.2. Operational Costs

To assess our model, we need some intuition about how the various numbers were arrived at. Given the assumptions of a 0.05 discount rate, a 1.5 return to scale factor for the representative firm, and a 2/3 elasticity, let us use the Southwest economy as a reference. Notice that the elasticity of marginal cost with respect to output is equal to 1 / (1−σ) = 33, and the output elasticity of capital is equal to 1 / (1−δ) k = 33. Assume that the annual return to capital is k = 15 percent; this is halfway between the current returns to equity and debt. If γN = 3 percent, net of profits, we have rN = rK(1−γN) = 0.15(1−0.03) = 0.144. Measured in terms of the numeraire, profit (90 percent in good times, falling to 70 in normal and low times) is a full 5.34 percent more expensive than capital.

If γN increased by 3 percent, the average operating costs, expressed as a percentage of income, in a competitive industry with no profit cushion would rise by 8 percent. The expected transaction costs for all legal gamblers would therefore be 3 percent, with handling costs for online gaming in addition. For the economy as a whole, total net losses from the three types of yearly gambling activity in the domestic market would amount to over $700 billion; profits from the gambling industry would amount to $62 billion. The cost to society of more entrepreneurial and financially strong organized crime might be well of the order of our estimate that current gambling transaction costs, measured net of gambling profits, were nearly $550 billion.

10. Challenges Facing Online Casinos

The greatest threat to the expansion of online casinos is the online payment processors due to being a risk factor in money laundering and fear of violating the anti-gambling laws. Another obstacle in the way of online casinos is the states, notably Florida and California, which are not thoroughly convinced yet of the benefits of bringing online gambling into their states. The two states that can most significantly impact the online gambling movement on the Internet are those with gambling establishments based in Florida and California. The most fearful challenge to state lawmakers is the potential loss of federal funding, as well as the resulting decrease in their personal campaign contributions from the brick-and-mortar establishments. The most pressing fight ahead for online gambling is at the federal level. The last obstacle in the path for online gambling could not only kill the online gambling industry, but also erode the rights preserved for Americans by the Constitution, which are federal lawmakers. Currently, there is enough legislative clout to prevent the pro-gambling supporters from obtaining their goals, but knowing the fighting spirit, that may not be the case for too long.

10.1. Regulatory Challenges

There are growing legal and regulatory concerns surrounding the ownership and control of internet casinos. Many existing casinos, including both land-based casinos and online casinos, are now owned directly or indirectly by foreign conglomerates. Examining publicly traded corporations for which casino gambling is the primary source of revenues, foreign ownership of domestic casino companies now accounts for a majority of the source of ownership for the American casino industry.

There have long been similar legal and regulatory issues associated with foreign ownership of traditional gaming establishments, such as the properties along the Las Vegas Strip – concerns about whether foreign entities or other “undesirable” elements that own those casinos may make “significant” lawful political contributions or may have engaged in financial or other transactions that are not fully disclosed and scrutinized by gambling regulators. However, the advent of the internet has increased both the types of transactions that foreign entities can become involved in and the volume of such transactions. As a result, including policies, positions, and applications for gaming licenses, as well as law enforcement background checks of gaming officials and the imposition of reporting and record-keeping requirements, casino business activities and transactions are themselves subject to extensive surveillance, regulation, and control.

10.2. Cybersecurity Threats

Another concern with online casinos relates to the hosting and provision of these services. Money is a great motivator, and there is a potential for large gains when gambling. Many countries worldwide have followed suit to keep up with the demand for gambling services, and while they do have various consumer protection requirements embedded into law, there is a risk. Ensuring the probity and integrity of gambling within a country in regard to identity and age checks is a real concern. It would not be difficult for a criminal enterprise to hack into an online casino and attempt to skew the outcome in their favor.

There are many providers of online casino platforms, but as with all business decisions, a decision to spend money in certain areas could be seen as a profit detractor. Cybersecurity threats are a serious concern for online casinos. These are the main components of a hosting provider who manages their infrastructure at the enterprise level. When considering the above-mentioned entities, it should be acknowledged that the best security products are already in place. If a criminal enterprise wished to bypass these controls, utilizing the consumer, or even the game provider would be the most likely entry points.

11. Future Trends in Online Gambling

The trend towards policies allowing internet gaming continues with new pending laws from Vermont permitting consumer protection and dedicated funds to improve low-speed connectivity. Other bills before the US Congress popularize the idea of local budget bailouts, which prohibition states can claim. In many cases of online gambling policy being formed due to COVID-19, the provisions under trade treaties have been followed, which argue that all remote horse race betting should be permitted as this is seen as discriminatory against foreign trade interests. The trend continues on the path emanating from two Supreme Court decisions that enabled all state legal casino operators to offer sports wagering services on-site and in-state online delivery. The COVID-19 crisis, causing state governments to seek new infusions of cash with budgetary shortages, is an added incentive. At the same time, some New Jersey politicians are supportive of introducing al fresco games where punters can bet money via dedicated servers at the marina. Noticeably, sports wagering proposals do not specify how and if online gambling revenue would be taxed, unlike proposed laws for global online gambling operators, particularly in rare states without casino gaming. The pandemic is a contributing policy factor in New Jersey and a stimulus for two other states to progress their online gambling policy legislation. State bills without COVID-19 logic have emergent qualities and interdependencies not fitting a logical category of online suggestion, such as peer-to-peer authorized poker. If the governments really earnestly believe that corruption has reached such a catastrophic stage, it would behoove the federal and state governments to actually shut down these corruption siphons they have authorized.

11.1. Emerging Technologies

One of the most captivating questions on the diffusion of casino gambling has been whether new emerging technologies are revolutionizing the established process and location of legal gambling. We find that this technology question, particularly as it relates to the casino gambling industry, has been underestimated. It is heavily tied to understanding the role of conductive features in creating and continuing gambling’s allure. More capable information services, both for gamblers and for casino management, have led to the creation of such key conductive features as those for greater security, lessening the casino atmosphere, better rewards and complimentary services, and the development of electronic gambling-assisted table games. When electronic gambling devices first began to appear in casinos, serious public policy concerns were raised regarding these gambling machines; however, increased familiarity with electronic gaming devices caused their presence and acceptance as central components of most new casinos and substantial renovations at existing casinos.

The casino industry has attracted and successfully accommodated more than ever before the baby boomer generation, and as their spending and demographic influences wane, the market expansion has continued their evolution into the baby boomer money machines. A constant emphasis on the use of new gambling technology and skill-based gaming machines has played a major role in bringing the elders into the casinos. These machines are designed particularly to meet the interests of female gamblers, who prefer devices that are in their own public space and that require relatively limited time and commitment to play, and so can also help the casino to develop a new customer segment with lower gambling involvement levels than the traditional male, higher-betting market segment. In a recent study of the casino customers at electronic machines, the average time in play on electronic gaming machines in Las Vegas casinos was approximately one hour. At these establishments, slot machines and video poker positions, with improved payouts in order to save labor overhead expenses, generated an average daily win of over $400. Because of changes in federal and appeals law, money held in electronic gaming machines in major riverboat gaming environments may not exceed a limit, and would only increase the figure for external cash terminals by a very modest amount. Conventional casino games have maintained their popularity, and scores showing problem gambling levels are higher among those who have wagered in all forms of gambling, including each of the games now available at American casinos.

11.2. Market Growth Projections

Now having identified the general market indexes applicable to the expansion of the casino market, what projections can be made of those indexes for the individual states’ economies? To ascertain growth rates, it is elementary to evaluate rapidly changing data, to stratify data, and to then act on that data. For the most part, economic data are routinely collected and analyzed by a number of government and private sector entities. This data provide the information needed to conduct market analysis. This data relate primarily to employment and wages, production, and income indices and are readily analyzed and projected. Predictions can thus be made which can then be applied to the impact analysis.

There are a few things, however, that could possibly be instructive about sales and price data at this time. Casino industry sales data may not be available on a state-by-state basis. Casino revenue is reported for each casino on a monthly basis, but casino revenue is rarely reported in other states on a casino-by-casino basis. Separating the industry revenues from associated amenities such as convention hosting, as well as generous royalty payments and exclusive franchise fees in connection with it, would be unusually difficult for someone other than the companies involved. Moreover, in many other types of industries, economic impact assessments generally do not distinguish systematically between the effects of a dollar of investment in the industry itself and those same dollars of investment made in peripheral industries that supply goods or services to the industry; rather, all downstream effects are considered under the umbrella of total direct and indirect effects.

12. Case Studies of Successful Online Casinos

Case Study: BetMGM Casino Online casinos have historically been associated with higher consumer protection risks for a variety of reasons, including ensuring that the consumer is of legal gambling age, preventing money laundering, and meeting stringent regulatory requirements. The introduction of online casinos in the United States is an important event in the gambling industry, both for the potential of market growth and especially for providing a clear example of the expectations around the safe and successful implementation of online casino operations. While the experience in the international market offers a glimpse into potential pitfalls, the United States has unique factors that can contribute to a more successful and sustainable implementation. Large institutional investors in the United States are accustomed to the higher corporate governance and transparency standards that the U.S. operates with.

In April 2018, the U.S. Department of Justice issued a formal opinion stating that the 1961 Wire Act applies only to sports betting, opening the door to legal online casinos. Since then, there has been a rapid adoption of gambling regulations. Currently, 23 out of 50 U.S. states have gambling legislation in place, and over 19 U.S. states now have regulated real-money casino websites active. In a market that has only been ‘active’ for a few months, the BetMGM casino provides an interesting perspective on the potential for safe implementation of online casinos. While the online casino operating perspective is only a small part of the BetMGM casino roles, the global nature of the casino operation team, institutional backing, and prior experience suggest that this small piece can potentially inform the implementation of online casinos in the United States in a large variety of ways.

12.1. State-Specific Examples

Online casino gambling takes unique forms in various states, driven by state-specific legal and political dynamics. Below is a brief description of the various forms of online casino gambling that have emerged across states that have implemented such gambling options, categorized by the extent to which they have implemented competitive market structures for privately owned firms to play a role in developing and promoting such options. It has not been the intention to present a complete summary and analysis of state-by-state policies, and the comparisons being made are between states that have authorized casino-style gambling over the Internet.

Some states—most conspicuously, Delaware—have allowed themselves to be a niche player in the market, granting a proprietary firm licenses to offer various kinds of gambling. Legislation is proposed in Delaware that would approve the internet gambling activities that have recently been authorized, granting the Delaware Lottery Commission powers to develop and regulate a full range of casino games. Four states—Delaware, Nevada, New Jersey, and Pennsylvania—have gone beyond this governance model, adopting a competitive model for privately owned and operated firms to participate in the market. They have developed a multi-faceted policy setting a strategy leading to the expansion of state government revenues from gambling and opening channels for an array of firms to make profits in conditions of publicized governmental policies of shared wealth. The following sections will provide more detail on these specific approaches, giving examples from the implementation experience of states that are leaders in the field of internet casino gambling.

12.2. Lessons Learned

In the course of conducting this research, we learned a great deal about estimating impact and about the potential impact of online casinos in society. We gained some knowledge about the policy-relevant questions. First, data access and availability can change over time, making policy estimation and impact analysis harder to do in real time. Second, the magnitude of the estimates affects resource allocation and budget constraints. Third, estimation techniques and statistical significance are likely to affect the normative value of results. With respect to understanding the potential impact of online casinos, we learned a lot more. One thing we learned was that the gaming industry was really a luxury factor that was resilient in times of hardship. Second, we learned that consumers had not only adapted to new technology and gaming forms, but that new technology and gaming forms actually fostered and facilitated demand growth. Third, these luxury goods caused the taxation of those items to become quite appealing to society, if only for a few days at a time. Finally, the market potential for any form of commercial activity in the absence of regulatory controls is vast, especially given consumer demand and preference for new technology.

13. Public Perception of Online Casinos

As we discuss in our law and economics classes, markets are made or broken on the back of public perception. Here in the United States, only four states have managed to independently legalize online casinos located within their boundaries. Legalized online casinos provide a natural experiment to look at public perceptions of legalized gambling. Our analysis sheds some new light on this relationship. Even within these states, licensed gambling is meticulous about participating in industry self-regulation that ensures fair gameplay, honesty, responsible marketing and advertising, and transparency of operations. These benchmarks are highly important and value-creating above and beyond those in international jurisdictions that do not command the same brand equity.

By analyzing the effects of unanticipated political coalitions and legislative infighting between state geographical and gaming site interests, we estimate surprising results. Of the four states that have moved forward and legalized online casino operations, one has already pulled back its approval. This action likely emboldens claims that gambling’s negative externalities justify strong regulation, like our strategy to maintain the Internet Gambling Enforcement Act sheen, now compromised by inappropriate potential abuses which have emerged in our costs and benefits of regulation analysis.

13.1. Surveys and Polls

The most direct means of examining the impact of online casino gambling is to ask individuals whether they have gambled online through a survey of consumers or through a panel survey. Several survey researchers have taken this approach, but the results are far from definitive. There are several reasons to question the findings from this type of research. The primary problem with survey research on the subject is that respondents may be reluctant to share information about illegal activity, in part to avoid revealing information that may be incriminating. This may be mitigated by the anonymous nature of most surveys and the lack of punitive consequences of admitting to gambling.

It is possible to use information generated from poll questions that, while not originally directed at determining gambling behavior, can be used to estimate an individual’s likelihood of being an online gambler. Thus, when 5,000 representative Americans were surveyed in 2000 about their interactions with seven forms of commercial mass entertainment—a small fraction of respondents admitted to engaging in all seven lewd and not so lewd behaviors. The authors make an important contribution to the survey literature by supplementing reports of participation in illegal activities with additional behavioral information, availability of alternatives, and demographic and other characteristics of the participants.

13.2. Media Representation

The majority of newspaper articles were occasionally neutral. Several articles were reserved in regard to gambling’s morality. Articles were encouraging of casino gambling, provided other economic development, tourism, or environmental improvement would typically mitigate impacts. There was also concern about the growth of the casino gambling industry. Articles appeared equally reserved and encouraged by the benefits of casino gambling, despite occasional concerns about the negative social impacts of gambling. As administrators in this study and in previous studies argue, media portrayal reflects the public’s limited understanding of gambling.

The opportunities for further research in this field are many. Clearly, the media’s negative portrayal of gambling could indeed alter that story and provide a full and balanced insight. Also, the articles speak of communities outside of casino gaming centers, which are themselves the exception given that the majority of casinos are located in certain states. It is not readily apparent why these communities are regarded outside the state. Clearly, as gaming centers proliferate throughout the country, the public is in luck. However, if much of a concentrated area is located as certain cities, there might not be the same public outcry. This study clearly demonstrates that gamblers are all about gambling. These articles do not. What they also have to say is clearly the emergence of a new culture that seems to have been ripe for reevaluation, given that no push for consideration was present. Should this pattern continue, there may also exist new duties for administrators to assume in order to educate the public and possibly the media.

14. International Perspectives on Online Gambling

Problem gambling as a complex public health issue is of international concern for countries committed to developing effective policy, services, and research. Thus, more and more jurisdictions around the world are addressing the reality of increased internet availability and use of online gambling. Several countries are implementing prevention and treatment programs and promoting responsible gambling. While gambling is thoroughly regulated in some countries, other countries are just beginning to develop and implement policies, programs, and services. Only a few jurisdictions explicitly identify online gambling and rise to the challenge of using the most flexible and sophisticated platform and conduit for gambling, the internet, to provide gambling services and prevention and treatment programs. The global village is constituted by varying geographical and political regions that address the need to shape responses to gambling issues. Where variation in terms of forms of consumption constitutes differences in the experience of gambling products, it is clear that solutions for treatment and prevention are not one size fits all. The ambition of this volume is to bring together people, policy, and research elements from different countries that are committed to understanding the diversity of gambling experiences and reducing risk associated with gambling access.

14.1. Comparative Analysis

In theory, the legalization of online casino gambling across the United States has the potential to have different effects on different states. Those that currently have brick-and-mortar gambling establishments serving the populations of their employed state would be expected to have a higher level of “cannibalization” of gambling revenues than states without, where a significant portion of their population is comprised of customers who currently patronize offshore or illegal online gambling establishments. The result is that the initial level of revenues is higher for the former than the latter and then grows faster for the former than the latter. Conventional wisdom would suggest that the more liberal the online casino gambling policy, the more likely this industry has to grow and the more likely that legal policy would be implemented. The more conservative the online casino gambling policy, the lower the chance that casinos would be established. In this study, four possible online gambling policy choices are considered, each having liability return levels sufficient to discourage firms from excessively gaming these pay and objective return levels. Almost all of these issues can be resolved before casinos are legalized. Examining the economic impact of an online casino gambling business model across the US: Results indicate that during the first year of implementation of the business model, the total economic impact of establishing an internet online casino firm with a single customer-elicitation website across the US exceeds a not-trivial one hundred eighty million in total output. While the level of Gross Domestic Product increases by about one hundred fourteen million, an alternate measure of economic activity suggests that there is slightly greater than 1.60 in output created for each of sales.

14.2. Best Practices

As we endeavored the good, the bad, and the ugly of online gambling, it became clear that there are a variety of different models out there. Some models should be held up as best practices. Good models ensure the consumer is connected and treated properly and that gameplay is fair and honest. They ensure operators are financially stable, that underage individuals are stopped from gambling online, and that problem gamblers are quickly and safely identified, and are protected with effective problem-solving programs at the ready. In good models, fiscal benefits do not entail associated social costs which raise questions of who truly benefits. The best models choose not to skirt the law, as this simply circumvents the justice system.

The online gambling world clearly needs regulation, and under a regulated environment, laundering of money becomes far less likely than in traditional processing room environments. More importantly, there is large potential funding in the billions of dollars to deal with and support persons with gambling addictions, educate individuals on the dangers of gambling themselves into dire financial straits, as well as educating others on the signs of problem gambling. The fates of our children, the fiscal health of the states, and the dire reality in which some of our fellow citizens are living are all worth the time and effort necessary to arrive at regulation in order to ensure that there is a true legal and ethical safety net.

15. Conclusion

The increasing expansion of online gambling in the United States is developing quickly across the board, from individual casinos bringing in a notable amount of revenue to states struggling to survive with the revenue from gambling. As such, individuals hoping to succeed in this form of entertainment or to benefit economically from it should look at online casinos not as a place with escalating profits but rather one with a place among a state’s revenue stream leading to funding many vital programs. Looking at the numbers, it is clear that online gambling is not a form of entertainment for most people but rather part of a states’ revenue stream. Despite the obvious interest in online gambling, it neither gains the majority of their profits from these casinos, such as is the case of land based casinos and evolved into a highly profitable business providing significant amounts of revenue to states outside of Nevada’s gambling profits. Consequently, this chapter shows, potentially leading to enough interest in the implementation, as well as a deeper diving into the specifics of running online gambling within a state, practically seeing states falling under the statute’s requirements.