New York Times: State Revenue From Online Poker May be Small
The New York Times this weekend published a report questioning whether a state-legalized online poker sector could actually be sustainable especially when one considers the population center for some states and the need for a rather significant player pool to make games more enticing to enter.
Case in point, it has taken many of the long established offshore poker sites years to build a viable enough player pool and this has mostly been accomplished through licensing of so-called skins (franchised online poker rooms all utilizing the same player pool in order to increase volume).
Michael Cooper of the New York Times writes:
As desperate as states are for new revenue, after four years of often painful austerity, there are questions about just how much income they can expect to receive from online gambling. The state of Iowa released a study last month that found that legalizing online poker might net it $3 million to $13 million a year, far less than private companies had estimated. The American Gaming Association, a casino industry trade group, has estimated that legalizing online poker would generate roughly $2 billion a year in new tax revenues, a fraction of what states get from their lotteries.
Supporters of legalizing online poker in California estimate that it would net the state $100 million to $250 million a year — a tidy sum, to be sure, but still only enough to put a small dent in the $9.2 billion budget shortfall California faces.
Responding to the idea that California might not see a substantial benefit from legalized online poker, State Senator Lou Correa, who is sponsoring an online poker bill, does bring up a valid point: “Two hundred and fifty million dollars buys you a lot of teachers.”
California’s population center is close to 38 million and around three quarters that of Italy or France. Both those European nations have proven they can support an online poker sector all their own. In fact, six of the top fifteen most trafficked online poker rooms in the world are inclusive to either Italy or France.
States like Iowa, on the other hand, may have a little more trouble with their barely 3 million population base.
Cooper points out the disadvantage these less populous states will have unless they elect to enter into a multi-state platform similar to that of the lottery system’s PowerBall:
One reason that the yields are not expected to be huge is that many states are considering legalizing only online poker, which they argue involves more skill and less chance than other forms of gambling. Since poker pits players against one another — unlike, say, roulette or slot machines, in which gamblers play against casinos that have the odds stacked in their favor — online poker sites make their money by taking a small percentage, or “rake,” from each pot. States could make money by taxing the rake, and by selling licenses to run the sites.
The key to success may be adding games of chance like Blackjack. This is something Washington, D.C. is currently considering. Sports betting would probably prove lucrative as well, however, the position by the US Justice Department that wagering on sports violates The Wire Act makes this less of a likelihood of happening any time soon.
- Chris Costigan, Gambling911.com Publisher
