Ontario Online Gambling Underperforms, New Jersey Peaks, and Brexit Worries Operators

Ontario’s state-run gambling monopoly has run into trouble for having previously overestimated its online gambling revenue forecasts. The Ontario Lottery and Gaming Corporation said earlier this week that its programme of reforms would increase annual revenues by C$889 million by the year 2021-2022. This is 30% lower than the C$1.26 billion that the gaming corporation had initially projected.

The OLG had contributed C$2.2 billion to the provincial coffers in 2015-16 and was the largest non-tax contributor to the government. However, this amount was C$500 million short of its 2012 estimate when it launched its modernization programme.

Late last year, OLD cancelled its plan to privatize its C$3.8 billion lottery operations. It says that lottery profits can be increased once their management is modernized but it did not go into details of how the additional C$209 million profits can be achieved. The province’s auditor general was skeptical about what he called the province’s optimistic growth projections.

Ontario’s auditor general also criticized the OLG’s estimates for its PlayOLG gambling site that was launched in early 2015. The gambling site fell far short of its projected profits of C$100 million by turning in only C$15 million in profits. The online business’ mobile app is on its way and while this will indeed boost profits, the auditor general doesn’t think that PlayOLG will touch its latest profit estimate of C$25 million.

OLG generated online revenues of C$49 million in 2016 and this is expected to grow to C$53 million the next year and C$70 million the following year, a growth projection of 32% over three years. However, the gambling industry has slowed down by September last year and it now seems likely that these optimistic figures will not be achieved.
The auditor general pointed out that the OLG doesn’t seem to have correctly estimated the reach that the gray market has.

New Jersey Online Gambling Peaks in December

New Jersey’s Division of Gaming Enforcement released figures that showed the licensed operators earned revenues amounting to $18.4 million from their online operations this December. This was 31% higher than the previous year and also exceeded by $1 million the revenue record set in July.

Casino games showed a 35% increase whereas poker went up by 6%. The Golden Nugget’s online site was a major contributor to this performance, sending previous market leader Borgata to the second place. Caesars Interactive New Jersey saw an 18% surge in its business this December. This was the first time since 2006 that the casino revenues showed a year-on-year increase, albeit a small one.

Will Brexit Affect the UK Gambling Market?

The United Kingdom has a well-established online gambling industry and some of the largest companies in the business are based here. Britons spent more than £3.6 billion on online gambling in 2015, making this one of the best markets in the industry. However, the industry is jittery about the Brexit effect and will be looking for ways to deal with it. For starters, it seems that the UK gambling market will close itself to companies operating from outside. Companies that are not licensed by the UKGC will most likely not be able to reach this market.

Gibraltar will most likely be affected the most by Brexit. Some of the biggest UK-based operators have moved here and 10% of the territory’s workforce is employed by the gaming industry. However, since it has opted to remain in the EU, it is unlikely that Britons will be permitted to gamble at Gibraltar-licensed sites. In other words, companies that wish to operate here will have to get the necessary licenses and comply with the tougher tax laws.

Jeff Sessions Unlikely to Change US Online Gambling Laws

The online gambling industry has been very unsure about the Trump administration’s policies concerning it. However, Jeff Session, the President’s pick to be Attorney General has indicated during his confirmation hearing that he might oppose the prevailing official stance regarding online gambling. Sessions was also opposed to the Department of Justice’s attempts to interpret the Wire Act when it initially took place. However, when asked for his opinion about the issue he admitted that he hadn’t studied the matter carefully enough to provide his view on it at the present.

It is quite likely that Sessions was providing a message to the land-based casino industry in the United States, and particularly to Las Vegas mogul Sheldon Adelson that there were going to be major changes happening soon. Adelson, a major donor to the Republican Party, has lobbied vigorously to prevent the legalisation of online gambling because it has the potential to eat into the land based casinos’ revenues. One does have to wonder why Sessions decided to weigh in on online gambling when there are so many other pressing problems to address at this juncture.

Even so, it would be best if Sessions sticks to the official position of keeping online gambling legal and letting the individual states decide which way they want to do with it. In other words, he’ll have to ignore pressure from Adelson and his camp. There are many reasons why this will be the best policy in the long run.

To start with, the Wire Act was enacted in order to prevent betting on sports and not gambling as a whole. A reading of the act’s wordings will make it clear that it deals with the use of communication facilities to place money bets on sporting events. As a matter of fact, its purpose was to keep organized crime away from sporting events by catching people when they took bets over the phone. There is nothing in it that talks about poker or casino games. Furthermore, the 5th Circuit Court of Appeals ruling of November 2002 categorically stated that the act was concerned with sports betting only. It is interesting to note that the Attorney General at the time was the staunch anti-gambling John Ashcroft.

The Unlawful Internet Gambling Enforcement Act (UIGEA) was passed in 2006 purportedly to overcome the shortcomings of the Wire Act. While the law did not specify what kind of betting was illegal, it made it illegal for banks to process monetary transfers for certain restricted transactions even though it did not specify what these transactions were. At the same time, UIGEA states that payments for legal betting cannot be banned.

The industry is of the opinion that Obama’s Attorney General Eric Holder took a step in the right direction by affirming the 2002 ruling that left it up to individual states to offer online gambling as long as it was restricted to the state’s residents only. Sessions will actually find it very difficult to explain how the Wire Act can be used for anything other than sports gambling.

There is another issue at stake here and it involves the 10th amendment. Individual states have the right to enact laws and the federal government has only limited powers as given to it by the Constitution. States have a right to conduct gambling operations as they see fit, and online gambling is just an extension of it and is only different in that it uses the internet as a medium.

The most interesting factor of all is that President Donald Trump firmly supports the 10th amendment and wants to keep policies free from powerful people such Sheldon Adelson. Needless to say, the industry will adopt a watch and wait policy.