Thoughts on the Future of Online Poker in the U.S.
Short intro, but
Got assigned a paper for my "State and Local Politics" class on " Internet Gaming and how it will affect Government". I thought "what a perfect topic!" and proceeded to get to work, in which I mean wait until 5 hrs before the deadline (lol).
I took out all of the government parts of the paper, didn't want to bore everyone on here with that I included all the poker parts, which is pretty much just a speculation/prediction on the U.S. poker market after legislation. Feel free to agree/disagree, but not really looking for your suggestions, as there is already a thread for that here somewhere.
Edit: Was going to use a PDF file, but couldn't get the convertor to work I apologize for the wall of text, but had to C & P from word to CC.
Internet Gaming, specifically Internet Poker, has the potential to make millions, if not billions over the next 10 years. This could potentially be in the range of 30-40 billion dollars of revenue for the country. Before I make an estimation on the actual potential revenue, lets first assume a few things about Internet Gaming.
For the sake of discussion, let’s assume a bill gets passed within the next year, 2012 and so, we will be examining the year 2013 as a model. Another assumption to make is that poker is federally regulated, meaning the sites would be interstate, not intra-state. This is a major point of discussion currently, but the obvious consensus is that an “interstate” bill is more beneficial to players than a “intra-state” bill, with the reasoning being Interstate sites would have a much larger player pool than an Intrastate pool would. Personally, I believe this will happen, as Congress can interpret “internet gaming” very broadly under the Commerce Clause, hence giving Congress the ability to regulate the industry. This isn’t a “free or regulated market debate”, but given the unique situation under which poker has existed, regulation is a 100% must. Finally, let’s assume that only withdraws, or whenever a player takes money off a site, will be taxed. The exact amount is obviously unknown at the moment, but my speculation is it will be somewhere between 5-10% per withdraw. Again, that’s pure speculation and there are others who know far more than me about the tax situation regarding poker who could clarify that number.
Okay, now that we have the ground rules set up, let’s take a look at other forms of gambling for comparison. For discussion, I will use the state of Pennsylvania
. Pennsylvania is a middle to large state, with a wide variety of ethnicities, races and professions. It has five large cities and the area surrounding these cities is mostly suburban and rural, making it an ideal area for model. First, let’s take a look at the Pennsylvania State Lottery, a major form of gambling. Also, revenue and profit are not the same thing, so in layman terms, revenue is gross amount taken in and profit is after expenses. It’s more complex than this, but for our purposes, this definition should suffice. Last year, the lottery showed a revenue totaling 3.072 billion dollars. The total 3.072 billion actually shows a decrease in revenue of .53% from last year, so for our purposes, let’s round that number to an even 3 billion dollars in lottery revenue last year within the state of Pennsylvania. Now, the speculation begins. If/when poker becomes legislated, it would assumedly become a staple of mainstream television. Imagine, where the nightly news is brought to you by “IPoker INC” or your local bus station has, “Wynn’s Internet Gaming INC” painted on the bench your sitting on. This is just scratching the surface of what poker could become if properly enhanced through advertisement.
So, let’s say that the routine lottery players within the state decide they want to try out this new, exciting version of gambling on the internet. This percentage of lottery players who deposit into new poker sites
could be anywhere from 1% of total lottery players to 100%, but in my opinion, this number will be around 10%. (Not getting into the why/how, but there is some thought behind this number.) 10% of 3 billion is 300 million dollars. Putting 300 million dollars into the player pool would have astronomical positive outcomes for the industry of poker. For comparison, Full Tilt Poker
, considered to be the second largest previously operating site in the U.S. who is currently facing legal action after their indictment by the Department of Justice, has approximately 300 million dollars in limbo currently, money which sums up all player deposits. 300 million is equal to 10% of the state of Pennsylvania’s lottery revenue last year. So, summing it up, if 10% of lottery players in the state of Pennsylvania decided to deposit their money onto a poker site instead of into the state system, the amount of $ in play could equal that of Full Tilt Poker. This is only for the State of Pennsylvania though, imagine if all 50 states opted in to internet gaming, the ceiling is unbelievably high.
Secondly, there are 10 operating casino’s in the state of Pennsylvania. While casino executives use to fear internet gambling, as they believed it would ditract players, they now are realizing that it would only broaden the poker industry, benefiting both internet and land based gambling. The exact amount of revenue or players who would begin playing online poker who currently play live only is impossible to calculate. As many players play both “live” and online, it would be impossible to segregate the groups as to get an accurate assessment, but in the overall picture of internet gambling, live players would make up a considerable amount of the player pool.
Thirdly, the amount of recreational players would be the main base of the online player pool. Again, this number would be very hard to pinpoint, as it really is not known whether the average non-poker playing American would take a liking to the game. With a highly paid research team, I would assume a rough estimate could be obtained, but without this, the number is unknown. As speculation though, I think this number could be large, in the millions of players. The United States currently has a population around 300 million, with 10-20 million citizens previously playing online poker in some form or another. Imagine if even 10% of those non-players decided to try their luck with internet gaming, that would more than double the market.
In summary, this model is only of the state of Pennsylvania, meaning the other 49 states would all contribute greatly to the player pool. If my bare estimates are correct, a U.S. regulated site would far exceed any site we have ever seen within internet gaming. Again, this is hinging on a few facts, those being:
1. A bill goes through congress legislating poker.
2. The site is federally regulated, all 50 states opt-in and the sites are “interstate”, meaning the states share player pools.
3. The sites themselves, which would again be run by licensed operators, advertise and market themselves correctly.
Some other factors are:
1. Would these sites be open to international players?
a. This question is not easily answered, as this will be solved within Congress
2. How would the taxes on this money work?
a. Either deposits or withdraws would most likely be taxed, again another problem yet to be solved
3. The sites would be open to all players, over the age of 18 or 21.
a. The argument can be made for 18 years of age to play, but it would most likely be 21, per reasons previously discussed. The only players who would possibly not be allowed to play would be those who live in states that do not opt in, those found to be cheating or tampering with the system, those with a “felony” on their record or members of the penitentiary system.