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Report Foresees US Online Gambling

By: Fabian Rictor, Wednesday April 13th 2011
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The situation of legalized and regulated online gambling in the United States is poised on a knife edge. It is difficult to make predictions. However, the reputed independent business and credit ratings organization, Fitch Ratings, has put its money on the line and released a new report that states that the legalization of online gambling in the United States is "increasingly likely".

There are several factors that have been considered by Fitch Ratings in making this prediction. Many states have been considering intrastate online gaming proposals and some of them have taken active steps. New federal proposals are being discussed and a bill has been tabled in the House. Companies involved in land casino and online gambling have started forming partnerships to be prepared for online gambling. Above all, the state and federal budgets remain strained and it is becoming increasingly difficult to ignore potential tax revenues from online gambling.

Michael Paladino, the gambling industry analyst for Fitch, pointed out that there are several issues that will have to be ironed out before legalization of online gambling can become a reality. Of these two are most vexing. The first issue is whether legalized online gambling will cover only poker or it will include services like online casino wagering and sports betting. The second big issue is whether the legislation should be intrastate or should be federal. A sub question in the case of intrastate proposals is whether online gambling should be offered only through state owned lotteries as in some Canadian provinces or should it be in a competitive but regulated environment.

An interesting feature in the Fitch report is that it discusses those sectors of the gambling industry that are likely to be hit by legalized and regulated online gambling. Racetrack slot parlors and state lotteries are high on this list. The Boston Herald, which carried a detailed article on the Fitch report, spoke to Massachusetts State Treasurer Steve Grossman, who also chairs the Massachusetts Lottery Commission.
Grossman said that his lottery is the most successful in the United States. It generates $4.5 billion in revenue a year and sends about $900 million a year to cities and towns as local aid. He added that online gambling is a major competitive threat to the lottery. If online gambling is to be legalized Grossman said that Massachusetts would like to put together a Massachusetts-based or a regional online gaming product that would protect the lottery revenues.

The Fitch report estimates that US online gambling revenues, currently going to offshore companies, are in the region of $5 billion a year. These would increase sharply if online gambling is legalized in America. Still it would be far short of the revenues from all forms of land based gambling.

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