The iGaming market has, at its fingertips, perhaps one of the largest and most exciting opportunities for growth since its inception. After banning any form of gambling aside from online horse race betting for years, a recent change in US online gambling laws has allowed states to start legalizing online gambling in the US and Canada.
Goldman Sachs believes that by 2033, online gambling in the US will be worth a huge $39 billion. To put that into context, in 2021 the market was valued around $900 million.
But it’s not just the US and Canada that are poised to take on Europe for iGaming dominance. Dubbed the ‘land of promise for the iGaming industry’, Latin America is set to be worth somewhere between $2-7 billion. Brazil, as the biggest territory, will play a big role in achieving that number after its Chamber of Deputies voted to legalize gambling - online and land-based - in February 2022.
While the opportunity on the other side of the pond may be huge, it’s not exactly straight-forward. While legislation may now exist, understanding how it differs by state and country is a bit of a minefield. So, with this blog, we want to help shine some light on the opportunities within different jurisdictions and how to put yourself in the best position to take advantage of those opportunities.
While the US may be home to arguably the most famous gambling destination in the world - Las Vegas - the rest of the country has been slow to offer up any alternatives to attending one of the land-based casinos ‘Sin City’ is known for. But that is changing. Of its 42 states, 25 (at the time of writing) have now fully legalized sports betting and seven (Connecticut, Delaware, Michigan, Nevada, New Jersey, Pennsylvania and West Virginia) have legalized online casinos, including online poker.
For a country that loves its sports, it seems inevitable that now the door into iGaming has been pushed ajar by a handful of states, it won’t be long until many more follow suit.
But it’s not just the joy of the game that is driving greater acceptance of iGaming in the US and Canada. A recent study has forecasted the potential tax revenues that each state could make if they legalize online gaming. And the numbers are not to be sniffed at. “If online casino gambling was legalized in all 42 states that currently allow land-based casinos or mobile sports betting, the potential size of the U.S. online casino gambling market could reach $30 billion. The study estimated this could translate to a combined $6.35 billion in annual state tax revenue, assuming a 20 percent tax rate in states.”
The incentive is certainly there. Growth could be hampered, however, by complicated US online gambling laws. Surprisingly, Nevada has some of the most draconian iGaming US online gambling laws, with frustratingly difficult registration requirements. Montana has just the one app for online sports betting, as does Washington DC where the app is operated by the DC Lottery.
New Jersey was the first jurisdiction to legalize online gambling in the US and is one of the least restrictive in the US. It has an agreement with Delaware and Nevada that allows players across all three states to compete against each other. Pennsylvania has also made significant progress since 2019 when it had only two online options - today, there are 18. Michigan has taken inspiration from both jurisdictions and since legalizing online gambling in 2021, is now one of the most established online presences.
Who’s next? We suggest keeping an eye on Massachusetts, New Hampshire, New York, Rhode Island, Illinois, Indiana and Maryland.
The key thing to know is that, while US online gambling laws may be strict, they are not so strict that they are unmanageable.
Latin America is made up of 26 territories with a population of just over 600 million.
As the largest market, Brazil’s approach to online gambling will have a big impact on the success of the region. While gambling has taken place in the country for some time - albeit illegally - the hope of Bill 442/91 is that it will “prevent and protect the players” and “allow the state to collect more taxes through the exploitation of games and betting, and will ensure greater resources for the implementation and development of social public policies of the states and municipalities, reinforcing our fiscal federalism,” said Federal Deputy Felipe Carreras, who drafted the bill.
The proliferation of smartphones in Brazil is also a key driver for iGaming. Did you know that Brazilians spend more time on smartphones than the rest of the world? This simple fact of accessibility on its own spells success for iGaming in Brazil.
Mexico is another big contender for online gambling in Latin America. The region’s second largest smartphone market, it has a population of 127 million and already has a relatively established gambling market, with some forms of online gambling legalized since 2004.
Similarly to the US, however, the answer to the question “is online gambling legal in Mexico?” is vague. The original Gambling Law was too general and attempts were made in 2004 to make it more specific. Rules were changed in 2012 and 2013 to provide more guidance on issues around the use of skill-based gaming machines and electronic games but further legislation is expected. In the meantime, Mexicans can play at licensed foreign online gambling sites, which follow Mexican registrations and laws. Foreign operators can’t currently acquire a license or offer services to Mexican players.
Colombia is perhaps the most established iGaming market in Latin America with an eGaming Act in place since 2016. To help prop up the sector after the impact of the pandemic, it expanded its iGaming industry by legalizing online bingo, instant games and digital scratch cards in 2021. The sector will be further supported by the arrival of Betfair, which received a five-year Colombian iGaming license that same year. The regulator hopes that Betfair will bring in around $6.5 million.
While the future is rosy, Latin America still lags behind Europe from a regulatory perspective. Generally, any legislation that is in place is chaotic, unclear and is riddled with loopholes. It is also fairly underdeveloped from an e-commerce perspective, although the pandemic has done a lot to change that. Despite this, Latin America has a very young population who are tech savvy with access to smartphones, so if it sorts out the issues with regulations to ensure they align with modern gambling trends, the region could be well on its way to becoming an important iGaming hub.
As mentioned previously, while the opportunities in the US, Canada and Latin America may be big, expanding into them won’t be simple. So, here are some things to consider.
Lack of consistency and cohesion across territories and states means you need to do your homework around what the specific regulations are for the area that you want to expand into. Colombia, for example, requires operators to pay a license fee of approximately $200,000 a year and 15% tax on gross revenues from gambling. iGaming players in Oregon can only bet through its Scoreboard app and Ohio only allows online sportsbooks that are connected to a brick-and-mortar gambling company.
On the flip side, regulations in Ontario have been developed to best serve players in today’s modern iGaming market. “With its competitive and ethical strategy for promoting online gambling in Ontario, the authorities are clearly paying close attention to the economic potential”.
As new states and territories are adding or amending legislation regularly, it’s important to ensure you keep one eye on what’s going on across the US, Canada and Latin America as things are changing quickly.
The local market, above and beyond regulations. What’s the potential market size? What might impact growth? What will enable growth? The Latin American economy, for example, “faces significant challenges, including tightening global financial conditions, lower global growth, persistent inflation, and increasing social tensions amid growing food and energy insecurity”, according to The World Economic Forum. Don’t let this put you off but just be conscious of perhaps the level of investment you choose to make and where.
Who’s already there. Some iGaming entities have been quick off the mark to establish themselves in growing markets. This could be an issue both from a competition perspective and on a practical level with the ability to obtain “skins” - the number of unique brands that are allowed under each individual online gambling license. Michigan only allows one “skin” for mobile betting, for example. In jurisdictions where “skins” are limited, they may have already been snatched up. It may be worth considering other jurisdictions that are less populated or perhaps even wait to invest in a state that is just about to join the party.
Getting your paperwork in order. Depending on what kind of company you are, you will need the relevant license. Ontario has an open license model and Brazil doesn’t limit the number of licenses but they are only valid for five years. Michigan only opened its doors to online gambling in 2021 so there is a backlog of applications as operators rushed to apply for licenses. The trick is to get your paperwork and documentation together before applying for a license to avoid potentially being further delayed because certain information is missing.
What IT infrastructure is required. Wherever you are in the world, IT infrastructure within iGaming has to be high-performance in order to provide players with the best experience possible. Latency is crucial so the physical location of your data center has to be a consideration when looking at a move across the pond. Whether you want to put that infrastructure in place yourself or work with a hosting provider, it needs to be resilient, scalable and comply with local regulations.
For example, multi-tenant cloud is allowed in New Jersey, Pennsylvania, Colorado and Nevada only. Single-tenant cloud is allowed in most other states if the vendor has the proper licenses. Also, in the US, redundant or secondary servers have to be located in-state so you might want to consider multi-vendor infrastructure.
It’s important to note that with the global chip shortage, getting components for any infrastructure company is difficult, especially in North America which is suffering from very long delivery times. If you are looking to partner with a hosting provider, find out how the delays might affect their ability to support you in-region, if at all.
Online gambling makes up half of the entertainment industry’s value worldwide. Consider how that number could continue to grow as iGaming in America, Canada and Latin America explodes.
It’s predicted that a further one billion gamers will sign up to online gambling worldwide by 2025, with a significant number coming from Latin America.
Thinking about expanding into one or more of these regions? Now is the time to do it. If you need help figuring out how to go about that expansion from an infrastructure perspective, don’t hesitate to get in touch with one of our iGaming experts.
