The New York Times this week made a splash with this front-page piece documenting how Silicon Valley tech companies have set their sights on online gambling. The story put something of an exclamation point on a series of recent developments highlighting the recent push to enable users to make wagers on their phones or PCs: New Jersey Governor Chris Christie recently signed legislation allowing gamblers to use phones and tablets to bet on horse races while at the racetrack, Delaware is soliciting proposals from vendors to create a centralized online gambling system by Sept. 30, and the Oregon startup DerbyJackpot this month launched an iOS app for users looking to place bets on American horse races through their devices.
Much of this new activity was sparked by the Justice Department’s 2011 reversal of its formerly Draconian embrace of the Wire Act of 1961, which prohibits wagering over telecom networks that cross state or national borders. While mobile gambling in some overseas markets has gained some traction in markets such as the U.K. and some major Asian markets, the Wire Act has pretty much relegated U.S. activity to things like letting users to gamble remotely while already in New Jersey or Nevada casinos. That’s very limiting considering Americans are estimated to bet somewhere between $4 billion and $6 billion a year.
A promising – but uncertain — new business model for apps
Predictably, mobile app developers who are salivating over the idea of introducing wagering into their wares. Many developers continue to struggle with concepts like freemiums and in-app purchases, and wagering is a great fit for all types of apps, from casual social games to real-time multiplayer offerings to (duh) casino games. That optimism certainly appears to be well-founded: A real-money casino app that Big Fish studios to the U.K market is generating an average revenue per user of more than $20 a day, according to the Times piece, up from “30 or 40 cents” per day in virtual currency.
Despite the lessened importance of the Wire Act, though, an enormous amount of uncertainty still exists regarding mobile gambling in the U.S. The Justice Department’s decision dealt specifically with lottery tickets, but states may now be able to allow wagering on all sorts of things other than sporting events. So each state must deal with a wide variety of factors as it considers legislation allowing new forms of gambling: Should it be limited to state-sponsored lotteries, or expanded to include casino-style games and casual games that leverage social networks? Must gamblers be in approved casinos, or can they be anywhere within the state’s borders? And how will that gambling activity be tracked, monitored and enforced?
Getting ready while the wrinkles are ironed out
Meanwhile, federal policy makers will face opposition from much of the traditional casino industry looking to protect its turf and as well as those who object on moral grounds. And Congress’s move in December to table online gambling underscored how difficult it will be for federal lawmakers to tackle the issue when so many other important problems remain unresolved.
It certainly appears to be a matter of time before both states and Congress begin to loosen the restraints on mobile and online gaming. The challenge for app developers and others, then, is to get into position to take advantage once those shackles begin to come off. App creators should focus on developing great apps that can build an audience, and experiment with integrating gambling in the U.K. and other markets where mobile gambling is already gaining steam.