Q&A: John Pappas As Online Gaming Celebrates 10 Years In U.S.

This year marks the 10th anniversary of the legalization of online gaming in the U.S. after Delaware launched in 2013, followed by New Jersey and Nevada in the same year.

American online gaming also brought about the return of online poker as well. Along with these states, others offering internet gambling (not including sports betting) include Michigan, Pennsylvania, West Virginia, and Connecticut.

Card Player recently spoke with John Pappas, an iGaming consultant and former executive director of the Poker Players Alliance, about where online poker is headed and the game’s importance to the industry.

CP: What are some key moments in the last 10 years that stand out for you in the U.S. legalized online gaming industry?

JP: Obviously, a momentous moment was the launch itself in New Jersey. I think there were a lot of people that weren’t convinced that it can be done in a proper fashion and New Jersey proved those skeptics wrong.

Companies like GeoComply and the operators did everything right from a confidence standpoint to ensure a regulated market right from the start – and one that wasn’t going to violate federal law. Everyone’s eyes were on New Jersey to see, ‘Are these guys going to slip up and will that stop online gaming in its tracks?’

But then over the years, there were a number of important milestones, such as when New Jersey started showing its first month-over-month revenue increases – state tax revenue increases as well as operator revenue increases. It hasn’t really declined since then. And going back to 2016-17 where the market really started to take hold, I think that a lot had to do with the improved ability of payment processors to accept funds and the comfort level of banks to deal with Internet gaming operators.

The third item I would highlight is [the overturning of] PASPA that helped supercharge the industry nationwide, and certainly has added to New Jersey’s growth over the last several years.

And then the most recent important thing to notice is about how iGaming, not just in New Jersey but in Pennsylvania and other jurisdictions, was a lifeline for states and for the gaming industry during the early days of the COVID pandemic where casinos were either shuttered entirely, or had very limited capacity requirements, and was really cutting into the resources that states rely on for gaming revenue. iGaming was truly the kind of lifeboat that helped keep those revenues coming into the state and keep the industry afloat.

CP: How have attitudes changed among states and legislators in the last decade?

JP: They’re softening. It’s hard for people to be able to poke holes in it from a consumer protection standpoint. I think [the industry] has done a very good job there.

I think one of the biggest challenges that we face is overcoming concerns over things such as cannibalization or the impact on other gaming-related verticals. The evidence isn’t there to suggest that it does that, but that’s still a common theme that we hear from other stakeholders and even from lawmakers.

CP: What are your thoughts on where online poker is headed, and why it’s kind of lagged behind sports betting?

JP: I think it’s not because there isn’t a lack of consumer interest. It’s not as profitable for an operator as sports betting or obviously an online casino game, given its peer-to-peer, skill-based nature. The profit margins are very small. So, there isn’t a lot of motivation for operators to invest solely in poker, particularly when it has to be done on a state-by-state basis with limited liquidity.

The ironic thing is, if not for poker and for poker players, I don’t know if the law gets done in New Jersey. Because that was really the driving constituent voice in New Jersey when they passed the law, and even in Pennsylvania and Michigan when they also passed the law. It was the voice of poker players reaching out to lawmakers and saying, ‘We need to have the ability to play this game in a safe and regulated fashion.’

CP: Where do you see the industry in another 10 years?

JP: I think we’re going to see considerable growth over the next 10 years. If you told me to make a prediction over the next two years, I would say there would only be maybe one or two states that legalize online gaming. But over the next 10 years, I think we’re going to be more than double the number of states we are today.

More and more Americans are turning to the internet for all forms of entertainment, and gaming is no different. That’s going to continue to grow and the fact that we have a huge, unregulated online gaming market today can no longer be ignored. States are going to say, ‘Why are we letting a site based in Costa Rica reap all the benefit of our residents, but our brick-and-mortar casino that that we’ve already licensed here in the state has to sit on the sidelines?’

So, I do think that states are going to quickly recognize that this is an industry that can’t be ignored from a revenue perspective, but also from a consumer protection perspective.

*Photo – John Pappas