This past year proved, once again, that change is the only constant in the ever-evolving world of legal gaming. And, 2020 promises to bring even more disruption to the industry worldwide. Here are five things to watch for in the coming year.
• Sports betting will continue to explode. With the demise of the Professional and Amateur Sports Protection Act in 2018, courtesy of the Supreme Court, 13 new states now have legal sports betting, while seven others have adopted enabling legislation, and 20 more are considering various proposals. Most observers predict that at least half of U.S. jurisdictions will have some form of legal sports betting by the end of this year. Indian tribes are also considering their options for adding sports wagering to their gaming operations. Professional sports leagues are moving beyond their historical opposition to broader legalization and are focused on partnering with operators to take advantage of the growing consumer demand. Indeed, the NFL’s approval of the Raiders’ move to Las Vegas marks a major reversal in the way pro leagues have viewed Nevada and the gaming industry. The floodgates are now open, and between consumer demand and potential tax revenue, politicians and gaming companies alike are mobilizing to take advantage of this opportunity.
• Gaming’s next frontier: Japan. In 2018, Japanese legislators approved casino gambling, allowing for the development of hotel-casinos throughout the country and creating a vast new market for the industry. The legislation contemplates the approval of “integrated resorts” in three locations, with Osaka being the first jurisdiction to issue a request for proposals. Major U.S. gaming companies have made significant investments in efforts to win licenses to build and operate facilities. This will create new competition for popular gambling destinations in East Asia, including Macau, Hong Kong and Singapore. Japan’s new gaming regulatory body, the Casino Administration Committee, held its first meeting Jan. 10 and is tasked with specifying the regulations that will control the licensing process, as well as the types of games and customer service issues. The process is sure to be slow and steady in the wake of the first scandal concerning this new legalization effort — a Japanese lawmaker was arrested in December on suspicion of taking bribes from a Chinese gambling operator. The first Japanese integrated resorts are likely to open in the mid-2020s.
• Cryptocurrencies will become more popular. Last year was very good for the cryptocurrency gambling industry. With online gaming platforms increasingly accepting cryptocurrencies such as bitcoin, many players are choosing this option because of the security and anonymity it provides. As online casinos become more popular, especially with millennials, so does the use of these alternative currencies, and this development is likely to bring the legalization and regulation of cryptocurrency in the broader gaming industry. And with more countries attempting to regulate crypto, its legitimacy is increasing. Although legal and regulatory issues persist, the proliferation of blockchain technology will likely lead to an increase in crypto’s place in the online gaming world in 2020 and beyond.
• The Wire Act’s next chapter. In late 2018, the Department of Justice announced a surprising change of position concerning its interpretation of the federal Wire Act. Historically, since the law’s adoption in the early 1960s, Justice had always interpreted it as applying to sports betting only. In other words, the Wire Act prohibited the transmission of sports betting information across state lines, but did not apply to other types of gambling. Indeed, this decades-long reading of the law was formalized in a published Office of Legal Counsel opinion in 2011. Given this history, the office’s 2018 opinion, which suggested that the Wire Act applied more broadly to all forms of interstate gambling, sent shock waves through the industry. Justice allowed for a period of nonenforcement while operators could contemplate how the new opinion might apply to their business models, but the New Hampshire lottery sued, seeking to enjoin Justice from enforcing the Wire Act in accordance with this new interpretation. A federal judge agreed with New Hampshire’s argument, effectively ruling that the new opinion was invalid, and that decision is now on appeal. If resurrected on appeal, Justice’s new view of the Wire Act’s application poses potential risks for many new online gaming business models. This legal battle could give the Supreme Court another opportunity to weigh in on an issue of tremendous importance to the gaming industry.
• Online gaming will continue to grow. Led by the ubiquity of smartphones, the popularity of mobile gaming saw tremendous growth around the world last year, with some statistics showing that online gambling is the fastest-growing segment of the gambling industry and is gaining market share on land-based casinos. Some of the largest land-based operators have long understood this trend and have made significant investments in their own online operations. However, legal and regulatory challenges remain, at least domestically, as only a handful of states have a legal framework for online betting. As more jurisdictions are likely to embrace this business model, obstacles to continued growth will be reduced, with estimates of the global online market value exceeding $90 billion by 2025. This would be roughly double what the estimated market value is today. Advances in technology, including artificial intelligence, have made online gaming both highly sophisticated and incredibly personal — exactly what the growing number of millennial gamblers seem to want.
Gregory A. Brower is a shareholder at Brownstein Hyatt Farber Schreck.