United States

Is Social Gaming Cutting Into Legal US Online Gaming?

A recent report by Adam Krejcik at Eilers Research shows that US social gaming is currently smashing the regulated market. According to Krejcik, social gaming, which sees players buy fake chips that can’t be cashed out, earned $350 million in the first quarter of 2014. Regulated US gaming, which consists of Delaware, New Jersey and Nevada, earned $35 million in 1Q.

As you can see, social gaming earned 10 times more than regulated sites. This is an alarming statistic when you consider that players aren’t even competing for real money at social casinos and poker sites. So it’s worth asking whether or not social gaming is likely to hamper real money sites.

These Markets Serve Two Different Crowds

Those who play at social casinos do so purely for the fun of it. In many cases, a player will pay $20 or so to get a massive number of fake chips. This large pile of chips allows them to extend their play while trying different games. Social gaming sites further appeal to casual players by putting an emphasis on colorful graphics and entertaining avatars. In many cases, these people aren’t even concerned with strategy when playing.

The majority of this crowd is unlikely to cross over to real money gaming when it becomes available to them. One big reason why is because their money won’t extend as far – especially if they don’t take the time to learn strategy for games like blackjack and poker. The real money environment can also be intimidating to novice players who are just looking for a little entertainment. Long story short, we don’t see social gaming holding regulated sites back.

Why is US Real Money Gaming Lagging Behind Social Sites?

If social gaming doesn’t really draw from the same market as regulated casinos and poker rooms, then what is holding the latter back? One huge factor is availability, which is very limited at the moment. Together, the New Jersey, Nevada and Delaware markets only serve 12.5 million people. With 314 million people living in the United States, that’s only 4% of the American population. Contrast this to social gaming, which can serve the entire US.

When/if states like California (38m people) and Illinois (12.9m) open up legal gaming markets, we should see a big spike in US real money play. Moreover, interstate pacts like the one between Nevada and Delaware will help the market grow – especially with regard to online poker.

One more aspect that will greatly increase the popularity of the regulated market is when credit card rejection rates are lowered. Well over half of those who’ve tried to deposit at New jersey gaming sites with a credit card have been rejected. So lowering this rate in NJ and future states is a must before real money gaming overtakes the social market.

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