Thursday, March 28, 2013

Nevada and New Jersey Gamble With Online Gambling

Online gambling has been illegal in the United States since Congress barred it in 2006.  But opinions and attitudes are changing.  Last month the state of New Jersey, home to many well known Atlantic City casinos including Bally’s, Borgata, and Caesar’s, officially legalized online gambling in the state.  On Thursday, March 21 2013, 888 Holdings Plc (EIHDF.PK) announced plans to launch online gaming in the state of Nevada after receiving the first U.S. license to ever be awarded to an internet gambling firm.

As reported by Reuters, 888 could launch their initial offering as early as May.  888 has reportedly already finalized a deal with Treasure Island in Las Vegas to launch online poker under its own brand in the state.  Deals have also been reached with Caesars’ and WMS to create an internet spin-off of Caesars’ World Series of Poker and provide an internet presence for WMS’ slot machine operations.

While initial revenue from the Nevada operations is not likely to be substantial, and reportedly not expected to impact 888’s bottom line until at least 2015, the company sees this as an important first step towards a broader U.S. gaming market.

"This is an historic moment for 888. This is the first time a company uniquely providing online gaming has been licensed by any U.S. jurisdiction," Chief Executive Brian Mattingley said.

Many internet gaming companies like 888 and Bwin, the world’s largest internet gambling company, are well positioned to take advantage of the emerging U.S. market, with the infrastructure and experience already in place from years of operating in Europe.

Online gaming has a distinct advantage over traditional casinos.  People will no longer have to travel, sometimes great distances, in order to gamble.  Instead they will be able to enjoy doing so from the comfort of their own home, or anywhere else with an internet connection.

What does this mean to holders of casino and gaming stocks?  In the short-term we don’t expect any impact, as the market is still in its infancy.  In the long-term online gaming is sure to steal some of the market share from existing traditional casinos as more legislation is passed and online gaming becomes available to more people.  But don’t fold on your gaming stocks just yet.  Traditional casinos and gaming establishments are well aware of the potential to lose market share and are already looking at ways to adapt.  While Treasure Island, Caesar’s and WMS have already established partnerships with 888, we expect many other gaming firms to follow suit and it’s highly likely that many of them will establish their own online presence as an extension of their traditional businesses.  Bottom line, for investors in gaming stocks, this can only be a positive development and you might want to look into expanding your holdings to include some online gaming companies if you don’t already.

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