Morgan Stanley Slashes US iGaming Market Value

April 2nd, 2015 | by Brian Corlisse
Morgan Stanley has cut its US igaming market value projection from $5 billion by 2020 to $2.7 billion.

US igaming’s market value cut. (Image:

Despite a relatively buoyant market in New Jersey and lots of potential for growth across the country as a whole in the next five years, Morgan Stanley has cut its financial projection for the US iGaming market by just under 50 percent.

In a report published on Tuesday, Morgan Stanley, one of the largest financial service corporations in the world, stated that its initial market valuation of $5 billion by 2020 was too ambitious and, given the current rate of growth, a more realistic figure is $2.7 billion.

Restricted Growth and Poor Return

Aside from taking into account the legal issues currently impeding the progress of online poker and casino games in the US, part of Morgan Stanley’s reason for reducing its estimate is the current performance on New Jersey, Delaware and Nevada.

The only three US states currently regulated to offer real money Internet gambling have only pulled in $135 million compared to the $678 million the financial experts initially projected.

We continue to believe that there is a material runway for growth, but results have been disappointing,” read the company’s report.

In addition to problems with current revenue streams, Morgan Stanley also believes that continued issues with geolocation, payment processing and effective advertising have slowed the growth of the three markets.

Moreover, continual resistance from lawmakers and political figures, such as Rep. Jason Chaffetz (R-Utah), has made it unclear how many states will follow the current pacemakers.

Legislative processes continue to be slow as lawmakers remain unconvinced that online gaming is currently worth the hassle for limited tax revenue,” stated Morgan Stanley.

Some Positives from Report

However, despite dropping its financial projection, the report does contain some encouraging points. Although Morgan Stanley believes there will be no further regulation in 2015, it does predict the entry of up to 15 states, including New York, California, Pennsylvania and Illinois, by 2020.

Describing the process as a trickledown scenario, the company stated that a move by larger states, particularly California, would cause smaller states to follow suit.

In addition to an increased network of regulated states, the issue of the Restoration of America’s Wire Act (RAWA) is one that doesn’t pose a significant threat to the industry, according to Morgan Stanley. Despite warning that the bill is gaining momentum and anything could happen on the legislative front, the company feels a federal ban is unlikely.

We believe a federal ban of online gaming is unlikely given legislators’ split views. However, a recent hearing in a House Judiciary subcommittee on (U.S. Rep.) Jason Chaffetz’s proposal for a ban suggests it could be gaining momentum. While the bill may advance out of committee, we believe it faces long odds of passing, especially without carve-outs for online lotteries and existing online gaming states,” wrote the company.

Although some commentators, including head of content at Pageant Gaming Media, Alun Bowden, have suggested that a market value of $2.7 billion by 2020 is still too high, the outlook for US iGaming is still positive.

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