The future of gaming: The digital generation – Management

As we approach the end of the year, industry experts C.J. Fisher and Harry Jackson of Fox Rothschild provide insights into the trends poised to shape the U.S. gaming market in 2022.

By C.J. Fisher and Harry Jackson, Fox Rothschild

Historically, gambling required physically visiting a casino, withdrawing cash from an ATM, and placing bets at slot machines or table games. This traditional model has been fundamentally disrupted, particularly in the wake of the COVID-19 pandemic, which has accelerated the digital transformation across various sectors, including gaming.

As our lives increasingly gravitate toward digital solutions—from grocery shopping to banking—the gaming industry is also embracing this shift. Notably, the rise of mobile sports betting has captured immense public attention. However, this evolution extends beyond sports betting, encompassing areas such as internet gaming, cashless wagering, esports betting, and the integration of blockchain and cryptocurrency technologies.

Mobile Sports Betting

In 2018, the Supreme Court’s landmark ruling overturned the Professional and Amateur Sports Protection Act (PASPA), allowing states the autonomy to legalize and regulate sports betting. Many states have eagerly embraced this opportunity, especially with a focus on mobile sports betting. Data reveals that a significant majority of sports wagers are now placed via mobile devices rather than traditional brick-and-mortar sportsbooks.

For instance, New Jersey achieved a staggering $1.3 billion in sports betting handle in October 2021, with over 90% of this amount wagered online, resulting in around $10 million in tax revenue for the state. This trend highlights the expectations of modern consumers for instant access to services via mobile devices. States that neglect to legalize mobile sports betting forfeit substantial tax revenue while inadvertently promoting unregulated wagering options, which undermines the intent behind the legalization efforts aimed at ensuring consumer protection and responsible gaming.

Internet Gaming

While the expansion of sports betting has been vigorous, the growth of internet gaming, or iGaming, remains comparatively moderate. iGaming includes online casino games such as blackjack, roulette, poker, and slots. Currently, only a handful of states like New Jersey, Pennsylvania, and Michigan permit full-scale iGaming, leaving many jurisdictions that have legalized mobile sports betting lacking in this area.

Potential reasons for this discrepancy include higher public recognition and acceptance of sports betting as opposed to iGaming. However, as revenue potential becomes increasingly evident, more states are likely to embrace comprehensive iGaming regulations. For example, New Jersey generated approximately $19 million in tax revenue from iGaming in October 2021, showcasing the significant financial benefits of this sector. During the pandemic, iGaming proved resilient, with New Jersey’s iGaming win rising significantly from $384 million in the pre-pandemic year to $779 million during the peak months of 2020.

Cashless Solutions

The emergence of digital payment platforms such as PayPal, Venmo, and Apple Pay has transformed how we manage finances. This shift was expedited by the COVID-19 pandemic, resulting in an increased demand for cashless transactions in the gaming industry as well. Casinos are now adopting various cashless technologies, allowing patrons to obtain chips using debit cards or wireless wallets, and enabling direct disbursement of winnings to bank accounts.

This trend towards seamless, frictionless payment options is expected to continue, elevating both the gaming experience and operational efficiency.

Esports Betting

As more jurisdictions move to legalize and regulate sports betting, esports betting is also on the rise. States including Arizona, Wyoming, and Nebraska have recently defined esports as permissible wagers under their sports betting legislation. Ohio has also included esports wagering in its legal framework.

As jurisdictions finalize their sports betting regulations, we may see further integration of esports betting, providing lucrative opportunities for investment from esports enterprises. For instance, New Jersey has made amendments to clarify the types of esports competitions eligible for wagering, providing clarity and encouraging market participation.

NFTs, Blockchain, and Cryptocurrency

While Non-Fungible Tokens (NFTs) may appear to be a side note in the gaming sector, their integration into the industry seems inevitable. NFTs, which can represent unique digital assets such as artworks or virtual items, are secured by blockchain technology, preventing duplication and unauthorized transactions. This technology is already finding traction in fields ranging from music to gaming.

Professional sports leagues are forming partnerships with gaming operators to create digital collectibles featuring athletes’ likenesses, which can be bought, sold, and traded. Moreover, states like Wyoming have adopted legislation allowing sports wagering accounts to be funded with cryptocurrencies, reinforcing the trend towards digital asset incorporation in gaming. However, challenges such as technical hurdles and regulatory concerns surrounding responsible gambling and compliance will need to be addressed for widespread adoption.

Future Outlook for 2022 and Beyond

The ongoing digital transformation within the gaming industry is evident through the rapid growth of mobile sports betting, coupled with the expanding landscapes of iGaming, cashless solutions, esports betting, and blockchain technologies. As more consumers engage with gaming via their mobile devices, the industry is set to continue evolving in 2022 and beyond.

C.J. Fisher and Harry Jackson are partners in the Gaming Practice Group at Fox Rothschild LLP, specializing in all facets of gaming law, including regulatory and compliance matters, and they are leaders in the expansion of legalized and regulated iGaming and sports betting across the United States.