Technology

Online gambling in New Jersey signals US expansion

Las Vegas strip
Image caption Despite giving the world Las Vegas, the US has resisted online gambling

Online gambling has been launched in the state of New Jersey, a sign that the US may slowly be opening up to the multibillion-dollar industry.

Unlike in many countries, online gambling remains prohibited by the US government because of legislation passed in 1961.

Individual states may allow online gambling if it does not cross borders.

A test is under way in New Jersey to make sure only people within the state can play.

Until now, only two of the country's 50 states, Nevada and Delaware, allowed online gambling and heavy restrictions are in place.

Image caption Online gambling companies want federal laws first set in 1961 to be relaxed

Geolocation technology, which checks where a person is logging on, is typically used to lock out gamblers from further afield.

In New Jersey, people taking part in the test have suggested the restrictions have been overbearing.

One user told the Associated Press news agency that he drove 30 miles further into the state to log on, but was still getting locked out because the system failed to recognise he was within New Jersey.

Despite these troubles, gambling in the state is expected to launch in full next week, with 14 websites on offer.

State-to-state

Although the US gave the world the glitz of Las Vegas and the bright lights of Atlantic City, the federal government has for the most part rejected the online gambling industry.

The 1961 Wire Act means a state can decide to allow online gambling, but only if sites and players are based within its borders.

The gambling industry is pressing for the federal government to greatly relax its stance, bringing it into line with other markets, such as the UK.

"A federal law, should it come in the future, would allow for a customer in California to play poker against a citizen in New Jersey," said Mark Jordan, a director at accountancy firm PricewaterhouseCoopers, who has researched the online gaming market extensively.

"At the moment you cannot do that. That's prohibited. What a lot of the operators are hoping is that as the states prove this can be done, and that it's safe, that the federal laws will change to allow state-to-state gaming."

Massive potential

The UK's online gambling industry is far less restricted, Mr Jordan told the BBC, and is envied by those looking to expand into the US.

"The UK gaming industry is one of the market leaders in the world," he said. "We are very well serviced here."

Image caption Online gambling is already big business in the UK because of more relaxed regulations

The value of the UK industry is put at around the $2bn (£1.2bn) mark. The US offers staggering possibilities in comparison.

"The estimates for New Jersey alone run somewhere between $250m and $1.2bn," Mr Jordan said.

"That market has got a huge broad range - it all depends on customer uptake and the quality of the product."

Illegal sites

Despite the illegality, some websites operating offshore have been able to offer gambling to people in the US.

Technology-savvy users have got around location restrictions by using proxy servers, which can fabricate a user's location.

But difficulties in receiving winnings have meant online gambling with offshore sites is too troublesome for all but a few determined users.

Furthermore, major innovations to create more sophisticated and life-like gaming environments are mostly the preserve of the major companies that do business in the UK.

Follow Dave Lee on Twitter @DaveLeeBBC

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