PayPal Returns to US Online Gaming Arena with Low-Key Debut in New Jersey

The emergence of PayPal within the American online gaming sector has caused quite a stir. Numerous specialists, including David Cook, are keen to examine its possible effects.

The early silence following the proclamation was unexpected to some. This is, after all, a significant event, arguably the most substantial since New Jersey permitted internet gaming in 2013.

The story surfaced when industry expert Steve Ruddock released a piece on Online Poker Report (OPR), outlining PayPal’s action. The report disclosed that WSOP.com, a Caesars Interactive Entertainment (CIE) entity operating in Nevada, was processing deposits through PayPal. Subsequently, the payment facilitator has become accessible on several US-oriented online gaming sites.

This comeback to the US market – a first since the Unlawful Internet Gambling Enforcement Act (UIGEA) of 2006 forced PayPal out – has ignited considerable attention. Industry observers are eager to comprehend the motivations behind this strategic maneuver and its potential consequences.

Ruddock, in his assessment, emphasizes several persuasive points. He cites a 2013 Forbes article indicating that PayPal boasts more than 50 million users in the US alone. This vast user pool represents a substantial prospective market for online gaming providers.

Moreover, PayPal’s inclusion is anticipated to bolster consumer trust. The confidence linked with the brand can alleviate worries about safety and authenticity, especially among those reluctant to engage with online gaming platforms.

Lastly, providing PayPal as a payment choice could give regulated operators a considerable advantage over their unregulated rivals. This action could steer more players towards the regulated market, cultivating a more secure and transparent online gaming atmosphere.

Ruddocks fascination with this tale stems from the sheer magnitude of PayPal. Established in 1998, it was acquired by eBay in 2002 for a staggering $1.5 billion. Their separation last year dealt a significant blow to eBay’s market capitalization. PayPal boasts a global user base exceeding 173 million, and its most recent fiscal year (2014) witnessed a GAAP operating income of $12.7 billion.

CIE’s collaboration with PayPal ultimately extended to encompass all of its New Jersey-based online brands, including CaesarsCasino.com, HarrahsCasino.com, and WSOP.com. PayPal is also prominently displayed as an approved funding option on the US platforms of 888’s New Jersey online casino and poker websites. 888 collaborates with CIE for its New Jersey ventures.

One might compare PayPal to a student who saunters into the lecture hall tardy, attempting to slip into the rear unnoticed. Although PayPal doesn’t appear to be broadcasting the news, at least not openly, the launch is probably met with a sense of ease considering the protracted timeline. OPR initially disclosed PayPal’s intentions to commence processing transactions for regulated internet gambling with a limited number of providers back in August 2014.

Enthusiasm surrounded PayPal’s venture into the New Jersey internet gaming sector, although we doubt it will be as groundbreaking as some anticipate. Neither CIE nor PayPal have heavily publicized it, causing some to take notice. Sector expert Steve Ruddock believes this is a rather noteworthy event, highlighting that PayPal has historically been against any wagering dealings.

It’s crucial to recall that PayPal isn’t the first major contender in this arena. MasterCard and Visa are already embraced at all 13 authorized internet gaming platforms in New Jersey. These corporations are generating substantial profits, with MasterCard achieving $9.47 billion in 2014 and Visa reporting $9.06 billion for the year concluding in September 2015.

CIE guarantees us that providing PayPal was not concealed, even if they didn’t broadly announce it. Seemingly, this is customary procedure for them when they incorporate a new payment method.

A number of individuals didn’t echo Steve Ladaucer’s excitement about PayPal’s foray into the internet gambling sector. Bill Rini, the top dog at the World Series of Poker’s (WSOP) digital poker platform, presented a contrasting view to Ladaucer’s positive perspective. “We hold Steve in high regard, we’re always reading his insights, we’re huge admirers,” Rini declared, “However, he might be getting a tad ahead of the curve on this one. We’re thrilled about PayPal joining the fray, it’s undoubtedly creating ripples in the payment processing realm, but we don’t envision it being the revolutionary force Steve seems to believe it is.”

Although PayPal chose not to provide a direct statement when reached by Gambling Insider, they did highlight a Q&A document crafted for media inquiries concerning the announcement. This document indicated that two online horse racing entities, TwinSpires and Derby Jackpot, were also participants in the trial program. Notably, PayPal remained silent on any upcoming strategies for real-money online gambling, electing not to divulge any additional information.

The weight of PayPal’s market entrance might not be as transformative as originally thought, especially with PokerStars, the dominant force in online poker, casting a large shadow. Amaya, PokerStars’ parent organization, asserts that PokerStars held a commanding 68% portion of the online poker market in the initial six months of 2015. With Amaya’s New Jersey debut projected in the first half of that year, the playing field was set for a major shift. Twelve months later, the story could change significantly, making it challenging to separate and evaluate PayPal’s influence in a vacuum.

Without considering PokerStars, PayPal’s entrance into the United States internet gambling sector is a significant development. New Jersey, at the forefront of the three states where real-money online wagering is permitted, generated an impressive $122.9 million in internet gaming income in 2014. Although we lack monthly comparisons for 2015, by the end of October, the revenue had already reached $121.6 million. Since this regulated market commenced in 2013, payment processing has been widely criticized as the most substantial obstacle to expansion.

Ruddock accurately identifies the problem: “The cumbersome payment procedure has been a major hindrance for US online gaming providers. Initially, when New Jersey was just starting out, credit card acceptance rates were dreadful – around 10%. It has improved over time, now reaching 60-70%. This enhancement is partially attributed to options like PayNearMe, Neteller, and now PayPal, but credit cards remain dominant. Unfortunately for the industry, they are also the least dependable.”

Rini attempts to minimize the concern, stating: “Certainly, payment issues haven’t been beneficial, that’s undeniable. However, let’s not exaggerate – it’s not as if they are solely responsible for hindering rapid growth.”

As you may have seen in this publication, we interviewed David Rebuck, the director of New Jersey’s gaming regulation, about a range of subjects, including transaction handling. Rebuck, who doesn’t always agree with CIE, emphasized the importance of PayPal’s entrance into the sector, deeming it a “major victory for us.” He elaborated that existing financial rules in the US, predating even the existence of internet gambling in New Jersey, fostered a belief that banks and financial bodies were reluctant to handle online gaming transactions, even when lawful. PayPal’s participation, he contends, “significantly helped to rectify that.”

While perspectives may vary on the comprehensive influence of PayPal’s reemergence into the US online gaming market, it’s evident that this action signifies another stride towards a forward-thinking industry. As the US continues to adjust to a regulated internet gambling environment, the consequences of this development will be intriguing to monitor.

This piece was initially featured in the January/February issue of Gambling Insider magazine.