iGaming in the UK and the US – What are the Key Differences?

Posted by Harry Kane on Thursday, June 17, 2021

For years now, the North American iGaming market has been something of a sleeping giant on the global landscape.

This was largely thanks to the impact of so-called ‘moral’ objections to the practice and a stringent regulatory outlook, which for a long time sought to prohibit online gambling at federal level and restricted the market from achieving its long-term potential.

However, the landscape is gradually shifting, as the US market continues to open and grow in terms of its cumulative value. But what’s the current state of the marketplace, and how does it compare with the UK?

Appraising the True State of iGaming in the US

According to the most recent figures, the iGaming market is poised for a sustained period of expansion between now and 2025, during which time it’s expected to record a compound annual growth rate (CAGR) of 14.78%.

This shows just how far the market has progressed since 2006, when the controversial Unlawful Internet Gambling Enforcement Act (UIGEA) was passed into law as a way of enforcing pre-existing legislation that prohibited all forms of online gambling.

This was implemented to build on the pre-existing Federal Wire Act of 1961, which was the primary legal stature regarding iGaming in the US. This fundamentally prohibited the electronic transmission of information for sports betting across state borders, although due to its historic nature, it failed to make provision for Internet gambling on a game of chance.

What’s interesting is that the hastily written and passed UIGEA legislation also failed to clarify what constituted lawful casino gaming online, meaning that the bill could only realistically be applied directly to sports betting practices as defined by the Wire Act.

So, while the infrastructure of the legislation was robust enough to curtail the once prosperous online poker niche stateside, it has been largely ineffective at preventing individual states from legalising iGaming activity nationwide.

To this end, New Jersey, Delaware and the iconic Nevada were the first states to fully legalise online casino gambling once the noughties had drawn to a close, with the former officially offering slots and casino gameplay to local customer in 2013.

Since then, both Pennsylvania and West Virginia have followed suit (in 2017 and 2019 respectively), while Michigan also joined the party by fully legalising online casinos, poker gameplay and sports betting in the formative months of 2021.

New Jersey remains the single most lucrative iGaming market stateside, thanks largely to the infrastructure and regulatory framework that has been built over the course of the last eight years.

In February 2021 alone, for example, the Golden Nugget/Betfair brand (which is currently the largest iGaming operator in New Jersey) recorded monthly online casino revenue of nearly $28 million. The Borgata brand recorded a similar monthly GGY of $25 million, while Resorts AC generated an estimated $19 million during the same period.

The burgeoning US market also enjoyed a further boost in May 2018, when the Supreme Court took the decisive step of repealing the controversial PAPSA (Professional and Amateur Sports Protection Act of 1992) legislation. This had previously prohibited sports betting at federal level, but the cessation of this law enabled states and local authorities to legalise this practice if they so desired.

As of the beginning of April 2021, a total of 22 US state authorities had fully legalised sports betting, including all the aforementioned jurisdictions alongside New York, Arkansas, Rhode Island and Iowa (amongst others).

Not only this, but an entire raft of states is considering following suit as 2021 continues to gather momentum, with Washington, Maryland and South Dakota leading this charge. This has created a new and lucrative string to the iGaming bow in North America, while creating a solid foundation from which the industry can finally begin to realise its full potential.

This trend is reflected by New Jersey’s sports betting GGY, which fell just short in December of becoming the first US state to accept $1 billion in sports bets in a single month. It also extended a sequence of record-breaking months while recording $6 billion in wagers for the year, with this trend expected to continue indefinitely in the near-term.

Interestingly, the growth in the US has come at a time when the UK market is faltering somewhat, in the wake of rising taxes, government legislation and an increase in stringent regulatory measures across the length and breadth of the marketplace.

However, the UK market remains a shining beacon of growth and opportunity for iGaming operators, with the region’s online gross gaming yield (GGY) worth £5.7 billion at the end of March 2020.

Interestingly, this represented annual growth of 8.1%, so there’s no doubt that the UK marketplace remains relatively robust as it continues to embark on an upward trajectory as 2021 unfolds.

Of course, this could change in the wake of the upcoming licensing review and potential rollout of stringent regulatory proposals such as a £2 cap on virtual slots betting. More specifically, we could see operator turnover depreciate markedly in the near-term, while further increases in the Remote Gaming Duty levy could also slash profits and devalue the iGaming marketplace.

Similarly, it’s hard to escape the sheer size and potential scope of the US market, with New Jersey alone delivering $6 billion in sports wagers through 2020. This sum is already larger than the total online GGY in the UK as a whole, meaning that we could well see the North American market supersede its more established counterpart at some point in the future.

This, coupled with a projected CAGR of 14.78% in the US market, highlight the immense promise that characterises iGaming across the Atlantic, while also creating a viable target for internationally focused brands in the UK and Europe.

What are the Key Differences Between the US and UK Markets?

OK, we hear you ask, but what are the tangible and practical differences that separate the US market from its more mature UK counterpart?

We’ll touch on some of the key areas of difference below, while asking how these factors are likely to evolve over time.

1. Legislation and Enforcement – State Authority vs. A Central Point of Control

Let’s start with the basics; as there remain significant and fundamental differences in how iGaming is regulated in the US and the UK.

These differences extend beyond the simple status of each market too, with the UK space considerably more mature and progressive in terms of its outlook.

Most importantly, the US market is not governed by a single or central point of control, despite the various legislative attempts to ban sports betting and online gambling across state borders at a federal level.

Instead, each of the 50 individual state authorities has the autonomy to regulate online gambling on behalf of its subjects, with the decision to strike down the 1992 PAPSA legislation and the 2011 interpretation of the Wire Act by the Department of Justic (DoJ) having helped to afford local jurisdictions even greater power.

We’ve already touched on the impact of the former, while the latter reversed the opinion of the 2006 UIGEA legislation and confirmed that the Wire Act did not apply to online gambling activity.

Of course, the DoJ has subsequently reversed its decision and suggested that the Wire Act does indeed cover virtual sports betting and casino gambling that crosses state borders, but this remains the subject of a sustained and nationwide legal offer.

With further federal intervention particularly unlikely under a Joe Biden administration (particularly given his rather pressing range of more important priorities), individual states are certainly capitalising on a relatively progressive regulatory outlook and looking to legalise various iGaming verticals as quickly as possible.

This means two crucial things for both individual states and the iGaming market as a whole. Firstly, states nationwide will be able to monetise online activity to create a lucrative source of tax revenue, while creating a regulatory framework that actively safeguards potentially vulnerable players.

Secondly, it’s ensuring that the US market continues to grow incrementally over time, helping North America to deliver on its incredible potential and trigger a seismic shift in the global online gambling space.

Of course, the presence of multiple regulatory bodies can be slightly problematic in the marketplace, especially from the perspective of interstate gambling as outlined (and subsequently contested) in the 1960 Wire Act.

After all, it’s increasingly hard for the DoJ to offer an interpretation that completely legalised in the US, with each individual state adopting its own regulatory approach across multiple verticals.

This is why some people and organisations are keen on the aforementioned UIGEA interpretation of the Wire Act, as it simplifies the regulatory climate from the perspective of both players and operators. However, it also makes it hard to states to enter into lucrative liquidity pacts with one another, especially in relation to shared customer data and technologies.

Conversely, the UK boasts a single regulatory body, and one that’s responsible for every region and jurisdiction nationwide.

These negate the variations and complexities associated with different legislative proposals, making it easier to safeguard players and creating a more open marketplace where smaller and independent operators have a better chance of achieving sustainable success.

Similarly, the UKGC oversees gambling activity both on and offline, creating a more holistic regulatory approach that’s synonymous with accessibility, better comprehension and greater compatibility between licensing, marketing and arbitration guidelines.

2. Taxation, Levies and Treasury Contributions

Clearly, the UK has a much simpler approach when it comes to market regulation, while this trend is also prevalent in the case of taxation and levies payable by iGaming brands.

Once again, however, US laws are much more varied and complex in the case of gambling revenues and taxation, making it harder for brands entering the North American market to comply with existing legislative measures.

More specifically, US operators (included those based domestically and overseas) are required to pay both federal and state taxes, depending on the various jurisdictions in which they operate. While the federal tax rate is fixed at 24% according to current legislation, the state levy will vary considerably, and this can be particularly challenging for firms that operate in multiple jurisdictions.

State tax levies are usually presented in scales too, with the rate payable by operators likely to increase in line with revenues banked during the financial year.

Not only this, but iGaming enthusiasts in the US are also required to pay both state and federal taxes on any net gambling winnings of $600 or more.

In this instance, the rate of tax payable also increases incrementally depending on the precise amount won, and this creates a significant challenge for operators when defining their margins and looking to successfully market specific verticals to new players.

Interestingly, players in the UK aren’t obligated to pay taxes on earnings, no matter how much they scoop when wagering online. However, operators based in Britain do have to pay an annual rate of corporation tax (currently fixed at 19% on these shores), with this applied to all profits generated both from inside the UK and abroad where applicable.

The UK is also home to a growing number of operators that are based overseas, typically in favourable tax havens such as Malta and the Spanish enclave Ceuta. In this case, firms will be compelled to pay corporation tax on all profits generated from its UK activities, so clear and concise accounting is pivotal here.

Additionally, all brands operating in the UK marketplace will have to pay a fixed rate of Remote Gaming Duty, which is applied to all gross revenues reported during each financial year.

Previously, this was capped at 15%, but in April 2019 the Treasury enforced a 6% hike as a way of offsetting projected revenue losses from the rollout of the controversial FOBT cap in the offline gambling industry.

3. Accessibility of Each Market to Overseas Players

Last, but not least, we must recognise that the UK and the US adopt very different approaches when catering to the needs of foreign players.

For example, the US market dictates that no foreign resident is permitted to register at any online gambling hub in North America. Similarly, the same restrictions apply to US-based players who want to register and wager in another jurisdiction, with customers currently prohibited from placing bets across state borders.

As we’ve already touched on, this currently applies to both sports betting and online casino gameplay, so the US remains far less accessible to non-local or overseas players.

Conversely, UK sportsbooks and iGaming operators are allowed to accept residents from other countries, so long as the nation in question has not prohibited online gambling in their own jurisdictions.

As a result of this, established and internationally renowned UK brands such as William Hill accept players from the EU, Australia, Canada and a raft of other nations, while also allowing wagers to be placed in a diverse range of international currencies.

This allows UK firms to significantly boost their revenues over the course of the financial year, with this advantage not currently available to brands that are based stateside.