## PayPals Reemergence in US Gaming: A Potential Turning Point?
The world of US internet gambling is abuzz with PayPal’s return, and the effects are more substantial than many predicted. Although the initial reaction appeared subdued, this action is perhaps the most momentous event in the US regulated online gaming market since New Jersey’s inception in 2013.
The announcement, first revealed by sector authority Steve Ruddock on Online Poker Report, caught many off guard. What began with Caesars Interactive Entertainment’s WSOP.com in Nevada rapidly expanded, and now a multitude of US internet gaming platforms are adopting PayPal.
However, why is this resurgence such a significant occurrence after PayPal’s departure in 2003?
Primarily, PayPal possesses a vast user network in the US. With over 50 million subscribers as per Forbes, their comeback instantly unlocks access to a massive group of prospective gamblers.
Moreover, PayPal’s participation brings an air of authenticity and confidence. For players apprehensive about digital transactions, a name like PayPal reassures them regarding customer safeguards and security.
Lastly, this maneuver provides regulated operators a considerable advantage over their unregulated rivals. Presenting PayPal as a payment choice bolsters their standing and attracts players seeking a secure and trustworthy gaming atmosphere.
Essentially, Ruddock’s interest in this narrative originates from the sheer magnitude and importance of PayPal. Established in 1998, PayPal was purchased by eBay in 2002 for a hefty $1.5 billion. The two entities parted ways last year, a separation that significantly affected eBay’s market capitalization. PayPal boasts a customer base surpassing 173 million globally, and their fiscal statements for 2014 (the latest complete year accessible at the time of publication) revealed a GAAP operating profit of $12.7 billion.
From those initial days, CIE has integrated PayPal into the framework of its New Jersey internet brands, encompassing major players like CaesarsCasino.com, HarrahsCasino.com, and WSOP.com. PayPal is prominently displayed as a funding option on the US iterations of 888’s New Jersey online casino and poker platforms, which are also facilitated by PayPal. It’s noteworthy that 888 and CIE have a collaborative alliance in New Jersey.
Consider PayPal’s entrance into this realm akin to a pupil discreetly entering a lecture hall tardy, aiming to avoid notice. Although PayPal hasn’t been publicly announcing this advancement, the initiation is probably a comfort considering the duration it has required. OPR initially disclosed back in August 2014 that PayPal intended to test the regulated online gaming payment landscape, commencing with a select group of providers.
Thrilled by PayPal’s market entry, we disagree with Steve Ruddock’s assessment of its disruptive potential” – Bill Rini
Neither CIE nor PayPal has formally acknowledged the update. Ruddock highlighted this lack of communication. Speaking with Gambling Insider, Ruddock expanded on the move’s implications. “Speculation was rife months ago when eBay divided the company, as this potentially enabled a policy shift,” he stated. “Essentially, it’s not entirely unforeseen. Nevertheless, PayPal has long maintained a stance against processing any gambling-related transactions, making their foray into this sector unexpected.”
It’s worth noting, however, that PayPal isn’t the first major payment processor to venture into the New Jersey market. Both Mastercard and Visa are accepted payment methods across all 13 of New Jersey’s real-money online gambling platforms. Mastercard’s 2014 net revenue reached $9.47 billion, while Visa reported an adjusted operating revenue of $90.6 billion for the fiscal year ending September 30, 2015.
CIE verified that the availability of PayPal on its sites is public knowledge, though not officially announced to media outlets. Back in September, we were informed that the operator had no plans for a press release, consistent with CIE’s standard practice when onboarding new payment providers.
William Rini, the director of internet poker for the World Series of Poker (WSOP), expressed less excitement regarding PayPal’s foray into the sector. He refuted assertions made by industry expert, Stephen Ruddock, stating that while he holds Ruddock in high regard and values his perspectives, he believes Ruddock might be slightly overly optimistic about PayPal’s influence. Rini conceded that PayPal’s arrival had created excitement and caused a commotion in the payment processing realm but hesitated to label it revolutionary.
Although PayPal opted not to address specific inquiries when reached, they did furnish a pre-written declaration revealing that two internet horse racing venues, TwinSpires and Derby Jackpot, were also participants in this trial program. Notably, PayPal remained silent on any prospective strategies concerning real-money online gaming.
The weight of PayPal’s action might be moderated by the impending presence of PokerStars, whose parent corporation, Amaya, boasts a staggering 68% market dominance in online poker (as of mid-2015). With Amaya’s New Jersey introduction projected within the initial six months of this year, the panorama could appear vastly different in a mere twelve short months. This complicates efforts to separate and evaluate the genuine effect of PayPal’s entrance at this juncture.
Without the presence of PokerStars, PayPal’s venture into the United States internet gambling sector could be transformative. New Jersey, the largest of the three states where real-money online wagering is permitted, generated $122.9 million in 2014. Although 2015 hasn’t been entirely effortless, with certain months displaying reduced earnings compared to the prior year, the overall outlook isn’t negative. As of October 2015, the cumulative revenue had already hit $121.6 million.
Since this regulated market commenced in 2013, numerous industry specialists have identified payment processing as a significant obstacle. It’s akin to possessing a high-performance car but encountering difficulties locating a fuel station that accepts your payment method.
One authority, Ruddock, stated directly: “The cumbersome payment procedure has been a substantial hurdle for US internet gaming providers. Initially in New Jersey, credit card acceptance rates were as minimal as 10%! Conditions have enhanced, with rates now hovering around 60-70%. Options such as PayNearMe and Neteller, and now PayPal, have assisted, but credit cards remain the preferred choice for the majority of users. The issue is, they are also the least dependable.”
Nevertheless, not everyone concurs on the magnitude of the problem. Rini, for instance, minimized the effect, suggesting that while payment difficulties haven’t been beneficial, they haven’t been a critical element hindering the market’s progress.
As youve probably read in this edition, we had the opportunity to speak with David Rebuck, the top dog in New Jersey’s gaming regulatory landscape. We discussed a wide range of topics, including the entire payment processing predicament. Rebuck truly stressed the significance of having PayPal on board, unlike some other individuals we spoke with (yes, CIE, we’re talking about you). He highlighted how certain outdated banking regulations in the US made banks wary of handling online wagering funds, even if it was completely legitimate and legal in New Jersey. The entry of a major player like PayPal was a massive endorsement for the entire sector.
We’ve encountered varying perspectives on the true impact of PayPal’s comeback in the US online gambling arena, but one thing is certain: it has disrupted the status quo. It will be fascinating to observe how everything unfolds as the US continues to navigate this whole legal online gambling situation.
This article was initially published in the January/February edition of Gambling Insider.
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