Morgan Stanley Report Sends Mixed Signals on US iGaming

Written By Steve Ruddock on September 17, 2014 - Last Updated on September 13, 2022
Stanley Report Uncertain on online poker future

In a recent analysis report Morgan Stanley severely slashed their previous future market estimates for online gambling in the United States. This is the second downward revision by the firm, the first coming in March of this year.

The firm’s analysts cut projected earnings across the board, starting with 2017 where their projections were cut from $3.5 billion all the way down to $1.3 billion.

They also dropped their estimates for the U.S. market in 2020, revising it from $8 billion to $5 billion – the firm’s initial 2020 estimate prior to the March revision was $9.3 billion.

Morgan Stanley also lowered their full U.S. market value (all 50 states) from $13.3 billion to $10.7 billion based on the current data available from Nevada, Delaware and New Jersey.

The report did offer up some reasons for optimism as well, as the analysts indicated they expect 12-20 states to have legal online gambling by 2020 (based on their bullish and bearish forecasts), and anticipate California and potentially Pennsylvania passing an online poker bill in 2015.

Future U.S. growth seems overstated

By far the most interesting prognostication is the notion that perhaps 20 states will have online gambling by 2020. Unfortunately, the report didn’t go into much detail on where that number comes from.

I’m not sure if they were simply trying to stick to a theme of 20’s here (20 states by 2020), considering that  even if the U.S. undergoes a domino effect of sorts following the passage of an online poker bill in California, or perhaps a state like Pennsylvania, it’s hard to envision 20 states with online gambling by 2020 –which as scary as this sounds, is just over five years away.

According to Morgan Stanley’s bearish forecast, California will pass an online poker bill in 2015 (and go live in 2016), followed by Pennsylvania, Illinois, and New York in 2018. That would make a total of seven states with online gambling by 2018 when you add in Nevada, Delaware, and New Jersey.

In the bullish forecast both California and Pennsylvania pass online poker bills in 2015 – strangely, Pennsylvania seems far more likely to pass a comprehensive online gambling bill and not an online poker bill as Morgan Stanley prognosticates.

Using the bearish and bullish forecasts, the next logical question is, who are the other five to 13 states that will join them in the following two years to make the market worth $5 billion?

Colorado, Iowa, Massachusetts, Mississippi, West Virginia, Maryland, Hawaii, and Washington are all believed to be potential contenders, or have at least explored the idea of passing an online gambling bill (some are far more likely than others), but this still leaves us up to five states shy of reaching 20.

This is of course assuming that all eight of these potential contenders mentioned above will pass online gambling legislation in the next five years as well.

Certainly some other contenders could spring into being, but I would call Morgan Stanley’s bearish estimate of 12 states bullish, and wouldn’t be surprised if just a half dozen states had online gambling by 2020. And I’m not the only one.

As Chris Grove reported, Deutsche Bank’s Andrew Zarnett and Eilers Research (who have proven to be among the most accurate prognosticators of the U.S. iGaming markets) both have produced their own estimates of around $2 billion by 2020 for U.S. iGaming.

This seems to be a more prudent projection, and indicates far fewer than 20 U.S. online gambling markets.

Working against Morgan Stanley’s credibility on this front is their previous estimates, where they were over five-times the Eilers and Deutsche Bank estimates of $2 billion just six-months ago, and are still more than double the other two estimates despite two downward revisions.

PokerStars NJ impact also addressed

In addition to the changes in their future projections, Morgan Stanley also highlighted the fact that PokerStars impact could be more pronounced than first thought.

According to the report, PokerStars entry into the New Jersey Market could be a complete game-changer, considering their arrival in the Italian market saw year-over-year growth of 62% for the market.

Of course the Italian market isn’t the most apt comparison considering the country only allowed for online poker tournaments during this period of time, and is far larger than the New Jersey by a factor of almost seven.

Another consideration was that poker was just starting to take off in Italy in 2008, so that growth may have occurred with or without PokerStars.

Furthermore, PokerStars didn’t have to deal with a three-year blackout period in Italy, as the Italian online poker market went from gray market to legal and PokerStars was there throughout, launching in 2008.

Still, it’s an interesting way to look at the power behind the PokerStars brand and the potential impact on the New Jersey market.

You can see Morgan Stanley’s complete breakdown of PokerStars impact on page 13 of the report.

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Steve Ruddock

Steve Ruddock is a longtime member of the online gambling industry. He covers the regulated US online casino and poker industries for variety of publications, including,,, and USA Today.

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