Citing more severe technical problems than expected, Morgan Stanley has reduced its estimate on the U.S. online gambling market by 30 percent.
The firm now expects the market to be $3.5 billion by 2017, down from a previous forecast of $5 billion. The firm expects the industry to be at about $8 billion in 2020, down from their previous estimate of $9.3 billion.
The Wall Street firm, however, remains optimistic about the future of online gaming in the country.
“While we remain bullish on the online gaming opportunity in the U.S., we are lowering our estimates to better reflect the insights we have gained following the first few months of operations in New Jersey, Nevada and Delaware,” the company wrote in a research note.
The firm also lowered its first full year estimate of New Jersey’s internet gambling revenue from $541 million to $203 million. Morgan Stanley pointed to continuing issues with geolocation technology—designed to ensure that players are physically within New Jersey’s borders—and payment processing options for players.
The firm said they expect those problems will eventually be solved, but revised its estimates for the present.
Meanwhile, the firm Fitch Ratings is also predicting around $200 million in revenue for New Jersey this year.
The firm also expects online gambling to continue to spread to other states.
“Fitch believes an interstate online poker agreement signed by Delaware’s and Nevada’s governors on Feb. 25, 2014 will accelerate state-by-state proliferation of online gaming,” the company wrote in a statement. “Additionally, the momentum for passing an online poker bill in California picked up in 2014. Other large states, such as Pennsylvania, may again consider online gaming as they head into their regular legislative sessions. “
Morgan Stanley also noted the possibility of California and Illinois legalizing internet gambling this year. But it said it does not expect five other states—Colorado, Louisiana, Massachusetts, Mississippi and Ohio—to do so this this year.
