Morgan Stanley has cut its estimate of the potential U.S. Internet gambling market by nearly half. The firm now estimates the nationwide online betting market at $2.7 billion by 2020, down from an initial estimate of $5 billion.

In a report issue Tuesday, the firm predicts no additional states will approve Internet gambling this year. Three states — Nevada, New Jersey and Delaware — have legalized Internet gambling, but online betting is off to a slow start. It took in $135 million last year; Morgan Stanley initially forecast $678 million.

“We continue to believe that there is a material runway for growth, but results have been disappointing,” the firm wrote. “Legislative processes continue to be slow as lawmakers remain unconvinced that online gaming is currently worth the hassle for limited tax revenue.”

The report cites several factors holding back the Internet gambling market, including problems with payment processing, a lack of effective advertising, difficulties with geolocation technology intended to ensure that a gambler is within a particular state’s boundaries, and a thriving offshore Internet gambling market.