ATLANTIC CITY, N.J. (AP) - Morgan Stanley has cut its estimate of the potential U.S. Internet gambling market by nearly half.

ATLANTIC CITY, N.J. (AP) 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.

It also predicts no additional states will approve Internet gambling this year but foresees California and Pennsylvania doing so next year, followed by New York and Illinois by 2018.

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.

Morgan Stanley predicts 15 states will have legalized online gambling by 2020.

It also thinks a federal ban on Internet gambling remains unlikely but is a growing risk.