
With iGaming expanding around the world, some US states have begun to raise concerns regarding what effects online casino could have on other legal gambling markets. In recent months, online gaming has therefore become a topic of controversy in several states and throughout the country at large. Since the Supreme Court overturned PASPA over six years ago, legal sports betting has rapidly spread throughout the country. Along with the District of Columbia, sports wagering is legal in 38 states and counting. However, the legal online gaming market has not experienced the same explosive expansion as sports betting.
To date, online gaming being legal in some form has been limited to just seven US states by comparison, although even some of those have limited access, such as online poker only. States with legal iGaming access include Pennsylvania, Delaware, Nevada, New Jersey, Rhode Island, West Virginia and Connecticut. But why hasn’t the market taken off the same way as sports betting?
There are a variety of factors, of course, but one main reason appears to be states raising concerns that legal online gaming markets could potentially harm the land-based industry. Those jurisdictions have hit the pause button on iGaming, claiming the industry could cannibalize brick-and-mortar casino revenue. Lawmakers in the state of Maryland this year considered whether opening its borders to legal iGaming would benefit the local economy. With the topic of possible iGaming legalization on the table, the Maryland Lottery and Gaming Control Agency studied the effect online gaming could have on the state.
Maryland welcomed legal retail sports betting in 2021. The state opened its online sports wagering market the following year. However, iGaming has not gained traction in the state because some feel bringing online gambling onto the scene could pose a threat to workers in land-based casinos and put jobs in jeopardy.This reservation is not solely a concern in Maryland. The debate regarding iGaming and the impact the market could have on land-based businesses has caused other states in the US to consider whether welcoming legal online gaming is a good move for their territories. Opponents say bringing iGaming onto the scene could pose a threat to workers in land-based casinos and put their jobs in jeopardy.
Do these objections have any merit? Some analysts say they do. In a 2021 study conducted by Deutsche Bank that looked at iGaming’s effects in Pennsylvania, research showed a decline in revenue at brick-and-mortar casinos that coincided with the launch of the state’s online gaming market.
Pennsylvania began offering players online gaming in July 2019. During its initial seven months, the state generated nearly $10m in revenue. As of January 2024, the state’s iGaming handle had reached nearly $3.2bn. Based on its findings, Deutsche Bank analysts noted that “Pennsylvania should take into account that land-based casino revenue was dropping due to the fact that iGaming was eating into their market share.” Analysts based their conclusions on comparing Pennsylvania’s results to productivity in other states with legal land-based casinos.
According to the findings, land-based casino revenue during March 2021 fell by 12%. Revenue in April rose by 1% but dropped by 3% during the month of May. During those months, several new land-based casinos opened in the Philadelphia area, yet there was a decrease in activity. However, researchers acknowledged the impact the Covid-19 pandemic had on the market and on the economy at large during the time of the study.
An additional recent study in New Jersey conducted by the National Economic Research Associates (NERA) found that the cost of programs to combat problem gambling within the state offset the tax contributions that iGaming provides monthly.
New Jersey’s iGaming market debuted in 2013 and though iGaming in the Garden State brings in a significant amount of tax revenue, the study revealed that fewer people are employed to provide iGaming services than those working in the state’s land-based counterparts. However, iGaming revenue continues to grow in the Garden State. During the month of October, the New Jersey Division of Gaming and Enforcement reported that the state’s online casinos and their partners walked away with $208.1m in revenue. But not everyone agrees with the NERA study findings. Trade association iDEA Growth recently published research refuting the NERA study, which claimed that legalized online gambling in the Garden State “resulted in a $2bn boost to New Jersey’s economy from 2013 through 2018.”
iDEA Growth disagreed with NERA’s findings and said the economic impact in New Jersey was much larger than the study suggested. The group went on to note that NERA’s findings were “erroneous” and were “found to be based on flawed and limited assumptions and analysis, severely underestimates the financial benefits iGaming brings to the State.” The group went on to note that existing research backs up the claim that legal iGaming “does not cannibalize revenue from brick-and-mortar casinos or other entertainment sectors.”
Reports from both Pennsylvania and New Jersey reflect lucrative tax revenues and handles that far exceed what both states brought in when their markets first launched.Going back to Pennsylvania, another study there highlighted survey data that reflected a rise in online gaming activity.
The Pennsylvania Department of Drug and Alcohol Programs published a survey in connection with Pennsylvania State University during 2021. According to the report, nearly one in 10 residents participated in online gaming. The survey also found that 28% of Pennsylvania residents said they have engaged in some form of gambling during the past 12 months.
Though the rising revenue numbers in states with legal iGaming do not lie, the debate continues around the country. During the most recent G2E show in Las Vegas, several panels addressed iGaming concerns and the potential benefits that expanding the US market could offer.One presentation addressed the debate head-on as part of an educational breakout session. The panel was led by politician and Fanatics lobbyist Brandt Iden, along with Soft2Bet CBDO Martin Collins.
Iden was instrumental in bringing legal iGaming to the state of Michigan. During the panel discussion, he listed three common “false narratives” that exist when it comes to expanding the US iGaming market, which include cannibalization and job losses, a potential rise in problem gambling and that iGaming is not broadly supported.
Iden used the Great Lakes State as a case study and as evidence that the common objections to denying iGaming access do not have merit. He provided recent tax revenue figures from Michigan to back up his claim. During the 2023 fiscal year, the Great Lakes State collected $23m in state government taxes from its sports betting market – iGaming yielded $486.5m in taxes for the same period.
He also cited a recent report released by Vixio and Light & Wonder iGaming tax revenue across 44 states could bring in an estimated $15bn. When addressing the concern that legal iGaming could potentially cannibalize land-based markets, Iden said the argument “is absolutely false.”
He said, “At the end of the day, iGaming does not impact the retail-based industry. In fact, it’s just simply another experience for the consumer to be able to participate in a regulated entertainment product.” Iden went on to explain that customers can enjoy the same product in different ways, and used his own experience of eating food from the same restaurant both by stopping by the business and by ordering food using Uber Eats.
During his portion of the session, Collins examined how iGaming is affecting the Canadian province of Ontario and discussed the legal framework in the province, which has the least restricted access to online gaming in North America.Collins noted that adding iCasino options in Ontario “has improved the accessibility of online gambling service providers in the province.”
Along with Iden and Collins, other leaders are hopeful the US will warm up to an expanded iGaming market soon.Play’n Go CCO Magnus Olsson noted that despite the slow expansion of iGaming throughout the US, the company’s goal is one of ongoing expansion within the existing market. “We’re hoping to be very successful here in the US, getting more protections in place as states open up and helping the states raise revenue without raising taxes,” Olsson said.
“Obviously things are moving a little slow. We knew this year would be slow in particular. We’re confident in 2025 and beyond for many factors, and we believe more states are going to be open. So, we’re on our plan as the company being every regulated jurisdiction.” Compelling arguments and corresponding research exist on both sides of the iGaming issue. Nevertheless, we can all be certain of one thing: The iGaming market is here to stay; expansion seems inevitable but, at the same time, far from immediate.