Connecticut gaming market has potential for $450m in annual revenue

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Analysts say small state could punch above its weight thanks to geography.

The regulated sports betting market in Connecticut eventually could generate more than $1.5 billion in annual sports wagers and more than $100 million in operator revenue, according to estimates by PlayCT.

Analysts for the company said online casinos in the Constitution State could generate as much as $350m in gross gaming revenue annually, becoming a huge tax generator for the state.

Governor Ned Lamont, who negotiated the agreements with the Mashantucket Pequot and Mohegan tribes to amend gaming compacts, on Thursday signed a bill to legalize retail and mobile sports betting, online casinos, online poker rooms and iLotteries.

The US Bureau of Indian Affairs next must sign off on the compacts. Once that happens, Connecticut will join more than two dozen states with legal sports betting in some form, and join New Jersey, Pennsylvania, Michigan, Delaware and West Virginia as the only states with full-scale legal online casino gambling.

With a population of more than 3.5m people, Connecticut could produce more than $1.5 billion in retail and online sports wagering by the market’s third year, according to PlayCT projections. Assuming a 7% hold, those wagers could produce more than $100m in operator revenue.

With a hypothetical effective tax rate of approximately 25%, PlayCT estimated the state government could collect more than $25m annually.

“Connecticut is a relatively small state, but the market has a handful of attributes that should help it punch a bit above its weight,” Eric Ramsey, analyst for the PlayUSA.com network, said in a statement. “Geographically, the state is in a good place, with the potential to draw significant out-of-state business from New York and Massachusetts. Connecticut also features one of the highest median household incomes in the US. Both factors should help the market reach maturity relatively quickly.”

Dustin Gouker, lead analyst at PlayUSA.com, said Iowa may be Connecticut’s closest comparison among current legal sports betting markets. With some 400,000 fewer residents but with a more open market that fosters more consumer choice than Connecticut, the Hawkeye State has produced $572.9m in online and retail sports bets and $40.2m in gross operator revenue through the first four months of 2021.

“Connecticut will be a successful market, and likely a significant revenue driver for the state for years to come,” Gouker assessed. “The state’s high median income and proximity to New York should be significant contributors to the market’s growth, particularly early on as New York makes its own push into the online sports betting market.”

Online casinos should be even more lucrative, capable of generating close to $350m in annual gross gaming revenue at maturity, according to PlayCT. If online casinos reach that mark, that could mean as much as $70m in annual tax revenue for the state.

The three largest online gaming markets — New Jersey, Pennsylvania and Michigan — each generate close to $100 million in operator revenue each month, PlayCT said.

“Sports betting grabs more headlines, but in states where it is legal, online gaming has proven to be the far more reliable revenue generator,” Ramsey noted. “Plus, history shows that a thriving, full-scale online casino gaming market helps spur interest in online sports betting, making it the tide that lifts all boats. There is no obvious reason that Connecticut won’t follow a similar pattern.”

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