Posted on: August 14, 2024, 11:20h.
Last updated on: August 14, 2024, 11:37h.
A new study on iGaming suggests states could receive an immediate financial windfall by legalizing online slot machines and table games.
London-based regulatory intelligence firm Vixio was recently commissioned by Light & Wonder, a global leader in the development and manufacturing of gambling products and services, to study the possible tax revenue implications of more states legalizing iGaming. Currently, only seven states permit online casino gambling: Connecticut, Delaware, Michigan, New Jersey, Rhode Island, Pennsylvania, and West Virginia.
Vixio researchers concluded in their market research that if the 44 states that currently have some form of in-person casino gambling and/or mobile sports betting would authorize online gambling websites and apps, the national iGaming market could balloon to nearly $50 billion annually in gross gaming revenue (GGR). That would lead to a possible tax windfall of up to $15 billion a year.
“States and local governments could conservatively generate approximately $9 billion to $15 billion in annual tax revenue from legal internet gaming,” the Vixio report summarized.
iGaming Tops Sports Betting
Sports betting is a small-margin business, something that’s not the case for online casino operators where win rates for interactive slots and table games are considerably higher than what oddsmakers reap.
Online casino tax revenue last year from just six states — iGaming began in Rhode Island only in March 2024 — totaled $1.61 billion. Tax revenue from legal sports gambling amounted to $2.06 billion, but there were 29 states with commercial sportsbooks operational last year.
Further proof that iGaming delivers states much more tax revenue than sports betting is that the six metered online casino gambling states last year included three of the smaller states in terms of population. West Virginia ranks No. 39, Rhode Island No. 44, and Delaware No. 45 in population.
Vixio determined that iGaming operators generate greater revenue per capita in more populated states, specifically Michigan, New Jersey, and Pennsylvania. Should more populated, affluent states like Maryland, Massachusetts, New York, and California legalize iGaming, those jurisdictions would be expected to exceed per capita GGR generation than the current markets.
It is likely that larger, wealthier states that may authorize iGaming in the future would over-perform compared to the blended average revenue per adult figure used for the purposes of this report,” the Vixio summary read.
Combined iGaming GGR from the six states last year reached a record $6.17 billion, up almost 23% year over year.
New Jersey, Michigan, and Pennsylvania accounted for more than 90% of the revenue. New Jersey and Michigan iGaming operators won about $1.92 billion while Pennsylvania online casinos won $1.74 billion.
Biggest Beneficiaries
Several states have mulled iGaming legalization in recent years, including several that Vixio believes would outperform the current online casino states in terms of annual tax income.
Vixio projects that New York could receive around $1 billion annually by legalizing iGaming, while the state government in Illinois could reap almost $700 million a year.
Of course, there are many opponents to online casino gambling. iGaming adversaries typically cite societal concerns, including elevated problem gambling and the possibility of underage people being able to access online casino sites.
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