A new study on iGaming suggests that 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 were to authorize online gambling websites and apps, the national iGaming market could balloon to nearly $50 billion annually in gross gaming revenue (GGR). This 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 appears to be more lucrative than sports betting. Sports betting is a small-margin business, which is not the case for online casino operators where win rates for interactive slots and table games are considerably higher than what oddsmakers reap. Last year, online casino tax revenue from just six states totaled $1.61 billion, whereas tax revenue from legal sports gambling amounted to $2.06 billion, collected from 29 states with operational commercial sportsbooks.
Further proof that iGaming delivers states much more tax revenue than sports betting is demonstrated by the inclusion of three smaller states: West Virginia, Rhode Island, and Delaware, which contributed to the substantial revenue despite their lower population ranks. Vixio determined that iGaming operators generate greater revenue per capita in more populated states, specifically Michigan, New Jersey, and Pennsylvania. If more populated, affluent states like Maryland, Massachusetts, New York, and California legalize iGaming, those jurisdictions are expected to exceed the current markets’ per capita GGR generation. The Vixio summary underscored this point, noting, “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.”
Combined iGaming GGR from the six states last year reached a record $6.17 billion, marking an increase of almost 23% year over year. New Jersey, Michigan, and Pennsylvania accounted for more than 90% of the revenue, with New Jersey and Michigan iGaming operators winning about $1.92 billion each, while Pennsylvania online casinos won $1.74 billion.
Several states have recently considered iGaming legalization, and Vixio believes some of them 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 Illinois could reap almost $700 million a year.
However, there are numerous opponents to online casino gambling. iGaming adversaries typically cite societal concerns, including elevated problem gambling and the potential for underage people to access online casino sites.
