Bet on it: Igaming is the future of gaming

May 12, 2024 6:36 PM
Photo: A composite created by CDC Gaming Reports from Shutterstock images
  • Ken Adams, CDC Gaming Reports
May 12, 2024 6:36 PM
  • Ken Adams, CDC Gaming Reports

The gaming industry is on a very long upward spiral. Gross gaming revenue reached almost $68 billion in 2023, more than $20 billion more than 2019. For the first quarter of 2024, the GGR is approximately $18 billion. At the current run rate, total GGR in 2024 will be double that of 2019 and 10 times what it was in 1990, when Nevada and New Jersey combined for $7.9 billion.

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The expansion of gaming outside of Nevada and New Jersey began in the 1990s on riverboat casinos and in remote mining towns. Eventually, major cities like Detroit, Philadelphia, and New Orleans got on the bandwagon. Each new state increased the total number of casinos and therefore gaming revenue, plus the spread of commercial gaming was mirrored by the spread of Indian gaming; Indian gaming revenues reached $40.9 billion in 2022.

Casino gaming is not the only form of gambling that has developed and expanded since 1990. Video lottery terminals (VLT) and historic horse racing machines (HHR) have become more numerous, although the spread has been much slower than with casinos. While Oregon, Montana, and Illinois have been very successful with VLT, other states have been more reluctant. Kentucky and Virginia only recently joined with HHR.

Another form of gambling, icasino, is a relatively new form. Online-casino games were legalized by New Jersey in 2013 and in its first 12 months, igaming generated $120 million. Online gambling has spread as slowly as VLT and HHR. As of March, just seven states permitted it. In 2023, the six igaming states generated $6.2 billion, up from $4.9 billion in 2023 and $3.6 billion in 2021. In the first quarter of 2024, igaming generated nearly $2 billion and is on track to hit $8 billion for the year.

Recently, SBC Summit North America held a panel discussion on igaming. The panelists all agreed it was the future of commercial gaming. But for whatever reason, it is not catching on as quickly as they expected. After all, sports betting is spreading across the country like a wildfire on the prairie.

Sports betting is the fourth major trend in the expansion of gaming and the newest form to be legalized. Sports betting became a possibility in 2018 when the Supreme Court voided federal laws prohibiting it. Since then, $348 billion has been wagered legally in the United States, generating $29 billion in revenue and $5.3 billion in taxes, according to Legal Sports Report. In 2023, the total national handle was $114.1 billion with $10.3 billion in GGR as compared to a handle of $93 billion and $7.3 billion in GGR in 2022. In 2018, three states offered sports betting. In 2024, there are 38 states where it’s legal.

The speed of the spread of sports gambling is one of the reasons that igaming proponents are confused. They have been watching sports and anticipating a like phenomenon with igaming. That is the wrong model. Sports are a major form of entertainment in the country and wagering on the games, at least between friends, is well accepted. There has been very little resistance to its legalization. More to the point for igaming, it has taken over 30 years for the commercial casino gaming industry to achieve the status it enjoys today. The progress was slow and uneven. The catalyst for new bursts of legalization was often economic.

Some of the igaming supporters at the SBC conference made a customer argument: Younger players use mobile devices easily and without a learning curve. In the proponents’ minds, that technological acceptance will help spur the spread of igaming. However, that is unlikely to be the case. Casino-gaming expansion was not held back by a lack of people who wanted to gamble in their home states. Rather, expansion was delayed by lawmakers who did not want to risk their political over the evils of gambling. They needed an acceptable excuse. Under economic and budgetary pressures, the evils of gaming always dims. Igaming needs a recession.

It is clear that igaming is popular with players. New Jersey is proof of that, as each month, igaming in New Jersey produces nearly twice as much revenue as the first 12 months did. Igaming slot revenues are approaching slot revenues from casinos in New Jersey, Michigan, and Pennsylvania. Online slots will probably pass bricks-and-mortar slots in those states by the end of 2024. The taxes are as significant.

The argument makes itself — igaming is the future of gaming. It does not lack willing customers. It is not capital intensive. It produces large revenue streams and significant tax revenues. The main barrier to expansion is the same that casinos faced in the 1990s, the perceived evil. The first casinos outside of Nevada and New Jersey were relegated to remote areas and riverboats to keep them from corrupting the general population.

But attitudes are changing. In 2024, New York state will probably authorize three casinos for New York City. Chicago, Philadelphia, Boston, and New Orleans have already fallen. However, igaming is different, being more invasive and having more opponents. The casino model is more useful than sports and early casinos and igaming have more in common. Igaming will spread slowly, but in a decade or two, it will be as ubiquitous as casinos. In time, igaming will generate more revenue and more taxes than either casinos or sports betting. Bet on it!