Long noted for its conservative and carefully considered regulations, Nevada is giving igaming a thought. The state’s Gaming Control Board scheduled a meeting to solicit input on the subject, but then postponed it. Instead, the Control Board held a non-controversial workshop on esports. After generating little opposition, esports received the regulators’ approval. The reason is simple: Esports is a very minor part of gaming and sports. Esports’ popularity is growing, but it does not threaten to disrupt organized sports or traditional gaming.
On the other hand, the possibility of legalizing online gambling in Nevada is generating significant opposition. Online gaming has always been a contentious issue in the state. MGM, Caesars, Boyd, and Wynn have already embraced the concept in other jurisdictions. Other casino companies, like Red Rock, South Point, Circa, Monarch, and Golden Gaming, oppose igaming in Nevada. Until he died, the champion of the anti-igaming cause was Sheldon Adelson. Adelson opposed it not just in Nevada, but nationally, donating generously to politicians who were willing to fight its legalization. However, without Adelson, Las Vegas Sands changed sides. Within months of his death, Sands had begun exploring igaming options. The fight within his own company is not the only battle Adelson lost; he lost the national fight against remote gambling.
Midway through 2021, five states already have full-blown online gaming, several more are in the ramp-up stage, and still others are exploring the idea in state legislatures. Remote gaming is fast capturing the imagination of lawmakers eager to keep up with the next-door neighbor and raise more revenue for state coffers. In part, remote-gaming growth is being driven by the phenomenal expansion of sports betting. In less than two and half years, 28 states have legalized sports betting in some form. Significantly, the states with the highest handle, win, and tax collections are those that permit remote sports wagering.
Where it is legal, remote/mobile sports betting is king of the hill. In New Jersey, Colorado, Pennsylvania, Indiana, Virginia, and Michigan, 90 percent of all wagers are placed remotely. Consequently, the handle in those states is many times higher than that in states with retail betting only. Every lawmaker in the country interested in sports betting as a source of revenue knows that story.
Online gambling is beginning to attract the same attention and for the same reason — money. In New Jersey and Pennsylvania, online revenues are about one-third of all gaming revenues and in Michigan, remote gambling generates half of the total gross gaming revenue and pays an equivalent tax rate.
The tax is what catches the eye of lawmakers, even in Nevada. Legislators see online gaming as a way to double the amount of gaming tax they collect with little or no effort. What a deal! The slight downside to that rosy picture is online casinos do not invest billions of dollars in a state. They do not employee thousands of people and there is no multiplier effect that new casinos create. In some states, that is not a consideration. Since it entered gaming in 2006, Pennsylvania has opted for maximum tax rates. Officials and politicians apparently do not recognize that their tax model generates a tiny fraction of the investment, employment, and additional economic activity compared to lesser tax-rate states.
Casino operators in Nevada have been following the events in other states with interest. Now, it’s with some trepidation. A group of operators sent a letter to both the Nevada Gaming Commission and Gaming Control Board on the subject. The letter asked the state to slow down, look at the issue carefully, and take their concerns into account. There is no way to know for certain, but it seems highly likely that Boyd, Caesars, MGM, Sands, and Wynn have been lobbying for legalizing online gaming in Nevada. Each of those companies has already invested heavily in building an online presence.
Online gaming is a complicated subject, but from online shopping, we know a few things. The most important is that size matters. The largest companies with the best-known brands dominate; think Amazon. You can also compare the statistic from sports betting in states with mobile betting. Regardless of how many licenses have been granted, four companies control each of those markets. Actually, two companies usually garner over 60 percent of those markets. Everyone knows who they are, because we all recognize their names, FanDuel and DraftKings.
Imagine being a small casino in Nevada with an online division. Your customers in Winnemucca, Elko, Pahrump, or Henderson log in and look for a game. They could choose your casino or, say, Caesars. Which do you suppose they would choose? Besides the name, Caesars offers all the benefits of its huge rewards system.
There is also the issue of cannibalization. The money spent on igaming is not spent in a brick-and-mortar casino.
Here, although it is probably obvious, I have to disclose that in general, I do not think legalizing online gaming is good public policy. It could put too many vulnerable people at risk. At the same time, it is necessary to acknowledge that the train has already left the station.
Online gaming is a fact and it is expanding for the same reasons any business expands. It is both popular and profitable. The trend will not end until it has reached a peak of acceptance. But I suspect Nevada may be the last to embrace it. Although there are some very big proponents, there are more, if somewhat smaller, opponents. And as ironic as it may be, I believe the need to protect the vulnerable will make sense to Nevada lawmakers and regulators. Officials in Nevada are also very aware of the benefits of investment and employment the state enjoys because of its retail gaming industry. Online/igaming gaming may eventually come to Nevada, but I do not think the state is ready for it now.