Wayne Parry of the Associated Press recently wrote an article in which he discussed the success of igaming in Connecticut, Delaware, Michigan, New Jersey, Pennsylvania, and West Virginia. Those six states have generated $7 billion in revenue and $1 billion in taxes since New Jersey first began taking bets in 2013. According to the Associated Press, New Jersey has generated $6.91 billion since Nov. 2013, Pennsylvania $4.34 billion since July 2019, Michigan $4.1 billion since Jan. 2021, Connecticut $615.3 million since Oct. 2021, West Virginia $294.7 million since July 2020, and Delaware $59.1 million since Nov. 2013. Online casinos are a budding, but not blossoming, new industry.
Internet gaming became possible when the Department of Justice did an abrupt about face in policy. On Friday, December 24, 2011, the Department of Justice issued an opinion that the Federal Wire Act, regardless of any enforcement actions taken in the past 50 years, applies only to sports betting. At the time, it appeared igaming would be the next wave of gaming expansion. New Jersey jumped right in, quickly passing enabling legislation and writing regulations. But it took Pennsylvania another six years before the state started taking online bets and another two-plus for Michigan; there have been no new igaming states since 2021. Why not? That is the question that Wayne Parry asked. There are no easy answers.
In those same years, online and mobile shopping has grown dramatically; according to Reuters, Insider Intelligence reports online shopping during the Thanksgiving shopping season doubled from $20 billion to $40 billion in just six years. This year, the National Retail Federation estimates that 182 million people were expected to shop during the holiday. Adobe Analytics reported $5.6 billion in online sales on Thanksgiving Day and another $9.8 billion on Black Friday. Clearly, i-shopping is alive and well.
So is igaming; in October, the six igaming states generated $562 million in revenue, up over 23 percent from 2022. In New Jersey and Pennsylvania, igaming revenue is about 70 percent of casino revenue. In Michigan, igaming generated twice as much revenue as the casinos. The casino workers in Detroit were on strike for half of October and although the casinos did not close, revenue was down about 20 percent. The numbers in Michigan are a bit skewed, as the Indian casino revenue is not reported, only the three casinos in Detroit, while igaming revenue from the tribes and their online partners is reported. Regardless, igaming in Michigan is very successful and generates revenue that is close to that of Pennsylvania and New Jersey. In October, Pennsylvania generated $186 million, New Jersey $166 million, and Michigan $160 million.
Remote sports betting is even more successful. In October, online sports betting operators in New York, New Jersey, and Illinois took over a billion dollars in wagers and New York had two billion dollars in handle. Another five states booked between $500 and $900 million in bets. When the final numbers are in, the national handle will probably be over $12 billion for October, with $1 billion or more in win. Before mobile betting, New York was taking under $50 million a month. Since January 2022, mobile-wagering handle has averaged over $1 billion and $100 million in revenue, resulting in $50 million in taxes.
Mobile sports betting and igaming demonstrate the power of online gambling to entertain gamblers, produce profits for the operators, and tax revenue for the states. So why no explosion of online casinos, similar to mobile sports betting? It would be nice to have an answer to Wayne Parry’s question, but I don’t have one. As early as 2012, I was predicting a tsunami of igaming. My early predictions were just for a stream of states legalizing online gambling; later, it appeared to me that igaming would become a disrupter that took revenue from casinos, forcing many to close. So far, none of that has occurred. Maybe it is time for a new forecast, another spin of crystal ball.
In the past, the expansion of commercial gaming has often been driven by economic conditions. For example, every time Illinois needed extra cash, politicians and lawmakers went to the gambling well. In 2009 during the Great Recession, Illinois authorized video lottery terminals in bars and restaurants. Today, there are 46,000 free standing slot machines in 8,500 locations; in the last 12 months, they generated $3 billion in revenue and $1 billion in taxes. In 2012, in the wake of the Department of Justice decision, Illinois became the first state to offer online sales. The state’s lottery generates over $100 million a month in revenue. In 2019, Illinois legalized sports betting, six additional casinos, and one additional VLT in each location.
The economic forecasts for 2024 call for the economy to slow. And according to Associated Press, consumers are turning to more credit buying. In November, buying on credit is expected to be $9 billion. The combination of less disposable income and slowing growth will mean that some states will be out beating the bushes looking for tax revenues. That need for cash could lead to more states adopting igaming. If it does, remember you heard it here. Of course, if 2024 does not lead to a rush to online gambling, the reason will have escaped me once again.
