The U.S. has the potential for igaming revenue that approaches land-based operations, but state lawmakers and governors across the country continue to resist its expansion for now, according to a Global Gaming Expo panel discussion on navigating the world of igaming.
Howard Glaser, global head of government affairs and legislative counsel for Light & Wonder, talked about missed opportunities for the gaming industry, which had $41 billion in for commercial-casino revenue in 2021.
The potential size of the U.S. igaming market revenue, if it were legalized in the 42 states that have land-based commercial, tribal casinos, and/or mobile sports betting, would come to $30 billion, a number considered conservative, Glaser said. “The potential scope of igaming is massive, almost competitive with commercial gaming.”
Only six states today have igaming: New Jersey, Pennsylvania, Michigan, Connecticut, Delaware, and West Virginia. Nevada offers online poker only.
Michigan, Pennsylvania, and New Jersey’s combined land-based and online casino gaming earned $12 billion in revenue for a 12-month period ending in June, some $4.5 billion or 38% of the overall total. From 2019 through June 2022, total annual revenue for the three states increased by 51%, Glaser said.
Iowa, Illinois, Indiana, Kentucky, and New York introduced igaming legislation in 2022, but failed to advance it. By comparison, since 2018, more than 30 states have adopted sports betting, compared to four for igaming, yet its revenue is comparable, Glaser said. Tax revenue of the six igaming states is about twice that of the 30-plus sports betting states, he said.
“It’s undeniable that the rollout in igaming in major states, including Pennsylvania, Michigan, and New Jersey, has been expansionary to the overall gaming industry in all three states,” Glaser said. “States with igaming grow their markets far faster and far larger than states without.”
Glaser discussed why it’s taken so long for igaming to gain traction.
One is the pandemic brought a budget windfall from the U.S. government that alleviated the need for more revenue. Second, lawmakers fear that adding igaming will take away from land-based revenue and cost jobs. Third, igaming might spark more problem gaming, being accessible on people’s cell phones.
Jonathan Michaels, senior vice president strategic development and government affairs for Sightline Payments, said the math doesn’t lie as to the opportunity for igaming, but sports betting took advantage of that opportunity for legalization that igaming hasn’t.
“One is industry alignment,” Michaels said. “A lot of people look at igaming with real skepticism and concern about cannibalization. I think there’s an opportunity for national associations to get behind that and drive it forward.”
Michaels said the messaging hasn’t been there, like it was for sports betting when people cited illegal gambling with bookies. It also doesn’t have the same appeal and consumer interest as sports betting. That’s why, he suggested, a “tremendous ground game” is needed to reach state lawmakers and explain why this matters.
“The last part of it is we need allies,” Michaels said. “With sports betting, you had a lot of interested parties, such as leagues and teams. No one outside of the gaming industry is interested in pushing forward in igaming right now. To interest legislators, you need third-party validators.”
Glaser said the gaming industry spent two decades convincing state lawmakers that land-based casinos were good economic investments that would create jobs. Now, operators are telling them to put it online. “The first thing they think about is Sears and Amazon or their hardware store and Home Depot online,” Glaser said. “They’re worried that brick-and-mortars will be threatened, even though some of the numbers don’t bear that out.”
Brandt Iden, head of government affairs for Sportradar and former Michigan lawmaker who led the way for igaming and sports betting in his state, said gaming is difficult for the average lawmaker to vote for. Michigan benefitted by doing it all at once, he said, the first time gaming law has changed in 24 years.
“They didn’t show up at the state capital to take a gaming vote,” Iden said. “That doesn’t come easy and part of the process is education. The industry screwed up. Pushing that boulder up the hill, whether you’re taking a vote on sports betting or icasino, is just as hard for lawmakers. We as an industry dropped the ball and it’s hard to go back. These legislatures just two years ago helped with sports betting and now you’re now asking for igaming.”
Glaser talked about California’s battle over sports betting, in which hundreds of millions have been spent on advertising that pit tribes against commercial casinos. That’s not helpful for the long run, he says.
“It’s about who gets to divide up the pie, as opposed to growing the pie, which is the point of the igaming and land-based discussion we’re having here,” Glaser said. “It’s a lot of time, effort, and money but hopefully the message from this panel will get through.”
Glaser said coming out of COVID, the expectation was that states would be in a position where they needed revenue and that the $5 billion highlight would come into play.
“I remember in March 2020, the week every casino in the country closed, there was a front-page article in the New York Times about igaming,” Michaels said. “What you saw over the course of the pandemic between casino shutdowns and capacity restrictions was states that had igaming were really lifted as a whole. We don’t know what will come in the future. There could be additional shutdowns. It’s a way the industry can protect itself and grow. When every state is running a surplus (from all the stimulus funds), it makes it difficult to say we can generate an extra $250 million in your state. As we see some of these recessionary headwinds, that’s going to change.”
Glaser agreed, saying the industry didn’t anticipate $350 billion in federal funds distributed to the states to help their way out of the pandemic.
“They didn’t really need it, because the economy is strong and they’re flush with cash,” Glaser said. “The revenue argument isn’t as solid as it would be. But I’m still very bullish on igaming. I just think all of these factors have to come into play.”
Finally, Glaser said it would be a mistake to dismiss the concern over problem gaming in relation to the expansion of igaming. There’s “an instinctual feeling” on the part of legislators that if slot machines and table games can be played on a phone 24 hours a day, that’s “a different animal.”
Cath Burns, executive vice president of customer service and RMG at Aristocrat, said her company brings the same characteristics to online gaming that it does to land-based casinos. Whether it’s a digital wallet and sign-up process and other protocols, it’s so much more transparent than land-based operations, she said.
“As an industry, we don’t want a level of problem gaming,” Burns said. “We’re in uncharted waters now in North America in terms of how this grows and it would be better to take an aggressive posture around responsible gaming, which most operators and suppliers do, and make us a benchmark in this part of the world.”