While sports betting continues to pump millions into state coffers nationwide, efforts to legalize online casino initiatives across the country remain in the early stages.

Nearly 40 states legalized sports betting by the end of last year, with 26 having passed measures that enabled bettors to wager on digital sports platforms. By comparison, online casino games are live in just six states, primarily confined to a band of jurisdictions in the northeast region of the country. While sports betting is viewed as a low-margin activity with hold rates hovering in the single digits, online casino is expected to generate more revenue for states in the red.

To that end, a group of leading state legislators are focused on closing the gap between sports betting and iGaming in educating stakeholders on the benefits of legalization. The subject served as a popular topic at this month’s National Council of Legislators From Gaming States (NCLGS) 2024 winter meeting in Florida. Over the next several months, the organization is working on crafting model legislation on iGaming for member states to bring back to their respective jurisdictions.

“We now have the data available to us to share with others and say, ‘This is great policy, it raises new revenue,'” said NCLGS president Shawn Fluharty, a delegate from West Virginia. “These states when they have a budget crisis, this is what they turn to. This is an option available to them.”

Model legislation

Fluharty (D, District 5) intends to hold a series of public hearings with stakeholders to help form uniform legislation on iGaming. The hearings, Fluharty noted, could take place as early as March. From there, a working committee plans to craft proposed legislation that NCLGS can vote on during the council’s summer meeting this July in Pittsburgh.

Fluharty, who also serves as the minority whip of the West Virginia House of Delegates, plans to enlist members of the academic community to receive their input on the proposal. One voice, he suggests, could come from Joshua Hall, dean of the John Chambers College of Business and Economics at West Virginia University. Beyond academia, Fluharty may also enlist two consultancy groups — The Innovation Group (TIG) and Spectrum Gaming Group — to provide another voice in the room.

Fluharty Presides Over Gaming States Conference #NCLGS
@intelligencerwv https://t.co/ZAhmaT6Mcz

— NCLGS (@NCLGS) January 9, 2024

The Innovation Group, a Las Vegas-based consultancy, authored a study on iGaming prospects in Maryland last November. A potential legal iGaming market could bring Maryland more than $900 million in annualized revenue, TIG found, a threshold the state could reach by 2029. As part of its methodology, TIG analyzed the per-capita spending trends among the six states that offer iGaming, then developed Maryland online casino projections at scale to reflect market maturation. By 2029, customer spend on a per capita basis could exceed $185 per iGaming user, the study projects.

An overarching concern among prospective states surrounds the cannibalization of brick-and-mortar wagering through the introduction of iGaming. In terms of Maryland, TIG estimates a cannibalization rate of approximately 10% on casino gaming revenue, an amount that translates to a loss of around $200 million per year. But with a windfall of around $900 million annually, iGaming at maturity could result in a net positive of roughly $700 million a year, according to TIG.

Boosting Online Casinos Is Aim of Many Legislators In 2024 – https://t.co/G1gv7mA8by

— NCLGS (@NCLGS) January 7, 2024

Spectrum Gaming Group, meanwhile, authored a 114-page study for the Indiana Gaming Commission on the prospects for iGaming in the Hoosier State. Although an Indiana online casino bill failed to advance out of a House committee last February, there is still a push to bring iGaming to the state. Some supporters of iGaming often liken issues on cannibalization to online shopping, a space dominated by Amazon in recent years. In a changing environment, traditional department stores such as Macy’s and JC Penney can turn to online shopping to augment retail sales from inside mall properties.

“Usually, competition breeds a better product,” Fluharty told US Bets at the South Florida conference. “We’re constantly evolving, no matter what we’re talking about, gaming or any other sector that involves business and technology.

“You have to evolve to survive and thrive. The change that is coming is helping everyone, what we’re seeing on the cannibalization issue is you’re bringing in new players — those players most likely were not going to the casino to begin with. And now, when you look at it, I might be able to play the same slot at the casino. Then the casinos will react by providing more entertainment, that’s just the natural evolution.”

A New York State of Mind

New York is one state that entered 2024 as a favorite to legalize iGaming this year. During the state’s 2023 legislative session, New York State Sen. Joseph Addabbo encountered opposition from the Hotel & Gaming Trades Council, the union for hotel and gaming workers in the New York City area. Addabbo appeared to make headway with a provision in a January 2024 bill that would have earmarked $25 million in iGaming revenues to a fund for casino workers.

But on Tuesday he suffered a setback when New York Gov. Kathy Hochul opted to not include online casino gaming in her Fiscal Year 2025 executive budget.

Just days after New York State Sen. Joseph Addabbo introduced iCasino legislation for the second year in a row, Gov. Kathy Hochul effectively put the kibosh on it for 2024, reports @jeffedelstein https://t.co/KG0AqJ0okA

— US Bets (@US_Bets) January 16, 2024

Given the Empire State’s clout, another year without legal New York online casinos will be a bitter pill for iGaming supporters to swallow. There are other issues to contend with. Over a six-year period through 2018, iGaming brought $259 million in tax revenue to state and local governments in New Jersey, a report from Meister Economic Consulting and Victor-Strategies found.

The amount, however, may be offset by various societal costs, according to a separate report issued in November by NERA Economic Consulting. Citing rates of problem gaming in the U.K., additional costs from healthcare, homelessness, crime, and welfare could lead to up to $350 million in added expenses statewide, NERA estimates.

Nevertheless, Fluharty is optimistic that more states will come on board once legislators become acquainted with the potential economic benefits of iGaming. Asked, however, to predict a total for the number of states with online casino gaming by 2030, Fluharty demurred.

“It’s going to be at the forefront not just this year, but the years ahead,” he told US Bets. “The slow rollout we had of iGaming compared to sports betting makes sense because sports betting has been ingrained in our society.

“I foresee conferences like this and the evidence we’re providing as being able to not necessarily change the narrative, but provide more evidence for clarity.”

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