How to Make the Case for iGaming in New States

SEACAUCUS, N.J. – With just six states currently allowing legalized real money online casinos with interactive slot machines and table games, iGaming is a popular topic of discussion here at the third edition of the SBC | Summit North America at the Meadowlands Exposition Center. New Jersey is an appropriate site; it's a state in which both iGaming and sports betting are flourishing.

Online casinos in NJ generated Gross Gaming Revenue (GGR) of more than $1.3 billion dollars in 2021, with more than $205.2 million going to the state in tax revenue.

Meanwhile, sportsbooks (both retail, online) delivered Trenton about $102.6 million.

New Jersey, along with Pennsylvania, Delaware, Connecticut, Michigan and West Virginia have legal online casinos.

Delaware hit a bit of a landmark in iGaming recently.

Those states, plus Nevada, also have legalized online poker.

Here, in the summer of 2022 – with rising inflation, the cost of daily living, weather conditions, coming in and out of the COVID-19 pandemic and other state issues – how can iGaming be incorporated and become a part of a state that already has sports wagering or that is entering on its own?

“From a lobbying perspective, it’s about talking to the states about how the money will be used,” said Craig Brown, head of delivery at Incubeta, during a three-member panel of building market-ready iGaming strategies with a legalized jurisdiction. “Speak to the general public on how it’s going to impact their pocket and that’s what’s going to make politicians listen about money and tax implications. That is what’s going to help,”

New Jersey currently imposes an effective tax rate of 9.75% on retail sports betting GGR, and a solid 14.25% on mobile. iGaming platforms are required to share 15% of their gross revenue with the state.

“I think we have to wait a little bit,” said Todd Cravens, president and CEO of Galaxy Gaming, the largest independent provider of proprietary casino table games in the world, with 6,000 gaming tables located in more than 600 casinos. “One of the things that has happened over the last couple of years here in the states is that there have been a tremendous amount of federal funds going into all sorts of states. States that have had surpluses coming out of COVID, so they really don’t need a whole lotta cash. That’s going to change over the next bit of time.

“I actually think, as we go further down the road and the budget of states get a little bit more tightened and they don’t have the federal monies coming their way, we will see more of it. I also think the opportunities for states like New York that have a very high rate of tax on their sports betting, this gives them an opportunity to say, ‘Look, we need to go in there and make a little bit of a hedge against this for iGaming to come down the pike.’ ”

Another state in which both online casinos and sports betting are legal and co-exist is Pennsylvania. Last year, the Keystone State reported iGaming GGR of more than $1.11 billion. Sportsbooks kept more than $340.1 million of players’ bets. The state currently taxes internet slot machines at 54% and interactive table game revenue at 16%. The sports betting tax is 36%.

"From a political standpoint, if you are a state that has sports betting, you have physical casinos, you have a lottery in your state, it is very difficult to have a moral high ground that you are not going to allow iGaming eventually,” Cravens said. “I think the one thing we have to be is very, very careful on how much we go in and how heavy we go in. I think responsible gaming also has to be a key element in this.”

One thing is for certain: iGaming is on the table for states to at least think about and discuss whether they should make it available to their residents. The knock on the door is coming.