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States Embracing New Form of Gambling: iGaming

March 03, 2024 (5 min read)

Never before has gambling been more accepted in the United States.

Today, 38 states—more than three-fourths of the union—permit some form of sports betting. About half allow some form of casino gaming. Forty-eight states have lotteries.

Just last month, America’s biggest sporting event, the Super Bowl, was held in Las Vegas, after years of gambling being the NFL’s biggest enemy.

According to recent research by the American Gaming Association, nearly 9 in 10 Americans find casino gambling acceptable for themselves or others, and nearly half of all American adults participated in some form of gambling in the past year.

Gambling has gone mainstream. But don’t get too comfortable with the status quo. A new form of gambling is slowly sweeping the country—and it’s threatening to upend the entire U.S. gaming market.

Welcome to the burgeoning world of iGaming.

Don’t Confuse It with Mobile Sports Betting

Generally speaking iGaming is any kind of online wagering on the outcome of a game. Technically it includes mobile sports betting, but that has become its own category of gaming, which is now legal in 30 states. So iGaming typically refers to online casino games like blackjack or slots.

Today, iGaming is only legal in seven states: New Jersey, Delaware, West Virginia, Pennsylvania, Michigan, Connecticut and Rhode Island.

But iGaming can be, well, a game changer.

Michigan legalized iGaming in 2021 and already the Great Lake State is home to the nation’s top online gaming market. According to the AGA, Michigan ranked fifth among all states in overall gaming revenue at $3.6 billion in 2023.

“This is significantly higher than what anyone figured” when the law was passed, Eric Bussis, chief economist for the Michigan Department of Treasury, recently told the nonprofit news organization Bridge Michigan.

Then again, the popularity of iGaming has been exploding in Europe for years, with the market there expected to reach $88.16 billion by 2029.

That’s caught the attention of one of the biggest states in America, a state that just so happens to be in need of an infusion of cash.

New York Could Become Next State to Adopt iGaming

New York is facing a $4.3 billion budget deficit that is only expected to grow in future years.

To combat the shortfall, state Sen. Joseph P. Addabbo Jr. (D), chairman of the Senate Committee on Racing, Gaming and Wagering, has proposed legalizing iGaming in the Empire State.

Addabbo’s SB 8185 would generate revenue for New York through a one-time, $2 million fee on licensed operators as well as an operator tax of 31.5 percent.

The senator, who faces political headwinds with his proposal, is promoting legalized iGaming as an economic necessity given the state’s fiscal problems.

To minimize political opposition, a critical component of his proposal is that it would only make iGaming licenses available to existing gambling operators in the state: four upstate casinos, three downstate facilities in development, three racetracks and three New York gaming tribes.

This provision could eliminate one of the biggest criticisms of iGaming, that it cannibalizes existing brick-and-mortar gaming operations. For example, in Nevada, where casinos effectively rule the state, only online poker is legal and mobile sports betting apps can only be activated after users visit a sportsbook’s physical location.

These rules are designed to ensure that gamblers continue to visit the casinos that effectively fund the entire Silver State. 

More States Focusing on iGaming 

At least eight states have introduced legislation this year dealing with iGaming, also referred to as internet gaming or online casino gaming, among other things. New Jersey enacted one such measure, (SB 4268), prohibiting state employees from having an association with the internet gaming industry. Seven states have legalized iGaming, most recently Rhode Island, last year. 

iGaming Growing in East

Perhaps the biggest barrier to iGaming becoming legal in New York is its governor, Democrat Kathy Hochul, who hasn’t revealed her thoughts on the proposal.

Addabbo is insistent, however, that now is the right time to legalize it in the Empire State, in part because the neighboring states of New Jersey, Connecticut and Pennsylvania have already embraced it.

“New Yorkers are already doing iGaming,” he said, adding that the state just isn’t benefiting from it right now.

Indeed, New Jersey generated the same amount of annual iGaming revenue—$1.92 billion—as Michigan in 2023 (although Michigan outperformed New Jersey by $115,000), while Pennsylvania ranked as the nation’s third-largest iGaming market, with $1.74 billion in annual revenue.

Connecticut, in just its second full year of legalized iGaming, saw its market grow 44.7 percent in 2023.

In the fourth quarter of 2023, iGaming in America set a quarterly revenue record of $1.68 billion, up 20.6 percent from the fourth quarter of 2022.

“Our industry’s future is brighter than ever,” AGA President and CEO Bill Miller said in a recent webinar unveiling the association’s new economic numbers for 2023.

Online Gaming Could Be Headed West Too

It isn’t just eastern states that have an interest in online gambling. Hawaii, one of only two states that ban all forms of gambling (the other being Utah), is currently considering companion measures HB 2259 and SB 3376 that would authorize a 10-year license for one entity to operate an online poker platform and sportsbook.

The biggest prize in the gambling industry, however, is California.

In 2022, billions of dollars were spent for and against ballot measures to legalize sports betting in the Golden State, with California’s tribal casinos eventually winning the day by blocking it. But gaming executives do little to hide that they’re still eying California—and perhaps more importantly their interest in the Golden State doesn’t end at sports betting.

Richard Scheutz, a famed gambling regulator, has long maintained that the push for sports betting in California is just “the camel’s nose in the tent.” While there’s a ton of money to be made in sports betting in California, he says the real interest in legalizing it there is to then pursue iGaming.

“This really isn’t about sports betting,” he said. “This is really about iGaming.”

In other words, if iGaming isn’t being talked about in your state now, watch out, because it could be coming.

—By SNCJ Correspondent BRIAN JOSEPH

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