A mantra in the gambling industry is “ the more competition , the better .” For operators , more competition can mean higher advertising or promotional spend , but it also means more innovation and overall profit for the industry . For consumers , it means more choice , competitive odds , and creative promotions .
A mantra in the gambling industry is “ the more competition , the better .” For operators , more competition can mean higher advertising or promotional spend , but it also means more innovation and overall profit for the industry . For consumers , it means more choice , competitive odds , and creative promotions .
Beginning in 2018 , when the U . S . Supreme Court overturned PASPA and made legal sports betting a state ’ s rights issue , U . S . jurisdictions legalized at a quick clip . Between May 14 , 2018 , when PASPA was overturned , and December 31 , 2021 , 19 states legalized some form of sports betting . Pennsylvania legalized in 2017 , and lawmakers in Delaware , Mississippi and New Jersey didn ’ t need new laws to go live . By the end of 2021 , a total of 25 U . S . jurisdictions were offering some form of legal , live sports betting , and 18 were offering digital wagering .
The tide has slowed since the initial rush , when states were feeling budget pinches , in some cases related to the Covid-19 shutdowns . In 2022 and 2023 combined , six states legalized . Halfway through 2024 , no state has voted to add legal sports betting or online gambling .
Want Revenue ? Online Casino is the Ticket
Rather than increase taxes in existing markets or set a higher bar for yet-to-legalize markets , Fluharty says there is a simpler way to create more revenue for states — legalize online casino .
So far , seven U . S . states , including Fluharty ’ s West Virginia , have done so . Of those , lawmakers in Connecticut , Michigan and West Virginia were able to pass sports wagering and online casino simultaneously . So far , Rhode Island lawmakers are the only ones to have passed a stand-alone online gambling bill after legalizing sports betting .
“ If states really want tax revenue , they would legalize online casino ,” Fluharty says . “ The saying in golf is ‘ drive for show , putt for dough .’ In this case , it ’ s ‘ sports betting for show , iCasino for dough .’ The real narrative is that if you are a state legislator , and you want good policy , then why aren ’ t you passing online ( casino ) gambling ?”
In 2023 , legal sports betting generated $ 4.5 million in tax revenue for the state of West Virginia . Online gambling generated $ 21.9 million .
Gambling revenue in West Virginia goes , in part , to fund educational scholarships .
Bussmann says the sweet spot for online gambling taxes is about the same as sports betting — 10-15 percent . Of the legal states , some have flat rates and others have bifurcated rates . Just like in brick-and-mortar casinos , online slots have a higher profit margin than table games , so some states choose to tax the online slots at a higher rate .
Art of the Tax
West Virginia taxes its online casinos at 15 percent . Fluharty says that when the state legislature legalized sports betting and online gambling in 2018 , it “ looked at tax rates very thoroughly . We looked for that sweet spot where you would have open competition , and no barriers to entry .”
A mantra in the gambling industry is “ the more competition , the better .” For operators , more competition can mean higher advertising or promotional spend , but it also means more innovation and overall profit for the industry . For consumers , it means more choice , competitive odds , and creative promotions .
Setting the tax rate is , ultimately , an art . Legal gambling is an industry of nuances , including when it comes to tax rates . States where legal gambling is regulated by the lottery have a stated goal of bringing in the highest amount of tax revenue possible , so many of those states have the highest tax rates . In other states , like Massachusetts , the top-line goal is consumer protections . And in still others , the goal may be consumer choice and competition .
It is , Susquehanna ’ s Stauff notes , easier to raise tax rates than it is to legalize a new form of gambling . Legal sports betting failed to get across the finish line in Georgia , Minnesota and several other smaller markets in 2024 . But 40 U . S . jurisdictions are already offering it . Comparatively , online casino barely got a look in many states , and it failed in Maryland , the great hope for legalization in 2024 . Seven states offer online casino .
“ It ’ s easy to raise taxes on online sports betting , in particular ,” Stauff says . “ It ’ s much harder to further expand gambling . iCasino could be a much more significant source of revenue , but it ’ s much harder to organize support around gambling expansion .”
16 Global Gaming Business JULY 2024