Gaming Stakeholders Again Refute iGaming Cannibalization Fears

Online casino gaming does not harm existing brick-and-mortar casino revenues, a panel of gaming stakeholders argued again during an industry conference Wednesday.

The handful of states with legal online slots and table games see net revenue positives from mobile gaming, representatives from some of the biggest names in U.S. corporate gaming said during a panel at Wednesday’s SBC Summit. The opposition from within and outside the industry is unfounded, panelists agreed.

The clearest indication of online gaming’s benefit to brick-and-mortar casino gaming benefits comes in revenue reports, said Adam Glass, director of B2B Services at Rush Street Interactive. 

“We look at the data the properties themselves are putting out that show coming out of COVID-19, retail businesses are growing and alongside those online businesses as well,” Glass said. 

In the five multi-operator online casino gaming markets – New Jersey, Pennsylvania, Michigan, Connecticut, and West Virginia – retail U.S. casino revenue figures have increased since the implementation of iGaming in their respective states. These figures, panelists Wednesday say, refute the cannibalization argument that has been one of the major factors in the suspended legalization of iGaming in new markets.

“Studies are what they are, but we’re very confident in being additive to the overall ecosystem and not trying to take away from what the retail side has been doing for a long time,” Glass said.

Proponents face inter-industry opposition

Many of America’s top gaming operators see regulated online casino games as an important tool to combat the rampant unregulated market – and a major new source of potential revenue. But while sports betting has been adopted in nearly 40 U.S. jurisdictions in the past six years, there are only seven states with some form of legal iGaming.

Unlike sports betting expansion, the gaming industry has been split among iGaming opposition and support groups. Spearheaded by former Las Vegas Sands founder Sheldon Adelson, who channeled millions of dollars opposing iGaming before his 2021 death, some large casino operators fear digital gaming will hurt their existing properties.

This division has been another blocker in iGaming implementation. Organized labor groups have joined in on the opposition, arguing it will hurt in-person visitation and, in turn, employment. Other opponents have argued this will further hurt auxiliary businesses near casinos, many of which are in economically disadvantaged areas.

These arguments helped sink iGaming legalization efforts in Maryland. Officials from Cordish Gaming, which operates Live! Casino Maryland, have publicly opposed online gaming and campaigned against the legislation.

This has actually hurt potential new jobs, Glass said. In New York, where organized labor has also opposed online gaming, this has hurt the potential for new marketing, media, and financial jobs in what would be the nation’s highest-grossing iGaming market.

Education remains essential

Educating lawmakers about cannibalization and the current offshore market remains a key to further iGaming expansion, said Caesar Fernandez, director of gaming relations for FanDuel. Not only does iGaming capture tax revenue not obtained by unlicensed operators already accepting bets, Fernandez said, but it also benefits government programs.

“That’s a lot of firefighters and police officers that don’t have to worry about whether their departments are underfunded,” Fernandez said. “And that’s part of the story, too. It’s not just educating on the actual products; it’s the larger picture of the net value add.”

The commercial gaming industry generated roughly $66 billion in gross gaming revenue in 2023, per the American Gaming Association, of which around $6 billion came from online casinos. Tax rates vary between game types, but the combined industry generated around $14 billion in taxes – more than $1 billion of which came from iCasinos.

Though it means millions more in tax revenues for iGaming states, it still represents 1% or less of a state’s annual budget. This has sparked fears of tax revenue losses from established brick-and-mortar streams in exchange for an uncertain digital return.

Online casino proponents argue that not only has iGaming not hurt these traditional casino revenues it has augmented them. In-person slot play and table game revenues increased 3.8% and 3.5%, respectively, in 2023 compared to 2022. Online casinos grew 22.9% during that same period.

Explaining this may take individualized education, said Elizabeth Suever, Bally’s vice president of government relations. Ahead of Rhode Island’s iGaming launch, Suever said she tried to garner lawmakers’ support person-by-person. She said many were unfamiliar with online casino gaming platforms.

This online gambling unfamiliarity compounds with opposition from within the industry itself, stakeholders have said, helping to explain the difficulties in legalization in new markets. Changing these laws takes continued pushes to showcase the benefits of a regulated market.

“You’re leaving all this tax revenue on the table by not legalizing it and all this money is going offshore,” Suever said. “You could use this (money) to do all this good for your constituents, your state, and your community.”

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