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Regulators From Established US Online Casino Markets Agree: No Retail Cannibalization

Competing studies released in the past year offer differing takes on whether online casino gaming is cannibalizing brick-and-mortar casinos in the United States. But what do the people who actually oversee gambling in the established US iCasino markets think about cannibalization in their states?

Casino Cannibalization
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Matthew Kredell Avatar
10 mins read

Competing studies released in the past year offer differing takes on whether online casino gaming cannibalizes US brick-and-mortar casinos.

But what do the people who oversee gambling in established US iCasino markets think about cannibalization in their states?

PlayUSA reached out to representatives of gambling regulatory bodies in those states to get their thoughts on the effect legal online casinos have had on brick-and-mortar gaming facilities.

While some expressed that the possibility of cannibalization is an important issue to monitor, none believed legal online casinos have negatively impacted casinos or jobs in their states.

David Rebuck, who recently retired from 13 years as director of the New Jersey Division of Gaming Enforcement, told PlayUSA:

“When you hear the fearmongering of cannibalization and loss of jobs from internet gaming, I have 12 years of data in New Jersey showing it isn’t true. Online gaming doesn’t cannibalize brick-and-mortar casinos and it doesn’t hurt casino jobs.”

Maryland is the battleground for cannibalization argument

In February, more than 100 Maryland casino workers wearing green T-shirts crowded into a room in Annapolis for a House Ways and Means hearing. Many testified that if legislators moved forward with Maryland online casino legislation, they would lose their jobs.

Their union handed out a green flier titled “SAY NO TO iGaming in Maryland” that claimed 43 other states have made iGaming illegal because it is a job killer.

The flier stated that 16,000 casino jobs were lost when iGaming passed in New Jersey. If approved in Maryland, it said that 2,000 casino jobs and 8,000 indirect jobs were projected to be lost.

In January, The Innovation Group stoked those fears in a briefing at the same committee. The Maryland Lottery & Gaming Control Agency chose The Innovation Group to study iGaming the previous year.

Brian Wyman from The Innovation Group explained that their research showed a 10% reduction in brick-and-mortar casino revenue when comparing states with iCasino to states without iCasino. The study also projected a 4% to 8% reduction in labor.

A New York labor union also cited the Innovation Group study this year in opposing New York online casino efforts.

Two of the six casinos in Maryland also oppose online casinos — Ocean Downs (owned by Churchill Downs) and Maryland Live! (owned by The Cordish Cos.).

The Anne Arundel County Chamber of Commerce, located in the same county as Maryland Live!, commissioned Sage Policy Group to conduct a study. Sage concluded that if the state legalized online casino, it would result in a loss of somewhere between 1,200 and 2,700 jobs at Maryland casinos after reducing brick-and-mortar casino revenues by 26%.

What regulators say in markets with legal online casino

When industry stakeholders try to respond to studies citing cannibalization by refuting the methodology or funding studies of their own, they are dismissed by iCasino opponents as the biased retorts of online interests.

Regulators can provide an impartial and informed opinion to settle the debate. They oversee the entirety of the gambling markets in their states and have an interest in protecting physical properties and jobs.

Here’s what established iCasino market regulators told PlayUSA about the impact they have seen on brick-and-mortar casinos.

A seventh state offers iCasino but the market is too new to provide information on possible cannibalization. Rhode Island launched online casino on March 11 through one operator, Bally’s.

Pennsylvania

Pennsylvania, which launched online casino in 2019, produced the biggest iGaming revenue year ever for a state last year with $2.1 billion. And, according to PlayPennsylvania, land-based casinos continued to thrive. Bolstered by iCasino, the Pennsylvania improved its total gaming revenue to a state-best $5.7 billion.

Pennsylvania Gaming Control Board Executive Director Kevin O’Toole said land-based slot machine revenue was up 3.1% in Pennsylvania in 2023 over the previous year. Table games were down slightly, 1.8%, after having a really good year in 2022. He wouldn’t call that cannibalization by Pennsylvania online casinos.

“Just because you have a good amount of customers at your iCasino games or betting sports online doesn’t necessarily mean they’re cannibalizing your land-based properties. That’s where my comment would be with respect to is there cannibalization. The answer is no. Does that mean you should not worry about it? You should always pay attention to it. You want to make sure you give these casinos an opportunity to continue their success.”

Pennsylvania has increased casino jobs since the implementation of iGaming with the opening of four new mini-casinos.

O’Toole said casino workers seem to be doing just fine in the state. He pointed to Harrah’s Philadelphia Casino, which had just signed a new contract with its food and beverage personnel. He added that Evolution has created 400 live dealer jobs in Pennsylvania, and he knows many brick-and-mortar dealers increase their income by moonlighting as online dealers.

“We haven’t seen labor use online casino or sports wagering as a reason to complain about their situations in Pennsylvania. I couldn’t explain why there may be a different perspective in another jurisdiction. I don’t know why these jurisdictions would bring up any issue with job security based upon iGaming.”

New Jersey

Along with Delaware, New Jersey online casinos were the first to market in the US, launching in 2013. And regulators believe the addition of iCasino has kept the Atlantic City gaming industry afloat.

Last year, as the state celebrated its 10th anniversary with iGaming, online casinos produced a state record $1.9 billion in revenue according to PlayNJ. And yet the site also shows that $2.85 billion in land-based slot revenue last year was the highest total since 2013.

Louis Rogacki, deputy director of the New Jersey Division of Gaming Enforcement, said that Atlantic City casinos have been able to use online casino promotions to enhance their brick-and-mortar revenue.

“I think our properties have realized that if you market it properly, it can be used as a tool for customer acquisition to bring new customers that are wagering online into the properties. So I would say what we have seen in New Jersey is a reverse cannibalization, especially as the market has become more established.”

Rogacki added that he hasn’t heard about any issues of casino job loss in New Jersey.

“It’s always a concern to make sure we’re keeping jobs in New Jersey, and I’m not aware of any job loss at brick-and-mortar casinos as a result of iGaming,” Rogacki said. “I would want to know from the industry if they’ve noticed any issue.”

Rebuck asserted that online casinos provide a wealth of information to make a regulator’s job easier.

“I constantly have to deal with other states who are fearful of internet gaming. And I tell them … as a regulator, you have more information, you have more tools at your disposal, you have more power and data and evidence in how to regulate the industry than you do in any retail environment.”

Michigan

PlayMichigan recently reported that the Michigan online casino market has remarkably increased in revenue every month since launching in January 2021.

Last year, Detroit CFO Jay Rising told The Detroit News (paywall) that the city was being cautious with casino tax revenue projections because it appeared some brick-and-mortar gamblers might be switching to online.

But that’s not how Henry Williams, executive director of the Michigan Gaming Control Board, sees it. Williams told PlayUSA:

“It’s been our observation that the brick-and-mortar commercial casinos in Detroit (MGM Grand Detroit, MotorCity Casino, and Hollywood Casino at Greektown) have seen steady revenue numbers since iGaming launched in Michigan in 2021. With that being said, there are always some potential variables that may interfere from time to time (such as the weather, a worker’s strike, or sporting events) that can make a difference, along with the end of various stimulus payments from the COVID era that may impact bottom lines. At this stage, we simply don’t have reason to believe that iGaming is cannibalizing land-based casinos but it is something we are keeping an eye on.”

Detroit casino workers also went on strike for 47 days last year, hurting land-based casino revenues. Minus strike months, PlayMichigan noted that the three commercial casinos in Detroit showed growth in 2023.

Michigan also has 12 Indian tribes that operate 26 tribal casinos. All 12 tribes entered commercial agreements with the state to offer iCasino. Regulators from one large Michigan gaming tribe told PlayUSA they had not seen cannibalization from online casino.

West Virginia

Early in the 2020 pandemic, with its four racinos closed, the West Virginia online casino market helped the racinos stay afloat after launch.

Despite increased competition from bordering states, West Virginia set a state record with $157 million in online casino revenue in 2023. It helped the West Virginia Lottery produce a state record $1.34 billion in revenue last year.

After a week of consideration, the West Virginia Lottery declined to comment on the issue. But Del. Shawn Fluharty, president of the National Council of Legislators of Gaming States and sponsor of the bill that legalized online casino in 2019, said he has not heard of any issues with cannibalization in West Virginia.

“I represent a district with a casino, so I would be the first to hear of complaints. That hasn’t happened. West Virginia casinos saw iGaming as a partnership and a new player-acquisition opportunity. This entire cannibalization issue stems more from politically manufactured outrage than it does from a factual policymaking perspective.”

Connecticut

Greg Smith, president of the Connecticut Lottery Corp., said retail lottery and tribal gaming continue to go strong in the state more than two years since Connecticut online casino and sports betting started.

“Since launching in late 2021, online gaming revenue has grown significantly in Connecticut. Customers of all products have many more choices for their entertainment dollar and, as with any new offering, customers appear to be doing some sampling but the existing products remain strong.”

Connecticut doesn’t have commercial casinos. But the two Connecticut tribes fought to get online casino and sports betting to accentuate their physical gaming properties. Mashantucket Pequot Tribal Chairman Rodney Butler told PlayUSA last September at Foxwoods that iGaming was helping to bring new customers into the casino.

Delaware

Delaware was the earliest adopter of online casino in October 2013. But the small state has only one Delaware online casino operator through the state lottery and three land-based commercial casinos.

BetRivers became the new internet gaming provider for the Delaware Lottery in December 2023.

Delaware Lottery Director Helene Keeley said that the agency’s unique role as regulator and operator has allowed it to put controls in place to monitor cannibalization and adjust when needed.

“Since our inception into the iGaming world in 2013 until 2023, Delaware Lottery has seen no evidence of impact on our three Delaware brick-and-mortar casinos. With the launch of our new iGaming platforms, we have seen increases in new player accounts, brand awareness, and cross-marketing opportunities with the new platform provider. We all work together, as a family, with the same goal to maximize revenue for the Delaware General Fund.”

Other factors impact casino revenues, jobs

Studies funded by groups opposing online casino assume that any dip in revenue or job loss at brick-and-mortar casinos in iCasino markets is caused by online play. State regulators see other reasons.

Rebuck explained that the 16,000 New Jersey casino jobs lost, highlighted by the union in Maryland, were because five Atlantic City casinos closed between 2013 and 2016. But he contends those closures were not a result of online casino.

Instead, the closures were caused by additional casinos opening on the state’s borders in Delaware and Pennsylvania and two racinos in New York City.

O’Toole also cited competition across the border as impacting casino jobs in Pennsylvania. He added that weather events can lower casino revenue.

“When it comes to what causes personnel to go down, you look at Harrah’s in Chester,” O’Toole said. “They were affected by the launch of Live! Casino Philadelphia because of proximity and because the fact that they are both 100 yards off the I-95.”

Rebuck credits iGaming and online sports betting for two Atlantic City casinos reopening in 2018.

“The bottom line is the primary loss of jobs has been caused by the expansion of new retail casinos throughout the region. Technology at those retail locations has also impacted performance and productivity and eliminates manual jobs just like every other commercial operation in the US.”

The Innovation Group study also references a volatile time for casinos marred by the pandemic. Rebuck noted that Atlantic City casinos are still trying to ramp up staffing after the pandemic.

“COVID still has a negative impact on staffing as hundreds of full-time positions in AC casinos remain unfilled as we speak,” Rebuck said.

Eilers & Krejcik study better reflects regulator comments

Responding to the cannibalization claims in studies cited in Maryland, online gaming trade association iDEA Growth commissioned a study by Eilers & Krejcik.

In its economic analysis of land-based casino revenues since the legalization of online casinos, the Eilers & Krejcik study compared the growth rate of land-based casino revenue before and after the introduction of iGaming in these six states.

Results showed a positive change in quarterly growth after the introduction of online casino in all six states:

  • Connecticut +0.34%
  • Delaware +1.94%
  • Michigan +4.89%
  • New Jersey +1.28%
  • Pennsylvania +0.14%
  • West Virginia +6.02%

That’s an average quarterly increase of 2.44% in land-based casino revenue over the six iCasino markets, which corresponds with the comments state regulators made to PlayUSA.

Eilers & Krejcik found little value in comparing states with and without iGaming because, in the markets that have adopted online casino, land-based casino revenues were generally flat or in decline at the time iCasino launched.

PlayUSA keeps track of states with active online casino bills. Only Maryland appears to still have a chance to legalize iCasino this year. But more states will be considering online casino legalization in the future.

Rebuck had one last piece of advice for states considering whether or not to legalize online casino, pointing out that illegal gambling is already going on.

“If you do nothing, guess what, it’s still there. It operates in each of the 50 states today. Everyone has online gambling. Everyone. Even Utah.”

Fluharty added that cannibalization is a benefit of legalization. But he doesn’t mean cannibalizing land-based casinos.

“The real cannibalization we should be talking about is cannibalizing the black market, which was our goal in West Virginia.”

Matthew Kredell Avatar
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Matthew Kredell serves as senior lead writer of legislative affairs involving online gambling at PlayUSA. He began covering efforts to legalize and regulate online gambling in 2007 and has interviewed more than 300 state lawmakers around the country.

View all posts by Matthew Kredell

Matthew Kredell serves as senior lead writer of legislative affairs involving online gambling at PlayUSA. He began covering efforts to legalize and regulate online gambling in 2007 and has interviewed more than 300 state lawmakers around the country.

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