Steve Friess: It Will Take Time For States To Add Online Casino

A couple of weeks ago, when Rhode Island became the seventh state to legalize online casino gambling, it was the fruition of the nose-under-the-tent strategy of the gaming industry. That is, lobbyists and friendly legislators pushed through sports betting wherever that was all a legislature could stomach with an eye on returning to the capitol whenever it seemed online casino became palatable.

The Ocean State’s move is the first known success in this regard, and it has raised the hopes of many across the industry that it will work elsewhere soon.

It won’t. Rhode Island was an exception; a more widespread adaptation of online casino be inevitable, but it is not imminent.

At least not until the next time states are seriously strapped for cash.

For online casino, it’s fight another day

It’s understandable that the industry and those patrons eager to play online slots and table games would feel momentum on their side — and that skeptics and critics of gambling would be raising alarms. The dizzying speed with which legal sports betting, both mobile and retail, has spread throughout the U.S. has been among the most stunning cultural and economic shifts in American history.

You’d be hard-pressed to think of any other new industry that required this much legislation, regulation and capital investment that has become acceptable and embraced the way sports wagering has. While the three most populous states — Florida, Texas, and California — remain out of reach (although Florida might be getting closer after Friday’s court ruling), by early next year we’ll be up to 37 states plus D.C. where sports betting is legal either online or in person.

And yet just seven of those states will have online casino. It is technically legal in an eighth, Nevada of all places, but there’s been zero movement there to enact regulation and issue licenses in the decade since that legalization.

Of the rest, Connecticut, Pennsylvania, Michigan, Delaware and New Jersey made online casino legal and active at the same time as passage of sports betting. One, West Virginia, legalized sports betting in 2018 in anticipation of the U.S. Supreme Court’s ruling striking down a federal ban, and then returned in 2019 to add iGaming to the mix.

Online casino brings in greater revenue

In most places, the casino industry is very antsy to add iGaming because that’s where the real profits are in mobile gambling. Sports gambling is a pretty modest and risky moneymaker after the payouts of player wins, taxes and promotions are taken into account.

I’m reminded, however, of what Kentucky State Sen. Damon Thayer told me a few months ago after he dragged his sports betting legalization measure across the finish line. It was a Herculean effort, it required a ton of compromises and caveats, and Thayer, the Republican majority leader, was ready to move on to other priorities.

With a hint of creeping legislative PTSD, he said:

“I’m not interested in dealing with any more gambling bills for a while. If casino companies are looking to Kentucky to expand because we now have sports betting, I’d urge them to look elsewhere. I’m not interested in it.”

I suspect that’s also how legislators in Ohio, Vermont, North Carolina and Massachusetts are feeling right about now. Take the win, see how it goes, fight more another day or let someone else do it.

No groundswell for online casino

One reason sports betting caught on like wildfire is because it combined three great American tastes that taste great together: Sports, betting and technology.

We love our teams. We love our games. And boy oh boy do we love our phones.

It also was something new and novel to a huge swath of the public who didn’t feel safe or comfortable spending money with illegal, unregulated offshore sportsbooks.

By the time the Supreme Court opened the nation beyond Nevada to legal, regulated sports wagering, there was already a brick-and-mortar casino within a two-hour drive of every major city in mainland America. Few, if any, Americans felt their rights were being curbed by a blanket prohibition, so there was no groundswell for online casino.

Sports betting hit a sweet spot that crosspollinated popular culture, capitalism and freedom. The political right loves it because it feels all-American and libertarian. The political left loves it because it raises money for public projects. Those on either end who oppose it — those who object on religious grounds and those who believe the government must protect the public from itself — came across as scolds and spoilsports.

There’s no similar groundswell for online casino — and little evidence that there will be any time soon. Yes, there is an audience for it. Yes, it would mint gobs of profit for the casino industry. Yes, there is a similar “freedom” argument to be made. But go back to the public record and you find many legislators who came around to sport betting saying they were doing so because it isn’t merely a game of blind luck.

Online casino expansion will take more time

On May 31, a Raleigh News & Observer headline read:

“NC Senate votes to legalize sports betting, House expected to in days. Casinos may be next.”

See that? It’s like a warning. And probably, in the long-term, it will be true.

But it’s going to be a minute.

The fact is, the brick-and-mortar casino expansion that began in the late 1980s took decades to come to fruition. The concerns about gambling addiction and the exploitation of the poor competed in an epic, dragged out battle with the drive to provide the entertainment many people wanted to enjoy. Every casino that opened went through the same rigamarole before state legislatures, county commissions and city councils.

The thing that typically tipped the balance: The promise of new tax revenue at a time when a state or city desperately needed it. Whenever there was an economic downturn — the early 1990s, post-9/11, the Great Recession — these measures passed as ways to bring money and jobs to town.

So it will be again sooner or later. Once sports betting sinks in and becomes an ordinary, acceptable pastime, opposition to online casino will begin to wane.

But it won’t happen in a roaring economy such as what we see right now. States and cities are still flush with unspent emergency pandemic relief and funds from President Joe Biden’s infrastructure bill. Prices are up, yes, but the employment rate and wages are way up.

Rhode Island was an exception. Don’t get used to that.