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A new study says legalizing US online casinos in every remaining state could generate billions in additional tax revenue.
According to the report, which was prepared by English intelligence company Vixio on behalf of Light & Wonder (NASDAQ: LNW), state and local governments could each year earn between $9 billion and $15 billion in annual tax revenue from legal iGaming.
That is, if online casinos were allowed in each of the states that currently permit land-based casino gaming or online sports betting.
If legalized in all 44 states that allow legal gambling in some form, land-based or online, the estimated annual tax revenue that could be generated by legal iGaming is $14.98 billion, assuming a comparable effective tax rate to Pennsylvania.
Key takeaways
- Currently, online gambling is legal in just seven states, which (without the recently launched Rhode Island) delivered $1.61 billion in tax revenue in 2023.
- The three largest regulated markets — Michigan, New Jersey and Pennsylvania — generated most of the online casino tax revenue in 2023.
- The report says the potential size of the US iGaming market, measured by annual revenue, could reach nearly $50 billion.
The US online casino market holds significant potential
US online casinos are legal in these seven states:
- New Jersey
- Pennsylvania
- Michigan
- Connecticut
- West Virginia
- Delaware
- Rhode Island
Online gaming first went live in New Jersey and Delaware in 2013. Pennsylvania online casinos launched in 2019. West Virginia followed in 2020, and Michigan and Connecticut in 2021.
Launching iGaming in March 2024, Rhode Island was the latest state to legalize online casinos and wasn’t included in total revenue generated last year. Nevada wasn’t included in the report either, as it only permits online poker.
Six states that offered iGaming at the end of 2023 delivered $1.61 billion in tax revenue for state and tribal governments during the last year. According to the American Gaming Association (AGA), that compares to nearly $2.06 billion in total tax revenue generated by 29 legal sports betting states.
The AGA also revealed that the US gambling industry generated $66.66 billion in gross revenue in 2023.
US mature markets accountable for nearly 90% of the revenue
In 2023, combined iGaming GGR from the six states hit a record $6.17 billion, showing a nearly 23% annual increase. Being mature markets and more populated states, New Jersey, Michigan and Pennsylvania were responsible for about 90% of the revenue.
The VIXIO report further states that New Jersey, Michigan and Pennsylvania commercial gaming tax revenue split in 2023 was divided as follows:
- iGaming: $1.52 billion
- Casinos: $1.84 billion
- Sports betting: $317 million
All eyes on the NY online casino market
Due to New York state’s population and its proximity to online casino states, much attention is being paid to considering iGaming legalization in the Empire State. However, it is unlikely that New York online casinos will become a reality soon.
Vixio estimates that legalizing iGaming New York could generate nearly $1 billion yearly.
Moreover, Vixio researchers concluded that if 44 states that currently offer any form of gambling would legalize iGaming, the potential annual revenue generated by that activity is estimated to be $47.86 billion.
As the report estimates, iGaming legalization would not only improve the industry but also significantly increase state and tribal government revenues.
