Industry Refocus Needed To Secure Online Casino Expansion, Say Execs

September 26, 2022
Leading gaming executives have pointed to a need for the industry as a whole to adapt strategically and adjust its priorities in order for online casino expansion to ramp up in the United States and reverse its current stagnation.


Leading gaming executives have pointed to a need for the industry as a whole to adapt strategically and adjust its priorities in order for online casino expansion to ramp up in the United States and reverse its current stagnation.

Compared to the rapid expansion of sports betting, which is now legal in some form in 36 states, internet gaming is essentially stuck in neutral, with online casinos regulated in only six states and only one adopting legislation since the beginning of 2020.

Although the explosion of sports-betting legalization is in many ways the exception to the rule when it comes to U.S. gaming expansion historically, that fast growth has enhanced the perception that online casino legislation is lagging.

As Howard Glaser, head of global government affairs for Light & Wonder, pointed out during a panel at the East Coast Gaming Congress in Atlantic City last week, that perception is also a reflection of industry expectations coming out of the coronavirus pandemic.

“During that period of time when land-based casinos went to literally zero revenue and states went to zero tax revenue from casinos, you saw the success and the growth of iGaming, and that was the proof point that added some reinforcement to the industry view that we’ll sit back and we’ll watch and we’ll wait and we’ll see iGaming sweeping the country,” Glaser said.

“That obviously didn’t happen because in some ways, we didn’t really make it happen.”

He pointed to headwinds such as states having excess revenue from federal stimulus packages and internal concerns from some stakeholders regarding the effect of online casino on their core land-based business. In addition, some state legislatures suffered from gaming fatigue following debates on sports betting that in many cases were ultimately resolved after extended negotiations.

Luisa Woods, vice president of marketing for gaming and entertainment for Delaware North, added another area where the comparison between sports betting and online casino falls apart is that sports betting has a larger tent of stakeholders pushing for changes compared to iGaming, which is pushed more exclusively by the gaming industry.

“You had media, you had the leagues and the teams and you had governments all coming together with a shared need and a shared objective around generating revenue, around addressing falling viewership, around addressing cord cutters and the fragmentation of media consumption, and they all needed to find ways to be able to generate new revenues,” Woods said.

“And when you look at how sports betting has expanded, there are all of these beneficiaries that are not necessarily the gaming operators.”

Richard Schwartz, CEO of Rush Street Interactive, added that many in the U.S. gaming industry simply have not been prepared to implement online casino until now.

“I say that because many of the land-based casino groups were just working out their own partnerships, their own strategies, developing their loyalty integration with the retail properties, creating an omnichannel strategy, and now that’s developed, you’ve seen clearly in some of the remarks by the largest land-based casinos that are now advocating very strongly towards legalizing iCasino, which wasn’t the case six months ago, a year ago, two years ago,” Schwartz said.

He added that for larger sports-betting companies, their interests are also aligned to bring the higher-margin online casino product to more states.

“Some of the ones with stronger sports-centric focuses are recognizing as well that with a goal to be profitable, which has become a target for the industry now in a way that it wasn’t six months ago, two years ago, that the economics of iCasino helps deliver that result.”

Glaser said that the industry has also been “distracted” by other pursuits, pointing to the ongoing sports-betting battle in California over separate ballot initiatives pushed by tribal interests and commercial gaming operators.

“That effort is basically a circular firing squad for the industry fighting among itself over who’s going to divide the pie that will exist as opposed to spending the time, resources, energy, intellectual capital on expanding the pie,” Glaser said. “If I had 10 percent of what they’re spending, I’ll give you iGaming in ten states.”

“That was ill-considered,” he added. “We’ve all heard the expression ‘the house always wins’; the tribes are the house in California and Florida.

“You’re not going to win, and they’re not going to win, but we can win iGaming and I think we will if we reset and reboot where we are and get along together as an industry.”

Another example of a state-level challenge for iGaming is New York.

Glaser said the legislature has shown some interest in iGaming, pointing to an online casino bill that cleared a Senate committee this year, but that interest could be impeded by efforts to lower the state’s 51 percent tax on mobile sports betting.

“No one wants to see that in iGaming, and the various entities that are involved in sports betting are more focused on bringing the sports betting tax rate down than they are in getting into iGaming,” added Glaser, who previously served as a senior advisor and director of operations for former New York Governor Andrew Cuomo.

“I’ll offer the opinion that’s also short-sighted. The New York state legislature is no more likely to lower a tax rate that you yourself put forward than the earth is to crash into the sun as we are in this meeting right now,” he added.

“It’s just not going to happen, so the focus on iGaming would be a more productive use with getting a blended tax rate, which would be valuable for everybody.”

Jeff Millar, commercial director of North America for Evolution Gaming, said that in addition to bringing online casino to new states, the industry can improve significantly on the existing offerings it has.

“Right now, we’ve still got a backlog of games and content that we haven’t rolled out in North America,” Millar said.

“It’s now really a time to get your house in order, to get it aligned with how your processes work in each of these states, and I’m confident that in the states where iGaming has been legalized already that there’s plenty of room for growth.”

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