As U.S. operators eagerly anticipate more states regulating online casino games, New York could initially look to limit the availability of iGaming to certain hours of the day, according to a chief proponent in the state's Senate.
Online casino gaming is currently legal in just six U.S. states, compared with the 24 states that have already dived into the highly competitive online sports-betting market, where operators are now under increasing pressure from Wall Street to show a clearer pathway to profitability.
For New York — home to the largest mobile sports-betting market — internet gaming is very much the “next step,” said state Senator Joe Addabbo, a Democrat who chairs the Senate’s Racing, Gaming and Wagering Committee.
Speaking at the SBC Summit North America on Wednesday (July 13) in New Jersey, Addabbo suggested legal iGaming could be considered as part of the process to adopt New York’s next state budget in 2023.
However, the lawmaker from Queens also suggested the Empire State could look to an incremental rollout of online casino, due to concerns of responsible gambling.
“The ease of which to do iGaming concerns me in terms of the problematic gaming possibility and the addiction, so we need to be careful with how we go forward doing iGaming in New York,” Addabbo said.
“Maybe it’s not 24/7 in New York; maybe we start off iGaming with limited hours, then we control it, even more so.”
Although New York’s four full casinos may operate on a 24-hour basis, under current law, its video lottery facilities have to close for at least four hours daily.
Lawmakers need to think not just about the revenue potential of online casino, Addabbo said, “but I need to think of it also in terms of the addiction issues as well.”
Slower Regulatory Cycle Than Sports Betting
Addabbo’s comments point to one of the most intriguing dynamics of a U.S. market in which state policymakers have been so quick to embrace mobile sports betting but more hesitant when it comes to online casino.
In those states with both verticals, online gaming accounts for around two-thirds of the revenue, while the impacts of the COVID-19 pandemic have masked the fact that land-based casinos are benefiting from combining their brick-and-mortar operations with online play, said Richard Schwartz, CEO of BetRivers operator Rush Street Interactive.
Land-based operators in the U.S. are now growing increasingly enthusiastic about lobbying for expanded iGaming, Schwartz said during a separate SBC summit panel.
“As that starts to solidify, I think you’ll see some movement on the iGaming side,” he said. “Eventually, the focus is going to be more on the online casino side.”
The slower and more reluctant rollout of legal online casino is not surprising at least as far as the number one U.S. sports-betting operator is concerned.
“The regulatory cycle we’ve seen is about what we expected,” FanDuel CEO Amy Howe said, crediting her company and rival DraftKings for generating significant momentum for legal sports betting even prior to the 2018 U.S. Supreme Court ruling through their lobbying for the regulation of daily fantasy sports.
Flutter-owned FanDuel is having a lot of success cross-selling sports bettors to online casino in states where both are regulated, with around 50 percent of bettors moving over to iGaming in Connecticut, according to Howe.
The FanDuel boss also described the “economic surplus” iGaming offers states with legal sports betting as “massive.”
“It’s just going to take a little longer,” Howe told SBC delegates.
One state highlighted at the SBC summit as an example for others to follow was Michigan.
In just 11 months in 2021, the Wolverine State was able to join the top five largest regulated online casino markets in the world, generating some $1.11bn in gross iGaming gross revenue compared with $292m in revenue from online sports betting.
The benefits of legal online gaming to land-based casino operators can be evidenced by MGM Grand Detroit growing its share of Michigan’s land-based casino market after seeing an “incremental lift” in customers coming from BetMGM’s online casino, said BetMGM chief revenue officer Matt Prevost.
“I think they can be very complementary,” he said of land-based and online casino.
Michigan was able to approve legislation for both online gaming and online sports betting in 2019 because of significant compromises made on the tax rate for the former, as well as an alignment of key stakeholders, most notably the state’s Indian tribes, said Dave Murley, deputy director of the Michigan Gaming Control Board.
“We knew the pie would be big; we didn’t know how big it would be,” Murley said. “But there is enough to go round for everyone.”
One reason for Michigan’s rapid rise was the state allowing for marketing prior to launch of online sports betting and iGaming, according to Marcus Yoder, chief commercial officer for Playtech in the U.S.
That meant “the revenue went just straight up, whereas in New Jersey and Pennsylvania it had to climb.”
The prospect of legal iGaming spreading beyond Michigan means tribes in other states should consider what will work for them in terms of operating models, advised Jim Wise, vice president of marketing and online gaming for Michigan’s FireKeepers Casino owned by the Nottawaseppi Potawatomi Indian tribe.
FireKeepers has chosen to operate its own-brand online casino and sportsbook in Michigan, but it involves a lot of work, Wise said.
It could also make sense for tribal casinos to outsource to a national brand when it comes to their online sportsbook skin, but perhaps not for iGaming given the overlap with casinos’ existing brands and their traditional slot and table player bases, added Quincy Raven, managing director U.S. for Aspire Global.
As things stand, the U.S. iGaming market is challenging for new entrants because there are so few skins in Connecticut and Delaware, no skins remaining in Michigan and few left in New Jersey, while Pennsylvania imposes such a high tax rate of 54 percent on online slot games, said Rob Picard, Rush Street Interactive’s vice president of business development.
However, adoption by more states could ultimately be a lifeblood to certain operators that may not otherwise be able to avoid consolidation in a sportsbook-only market, according to Bobby Soper, a consultant and former CEO of the Mohegan Tribal Gaming Authority.
Soper compared online sports betting to the poker room of a land-based casino that plays a key role in attracting players to the property, but often does not generate a profit.
“In my mind, online sports betting can be profitable if you are sensible in how you operate, but the pot of gold is iGaming,” Soper said. “That’s going to be the real opportunity in online.”