U.S. Embraces Sports Betting, Remains Cautious Of Internet Gaming

June 5, 2024
Despite many in the U.S. gaming industry believing that internet casino gaming is the future and will drive significant revenue growth, concerns about cannibalizing land-based casinos and increasing gambling addiction have stalled legislative progress so far in 2024.

Despite many in the U.S. gaming industry believing that internet casino gaming is the future and will drive significant revenue growth, concerns about cannibalizing land-based casinos and increasing gambling addiction have stalled legislative progress so far in 2024.

An inability to reach a consensus among key stakeholders has stalled bills seeking to legalize internet gaming this year in several state legislatures, from Illinois to New York and Maryland.

Illinois is one of a handful of U.S. states that analysts believe is a candidate for internet gaming legalization, while efforts in New York remain convoluted as the approval process for three downstate casino licenses continues to be delayed.

For the second consecutive year, internet gaming bills in both chambers of the Illinois General Assembly are on life support ahead of a fall veto session of lawmakers. 

Representative Edgar González Jr., a Democrat, filed House Bill 2239 in February which has failed to advance out of the House Rules Committee, while a companion bill – Senate Bill 1656 – filed by Senator Cristina Castro in 2023 currently sits in the Senate’s Gaming, Wagering and Racing Subcommittee.

Gonzalez’s bill would tax iGaming at 15 percent. The bill would allow licensees to have up to three individually branded internet casino skins, which differ from sports betting where each casino licensee is allowed only one. The fee for a license is $250,000, while a fee to renew a license is $100,000.

The Illinois legislature adjourned its regular legislative session on May 29.

Brendan Bussmann, managing partner at the Las Vegas-based advisory firm B Global, believes the state of Illinois has a lot of gaming issues to deal with from the tax increase on online sports betting and video gaming terminals (VGTs) to VGT expansion in Chicago and Bally Corp.’s pending construction of a downtown Chicago casino.

While the VGT industry is opposed to legalized iGaming, Bussmann expects it to become legal in Illinois at some point, but it is far from clear exactly when there will be enough to get a bill through the General Assembly.

In terms of New York, Bussmann made it clear in a conference call hosted by Truist Securities that the next step forward remains convoluted, as the process to issue three land-based casino licenses continues to be delayed with no end in sight as licenses may not be issued until early 2026.

About 11 casino companies and real-estate developers are looking to obtain one of the three licenses that will be awarded on a range of selection criteria. The state will receive $500m per license, with companies expected to spend another $1.5bn or more to develop their integrated resorts.

Bussmann said there had been the potential for New York to flip-flop priorities and put iGaming in the forefront of its gaming expansion plans, given the speed at which the state could launch iGaming compared with the time it would take to build or expand land-based casino.

“Doing this could provide the state a bridge to generate tax revenue until the land-based process concludes,” Bussmann said.

Elsewhere, Bussmann noted the recent letter by Saracen Casino Resort to the Arkansas Racing Commission seeking a rule change to allow for online casino games which had been a surprise and has, so far, been unsuccessful.

In the letter, a Saracen Casino Resort executive argued that Arkansas regulations already authorize interactive poker games and the rule could be amended to include other forms of casino games.

“Amending this rule to include other already authorized games would not only provide an opportunity for the casino licensees you regulate but it would also generate significant sums for the government,” wrote Carlton Saffa, Saracen Casino Resort's chief market officer.

Despite the letter, Bussmann said he did not see a push for legalizing iGaming in Arkansas “as imminent”.

In Maryland, Senate opposition to a bill putting the legalization of online slot and table games on the November ballot meant legislation was unsuccessful this session, even though House Bill 1318 passed the House of Delegates by a vote of 92-43, clearing the three-fifth majority needed to pass a state constitutional amendment.

Several of Maryland’s neighbors offer iGaming, meaning that pressure may be placed on state lawmakers to eventually put the issue on the ballot. New Jersey, Delaware, Pennsylvania, and West Virginia are among the states that offer iGaming.

The other states with iGaming are Connecticut, Michigan and Rhode Island. Nevada only permits online poker. In contrast, 38 states and the District of Columbia offer legal sports betting.

“Maryland couldn’t get iGaming across the line last session, though it continues to face budget constraints possibly driving the conversation,” Bussmann told Truist Securities. 

Legislative budget analysts project that by next year, Maryland’s structural budget deficit will grow to $1bn. In 2027, it grows to $1.3bn before reaching $3bn in 2028.

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