US igaming could generate $6.35bn in annual taxes – L&W report

US igaming has the potential to generate over $6.35bn in annual state taxes, should the 42 states that legalize land-based casinos or mobile sports betting allow online casinos to operate
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US igaming has the potential to generate over $6.35bn in annual state taxes, should the 42 states that legalize land-based casinos or mobile sports betting allow online casinos to operate, according to a report conducted by Vixio GamblingCompliance.

US igaming market could reach $30bn GGR

Commissioned by Light & Wonder, the report revealed that allowing US igaming in the 42 states would generate over $30bn in total GGR. 

The report assumes an average tax rate amongst the states of 20%, leading to a calculation of around $6.35bn yielded for state coffers.

Whilst the estimates were made by Vixio and from independent forecasting measures, it is worth noting that the report was commissioned by Light & Wonder, a company 100% focused on igaming since its rebrand from Scientific Games and the divesture of its lottery business earlier this year. 

“Vixio’s report demonstrates that states are leaving billions of dollars in tax revenue on the table which could fund a variety of public programs and services without resorting to broad based taxes,” said Howard Glaser, Global Head of Government Affairs of Light & Wonder. 

“The dozens of states that already have land-based casino gaming merely have to turn on the digital channel to realize tax revenues which are otherwise being siphoned off by the prevalence of illegal off-shore internet gaming.” 

California theoretically leads the way

According to the report, California would be the most lucrative state should igaming ever be legalized, with a total GGR forecast of $4.27bn for the Golden State. It also notes that this would generate $853.1m in taxes to help the state’s coffers. 

However, with California’s legislators quarreling over the look of the prospective sports betting bill, it would seem unlikely that igaming would be legalized in the near future. 

That is unlike New York which, following the launch of mobile sports betting this January, is exploring the options when it comes to igaming. The report places the Empire State as the third highest igaming market, generating $2.14bn in GGR and yielding $428.2m in state taxes. 

New York was joined in the top five ranked states for US igaming taxes alongside Florida (GGR: $2.44bn + $487.8m tax), the already legalized New Jersey (GGR: 1.7bn + $308m tax) and already legalized Michigan (GGR:$1.74bn + $402.3m taxes).

New York Senator Joseph Addabbo, Chair of the NY State Senate Racing, Gaming and Wagering Committee added: “New York is surrounded by igaming states, namely New Jersey, Pennsylvania and Connecticut, which are witnessing hundreds of millions in annual revenue from igaming. 

“Those states have proven the model works and that iGaming can complement land-based casinos and ensure protections for players. When implemented safely and credibly, New York will also witness significant increases in revenue and educational funds from iGaming, while improving programs addressing gambling addiction. 

“It makes no sense for New York to lose that revenue to neighboring states and the illegal offshore market.”

US igaming subject to higher tax rates than sportsbooks

The report assumed that each state with legal land-based casino gaming or mobile sports betting would generate similar average revenue per adult as Michigan, New Jersey, Pennsylvania and West Virginia do for their already live igaming activities. 

It also averages a 20% tax rate, however, does note that igaming is subject to higher taxes than sports betting due to ‘the higher-margin nature of igaming relative to sportsbook operations’. 

This higher tax rate was shown in force in the report, which revealed, via state gaming commissions, that the six legal igaming states raised $970m in tax during 2021, compared to just $560 across the 30 live sports betting states in the same period. 

Indiana Senator Jon Ford, recently installed President of the National Council of Legislators from Gaming States (NCLGS), concluded: “Indiana prides itself on taking a thoughtful, measured approach to gaming policy. 

“With that in mind, we certainly recognize that igaming, when structured properly, has the potential to attract a broader demographic, and to become a meaningful source of state tax revenue.”