After months of work, the National Council of Legislators from Gaming States (NCLGS) published its full draft model legislation for iGaming on Monday.
The council has opened up the draft for public comment. The ultimate aim is to help prepare state lawmakers to introduce and sponsor online gambling bills by offering a framework that can be built and tailored to specific state conditions and requirements. The draft acknowledged that legislation should vary to lean into and support existing gaming infrastructure in a state.
NCLGS noted that the model legislation is built around several “fundamental principles,” including avoiding cannibalization of retail gaming, enforcing strict regulation, ensuring stiff player protection and security safeguards and avoiding infringing on state online lottery operations and tribal gaming.
The draft outlines a range of recommendations, some of which operators “may” do and others it says operators “shall” do.
NCLGS asserts best iGaming tax rate is 15-25%
NCLGS recommends states impose a tax rate of between 15 and 25% of licensees’ adjusted gross revenue. This, the council says, would achieve “the desired result” of maximizing revenues, allowing for competitiveness with other gaming jurisdictions and facilitating competitive technological growth, all without creating a barrier of entry.
NCLGS notes that the average iGaming tax rate in the U.S. is 19%, excluding Pennsylvania’s 54% tax on online slots.
The council also referenced the potential for states to implement a graduated tax rate, noting that Michigan online gaming operators pay a rate on a sliding scale based on adjusted gross receipts. Another high-profile example, albeit on the sports betting side, is Illinois‘ move to a graduated rate that tops out at 40% for the biggest revenue-generating sportsbooks.
Illinois isn’t the only state in which tax reform has been discussed this year. In New Jersey, a bill to hike tax rates for both online sports betting and online casino to 30% was introduced to the Senate back in April. On the other side of the coin, a bill introduced in Ohio advocated for online casino expansion with a tax rate of 15%, lower than the 20% currently levied on sports betting in the state.
Model legislation takes hardline stance on sweeps
The NCLGS also included a section in its model legislation specifically dedicated to online sweepstakes casinos, a repeated thorny topic of discussion in 2024.
For many states, there is a lack of legal clarity around sweepstakes casinos. Accordingly, the model legislation suggests a section that would explicitly define and forbid sweepstakes entities from operating in a state.
As for what classifies as a sweepstake, NCLGS defined it as any online game, contest or promotion that simulates casino-style gaming, awards a prize based on chance, and allows players to exchange an in-game currency for any prize or cash equivalent. That definition would be extended to, but not limited to, slot machines, video poker, table games, lottery games and sports wagering.
Any person or entity found operating sweepstakes under this definition should be subject to a fine of not less than $10,000 and not more than $100,000 for each violation and subject to potential loss of gaming license, said the council. The state’s gaming regulatory authority would have the right to investigate and take enforcement action.
Legislation suggests fast-tracking licenses for existing operators
Among the other specific issues discussed by the NCLGS in the draft model legislation include licensing. The council stipulated that states shall offer “an abbreviated application process” for iGaming applicants that currently hold a valid sports betting license “in good standing.” Licensees should be given the option to offer multiple brands, a model currently used by the likes of Caesars Digital in various states.
The draft legislation also approved of the Multi-State Internet Gaming Agreement (MSIGA), which allows online poker operators connect their poker sites across state lines. Currently, players in Nevada, Delaware, Michigan, New Jersey and West Virginia can play against each other under a MSIGA.
There were also numerous responsible gambling and player protection-related recommendations, including the mandatory creation of a player health program.
