How much money are states with online sports gambling, but without iGaming, missing out on each year?

For the better part of four years, sports bettors looked longingly across to New Jersey – and also Pennsylvania (depending on what part of the Empire State you were–as the duo were the first to embrace the new online sports betting landscape in mid-2018.

The Garden State (and once again, the Keystone State to a smaller extent) also benefited from the fact that New York did not legalize sports betting right away: some estimates put the total amount of bets placed from people coming across the various bridges into New Jersey at 25 percent.

But it was not just the sports bettors that were gazing at the record numbers New Jersey was posting each month: lawmakers in the Empire State saw potential tax revenue slipping through their fingers with every month.

Maybe that was not as important before the COVID-19 pandemic, but after it? New York needed to legalize sports betting quickly, and it finally did, as the Empire State finally went live in January of 2022.

Yes, the sports betting revenue numbers in New York have been massive. But the Empire State, and many others that have (Illinois) or will soon (Ohio) are still missing out on a massive chunk of change that New Jersey has monetized very successfully.

Online Casino Revenues

According to this study done by data analyst Martin Eriksen of NJ.bet, which took into account the projected amount of iGaming tax revenue in New Jersey and then adjusted for population size and income differences (NY 15 %: 1,055 million USD (NJ iGaming tax revenue 2022 projected)*(NY population/NJ population)*(NY per capita income/NJ per capita income) = 2,265 million USD), New York could be missing out on over $2.2 billion in tax revenue each year.

If New York taxed iGaming at 25 percent, that number would jump to $3.775 billion each year.

But it is not just the Empire State that could benefit from this. Currently, there are only six states that allowing online casino gambling: Connecticut, Colorado, Delaware, Michigan, New Jersey, Pennsylvania, and Michigan.

This time, New York lawmakers can basically look in any direction and see neighboring states raking in the cash from iGaming. 

So, what are the numbers each state could expect if they use New Jersey as a guide?

If the following states were to introduce igaming in 2023, what could they expect in terms of tax revenue based on the best practice example from NJ (15% tax for online casinos at 33 of the licensed online casinos sites)?

Let’s take a look.

Estimates for IGaming Tax Revenues in Selected States (Annually):

Below estimates for possible tax revenues in states with legal online betting or upcoming legal betting is depicted:

For New York–and Ohio, Illinois, Colorado, and on down the line–it looks to be a slam dunk: legalize iGaming, and start bringing in much-needed tax revenue on top of their sports betting takes.

Here is the methodology for the report:

How did we do?

NJ projected iGaming tax revenue of 1055 million USD is the basis of the calculation. The states have been adjusted for population size and income differences.

For example:

NY 15 %: 

1,055 million USD (NJ iGaming tax revenue 2022 projected)*(NY population/NJ population)*(NY per capita income/NJ per capita income) 

= 2,265 million USD

Sources:

• Source income: apps.bea.gov 2022 Q2 (SQINC1 State quarterly personal income summary: personal income, population, per capita personal income).
• Source population: data.ers.usda.gov
• Betting taxes has been found on: taxfoundation.org/sports-betting-tax-treatment

Premise:

• Players will, over time, get the same player behavior as in NJ, not taking societal values etc., into account. 
• The data is based on speculative criteria: the same tax and number of online casinos.
• Income adjusted to purchase power (PPP) comment: Estimates have also been performed for income per capita adjusted for purchasing power, which changed the end result up to 17 % for OH, but in most cases, 5-10 %. For New York, a 2 % difference if adjusting for PPP was seen.

Weaknesses: 

• The calculation does not take retail and tribal casinos into account. Data shows a slight decrease in revenue of approx. 10 % in Michigan after adopting online casino games.