The Agenda

Foot in the Door

By Roger Gros, Publisher

Gaming has always grown incrementally. For almost 40 years in the U.S., Nevada was the only gaming in town—or in the country. When New Jersey considered legalizing gaming, it was limited to Atlantic City. The hotels needed to be at least 500 rooms. Casinos were limited in size, and had to close for at least four hours a day.

Native American tribes offered only bingo games early on, figuring if religious organizations were able to offer bingo, so should they. Some public officials disagreed, but most states let it go on. At Foxwoods, they offered a bingo game that stretched across a room bigger than a football field.

Now when the Indian Gaming Regulatory Act passed in 1988, all bets were off. Tribes could offer the same kind of gaming permitted elsewhere in the state, whether it was by charities, the lottery or private establishments. In Minnesota they only allowed video slot games for years for some reason. In Oklahoma, Class II bingo slot games were the limit. In Connecticut, only tables were permitted at the outset because the basis of legalizing gaming there were the Las Vegas Nights that some charities were permitted to hold where only table games could be offered. California has inched from bingo games to full-blown casinos on the strength of several statewide referendums.

In the early 1990s, gaming was legalized on riverboats in the Midwest and South like the old days. In most cases, they actually had to cruise and players needed to make a reservation to board. The old Western towns of Deadwood, South Dakota and Cripple Creek, Black Hawk and Central City, Colorado, were permitted some limited gaming with strict limits.

Horse racing realized that linking a casino to the tracks would help them save a dying sport. Again, strict limits were imposed so that casinos would not overshadow the racing. That didn’t last too long.

All these forms of gaming have now evolved into the mature industry that provides jobs, tax revenues and economic development.

The rise of iGaming in the U.S. has followed a similar path. It started in Delaware but New Jersey was the first state to introduce a full-blown industry, and to this date, the most successful. But then it stalled. Since then, only Pennsylvania, West Virginia and Michigan have joined the fray.

Sports betting, meanwhile, has been pedal to the metal since day one when a New Jersey lawsuit overturned the PASPA law in 2018 that prevented the widespread growth of sports betting. As of early December, sports betting was up and running in 29 states plus the District of Columbia, with three states considering legislation. All that occurred in only three and one-half years, compared to five iGaming states in eight years.

So what’s going to spur some of these sports betting states to consider legalizing iGaming?

Several things. First, lawmakers were mesmerized with the numbers that sports betting proponents were discussing. Their eyes lit up when you talked about billions of dollars in bets. But when it comes right down to it, the tax revenues from sports betting are bound to be disappointing.

On the other hand, iGaming presents a much more lucrative tax situation for states. You’re able to set a higher tax rate on iGaming because there’s no bricks-and-mortar overhead and you can still run a profitable iGaming site with a tax just south of 50 percent, even though the most successful iGaming states, New Jersey and Michigan, have a much lower tax rate.

And if another pandemic comes down the road, your taxes from land-based and sports betting will dry up if those industries are again shut down. The locked down will continue to gamble online, and taxes will still flow through that portal at a time they’re needed most dearly.

Sports betting has gotten people accustomed to betting on their mobile devices, which is an essential for iGaming. They now understand how to create accounts, deposit and withdraw funds, and get used to playing online for money. Social casinos have also helped them get over that hurdle.

Land-based casino companies are getting more involved in creating connections between their bricks-and-mortar facilities and their online casino sites. Early on, they basically just turned over their online operations to a third party and considered that revenue to be icing on the cake. Now, that revenue is quickly being seen as part of the cake, with the ability to connect with their players in a 365degree omnichannel approach.

Yes, believe it or not, sports betting was just a foot in the door, and legal online gaming is the golden goose.