iGaming Study Suggests States Leaving $15B in Possible Tax Revenue on the Table
A recent study on iGaming indicates that states might experience an instant financial boost by making online slot machines and table games legal.
The regulatory intelligence company Vixio, located in London, was recently hired by Light & Wonder, a worldwide leader in creating and producing gambling products and services, to investigate the potential tax revenue effects of additional states making iGaming legal. At present, just seven states allow online casino gambling: Connecticut, Delaware, Michigan, New Jersey, Rhode Island, Pennsylvania, and West Virginia.
Vixio researchers determined through their market analysis that if the 44 states with in-person casino gambling and/or mobile sports betting allowed online gambling platforms, the national iGaming market might expand to nearly $50 billion each year in gross gaming revenue (GGR). This could result in a potential tax surplus of as much as $15 billion annually.
“States and local governments could conservatively generate approximately $9 billion to $15 billion in annual tax revenue from legal internet gaming,” the Vixio report summarized.
iGaming Surpasses Sports Betting
Sports betting operates on thin profit margins, which differs from online casino operators, where the win rates for interactive slots and table games far exceed what oddsmakers earn.
Last year, tax revenues from online casinos across just six states — with iGaming starting in Rhode Island in March 2024 — reached $1.61 billion. Legal sports betting generated $2.06 billion in tax revenue, with 29 states having commercial sportsbooks active last year.
Additional evidence that iGaming generates significantly more tax revenue than sports betting is that last year, the six states where online casino gambling was tracked included three of the less populous states. West Virginia is placed 39th, Rhode Island is in 44th, and Delaware holds the 45th position in terms of population.
Vixio found that iGaming operators earn higher revenue per person in states with larger populations, particularly in Michigan, New Jersey, and Pennsylvania. If more populous and wealthy states such as Maryland, Massachusetts, New York, and California were to legalize iGaming, those areas would likely surpass the current markets in terms of per capita GGR production.
"It is likely that larger, wealthier states that may authorize iGaming in the future would over-perform compared to the blended average revenue per adult figure used for the purposes of this report,” the Vixio summary read.
The total iGaming GGR from the six states last year hit an all-time high of $6.17 billion, increasing nearly 23% compared to the previous year.
New Jersey, Michigan, and Pennsylvania represented over 90% of the income. iGaming operators in New Jersey and Michigan generated approximately $1.92 billion, while online casinos in Pennsylvania earned $1.74 billion.
Largest Recipients
Numerous states have contemplated legalizing iGaming in recent years, including those that Vixio predicts would surpass the current online casino states regarding yearly tax revenue.
Vixio estimates that New York might generate approximately $1 billion each year by legalizing iGaming, whereas the Illinois state government could benefit by nearly $700 million annually.
Naturally, numerous critics exist regarding online casino gambling. iGaming opponents often point to societal issues, such as increased problem gambling and the risk of minors accessing online casino platforms.
