Among the many tolls exacted by the COVID-19 pandemic, one has been a severe economic loss to states.
But earlier this week, a group of experts gathered for an online panel hosted by the National Coalition of Legislators from Gaming States — better known as NCLGS — suggested that there are more urgent, and more lucrative, priorities.
“Sports betting captures the headlines, but online [casino] gaming is bigger,” said Golden Nugget casino executive Thomas Winter. “The reason is that iGaming players are older and have more disposable income.”
Typically, about 95% of sports bettors are male, Winter said, and they tend to be aged 30-35, whereas online casino players are more likely to be aged 40-45.
He also noted that sports betting produces lower margins, with the unique possibility of bettors actually “beating the house” in the occasional month.
In the first five months of 2020, Golden Nugget racked up $121 million of the Atlantic City casino industry’s $338 million total online casino profits.
Sports betting lagging in 2020
Sports betting produced just $96 million in revenue in that time frame as the lack of major sports competition due to the worldwide pandemic has left such wagering stagnant even as online casino play has nearly doubled in that span.
Winter added that online casino gaming someday could become a $22 billion annual revenue stream across the U.S. He said that New Jersey operators, who collected $483 million in 2019, could reach $780 million in 2020.
“There is still a misconception that online casino play cannibalizes land-based casinos,” Winter said. “But iGaming’s competitors are Netflix and Candy Crush — not casinos.”
Winter called New Jersey Division of Gaming Enforcement regulations “the gold standard not only in the U.S., but worldwide.”
He suggested that states adding online gaming would do well to “copy and paste” New Jersey online casino regulations both for more efficiency and as a cost savings.
The issue of how many “skins” — or online casino operators — should be permitted in each state is becoming clearer, Winter said. He estimates that three skins per 1 million residents is an optimal number, and suggested that states match New Jersey’s 15% online casino gaming tax rate.
The pandemic has boosted online casino gaming dollars, but a 15% increase in gambling among longtime customers will evaporate, Winter conceded, once the economy returns to a relatively normal level. Former customers who have revived their accounts, Winter added, may fade way within 12 months.
But he said that of the influx of new signups, about 15% may stay “for years and years.”
Online lottery a good play for states?
Gaming executive Michael Lightman of Cerpien Solutions pointed to another overlooked area of opportunity for cash-starved states: online lotteries.
Lightman said that lotteries overall generate $90 billion in annual sales with a $25 billion revenue stream, with a participation level of U.S. adults annually at 75%.
He cited a comment by Massachusetts Treasurer Deborah Goldberg that “COVID-19 has exposed the vulnerabilities of the lottery’s all-cash-in-person business model.”
Online lotteries are now legal in 10 states, Lightman said, and he echoed Winter’s observation that adding an online gambling option does not harm the traditional product.
Retail lottery sales are up 45% in the six years since Michigan added online lottery play, Lightman said, with Georgia up 20% in five years and Pennsylvania managing a 7% increase after one year of adding online lottery play.
The sizzle of sports betting “handle”
So why does online sports betting get more of the attention?
Michael Pollock, managing director of Spectrum Gaming Group, speculated that some legislators may mistake “handle” — the amount of money wagered annually — for “win,” or the amount of revenue generated by operators.
“That’s probably what has attracted attention — those enormous numbers,” said Howard Glaser, the global head of government affairs and special initiatives for Scientific Games. “But it boils down to what does the state receive on the other end of that?”
In New Jersey, the sports betting handle for 2019 was $4.6 billion, with operators collecting $299 million and the state collecting a mere $36.5 million.
“With the lottery, the state collects the bulk of the revenues,” Glaser said. “So it’s an education process for legislators.”
There tends to be a “disappointment” among legislators regarding sports betting, Glaser added, when the big handle numbers don’t translate to a major revenue boost for the state.
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