As sports betting legislation continues to sweep the nation, online casino legislation continues to be … well, practically non-existent.
With only six states — New Jersey, Michigan, Pennsylvania, Delaware, Connecticut, and West Virginia — regulating iCasino, and zero states with bills passed or pending, it would appear the industry is stalled out.
But not so fast, according to industry watchers Eilers & Krejcik Gaming.
In a recent note, they observed that online casino revenue in the United States in the six states mentioned above has hit a plateau. But they believe it’s merely a pause, as evidenced by the words of Rush Street Interactive CEO Richard Schwartz, who, during the company’s most recent earnings call, said, “All of our peers, whether it’s large land-based casinos or sportsbook-first DFS companies, they are all aligned around funding, not just supporting verbally, but really putting some money to work to lobby for iGaming legislation for the first time really in the history of this industry in the U.S. market.”
$RSI – Rush Street Interactive, Inc. (RSI) Q3 2022 Earnings Call Transcript. https://t.co/POfrsyKy3n #stocks #markets #stockmarket
— Seeking Alpha (@SeekingAlpha) November 3, 2022
In other words, expect the industry to start spending a lot of time and money in an effort to woo legislators on the benefits of bringing iCasino to their states. And wooing will be needed, as online casino gaming has been a non-starter for many state legislatures thus far.
“The lack of aggressiveness in casino vs. sports comes down to undeniable facts,” said Rebecca Giden, the director of policy for Eilers & Krejcik. “Casino, specifically online casino, is still incredibly polarizing, especially when land-based casino referendums are still difficult to pass. There’s a small and vocal cohort of lawmakers in a lot of different states who just do not want any more gambling period, and on the order of most objectionable to least objectionable gambling expansion, online casino checks all the boxes. You have less objectionable gambling items, like sports betting and DFS, and more objectionable items, like online slots and table games. There’s a cultural barrier that absolutely still exists even in the 21st century, that still exists in a lot of states.”
But it’s not just the old fuddy duddies of the world who are keeping online casino legalization on the sideline; there are other issues.
“From a support standpoint, online casinos don’t bring in as wide a variety of stakeholders as sports betting does,” Giden noted.
So what can bring more states to the online table?
“In theory, the best path for online casino — unfortunately for the economy — runs through a real need, a real big budget deficit,” Giden said. “But even that is not necessarily sufficient.”
New York enters the chat
“We are still in the throes of a bad economic situation because of COVID, and we’re almost certainly not getting the federal assistance next year, it’s not going to be a birthday gift of billions of dollars a year,” said New York state Sen. Joseph Addabbo Jr. “So we’re going to need revenue, and so iGaming needs to be on the table.”
And when it comes to online casino gambling, New York, once again, is finding itself surrounded by states that have something in the gambling world New Yorkers don’t.
New Jersey? Check. Pennsylvania? Check. Delaware? Check. Connecticut? Check. New York? Lacking a check.
“I guess this is like when we did mobile sports betting — and remember, when we did this we were working under the previous governor, and that governor did not like expansion of gaming, even when the Supreme Court said we could,” Addabbo said. “I said, ‘My god, New York, the sports capital of the world, we should be in on this,’ and instead he let other states leapfrog over us, taking all our money, billions of dollars lost.”
The governor in question then was Andrew Cuomo. Today, the governor is Kathy Hochul, and Addabbo thinks he’ll have a much better chance of getting iCasino passed with her at the helm.
After winning last night, Sen. Joe Addabbo plans to continue his online casino push for NY as we head into the 2023 legislative season. "First and foremost, we'll look at iGaming," Addabbo said. "That's the priority at this point."
— Mike Mazzeo (@MazzNYC) November 9, 2022
“We now have an administration that is so professional and willing to have these conversations, so I like my chances here,” Addabbo said. “We won’t really know until we have those conversations and see how the budget goes, but if we do it right — and it will be done correctly in terms of safety measure protocols — I like our chances. We’ll see what the fiscal situation looks like. I can never see leaving billions on the table while we lose the money to other states. It’s that kind of rational discussion I look forward to having during the budget process.
“And once again,” Addabbo continued, “other states are doing it rather well and safely, New Jersey, Pennsylvania, and so forth, we’re still surrounded. And so we’re losing that money to other states and, of course, to the big, robust illegal market.”
Addabbo’s bill is sitting in the legislature, and he has high hopes it will get through this year and get signed by the governor.
Giden isn’t convinced — yet.
“New York was not too much on our radar because they just legalized online sports betting and they are also in the process of licensing the downstate casinos,” she said. “Next year feels like a good opportunity to figure out operational details. We currently have them in the 2024-25 range, a near- to mid-term candidate. I’m not over the 50% mark for next year, at least not yet.”
But Giden did note she saw a New York state budget projection, and it was not pretty.
“It’s looking like a big budget deficit, especially in regards to pension funding,” she said.
Nothing a little ching-ching-cha-ching on a few million iPhones couldn’t help.
The three I’s
So New York looks like it may be on its way to legalizing online casino play. Do any other states look promising?
“Illinois, Iowa, Indiana,” Giden said. “What we look for in making near-term projections … a really important part is just that lawmakers are willing to talk about it. So when we see bills filed, that’s the first indication. In Indiana, the state gaming commission ran a study on feasibility. These sort of tangible actions are pretty good signs. And what we look for on top of that is any evolution in major sticking points. For instance, Iowa’s major sticking point is the national casino operators are onboard but local operators are not yet convinced.”
One thing, however, is certain: The iCasino train has left the station.
“It continues to be very important,” Giden said. “You can hear it on the earnings calls. The big operators, the national brands, view online casino as very important to their long-term profitability. For their sports apps it’s a huge cross-sell opportunity, and online casino makes more money than sports betting. I can say this much: Casino legalization and expansion will not get less important in the next five years.”