Report: iGaming Could Generate $15 Billion in Tax Revenue

A new report suggests that legalizing online casino gaming (iGaming) in U.S. states that currently allow some form of legal gambling could generate billions of dollars in additional tax revenue annually. The study, conducted by the British intelligence firm Vixio on behalf of Light & Wonder (NASDAQ: LNW), estimates that state and local governments could collect between $9 billion and $15 billion each year from legal iGaming.

The report focuses on the potential financial impact if iGaming were legalized in all 44 U.S. states that currently permit either land-based casino gaming or online sports betting. The analysis estimates that if online casinos were legalized in these states, the annual tax revenue could reach as high as $14.98 billion, assuming a similar tax rate to that in Pennsylvania, one of the largest iGaming markets in the country.

• Currently, only seven U.S. states allow online casino gaming, and these states generated $1.61 billion in tax revenue in 2023.
• The report highlights that the three largest regulated markets—Michigan, New Jersey, and Pennsylvania—contributed the majority of this tax revenue.
• If iGaming were legalized nationwide, the potential annual revenue from online casinos could approach $50 billion.

The Growth and Potential of the US iGaming Market

As of 2024, U.S. online casinos are legal in New Jersey, Pennsylvania, Michigan, Connecticut, West Virginia, Delaware, and Rhode Island. The first states to launch online gaming were New Jersey and Delaware in 2013, followed by Pennsylvania in 2019. West Virginia, Michigan, and Connecticut joined the market between 2020 and 2021, and Rhode Island became the latest addition in March 2024.

Despite its recent entry into the market, Rhode Island’s revenue from iGaming was not included in the 2023 tax revenue figures cited in the report. Nevada, which only permits online poker, was also excluded from the analysis. The six states that offered full online casino gaming by the end of 2023 generated $1.61 billion in tax revenue, compared to the $2.06 billion brought in by the 29 states that legalized sports betting.

The American Gaming Association (AGA) reported that the U.S. gambling industry generated a total of $66.66 billion in gross revenue in 2023. Notably, mature iGaming markets like New Jersey, Michigan, and Pennsylvania contributed significantly to these figures, with the three states accounting for approximately 90% of all online casino revenue in the U.S.

In 2023, iGaming gross gaming revenue (GGR) across the six legalized states reached a record $6.17 billion, representing a 23% year-over-year increase. According to the Vixio report, tax revenue from online casinos, land-based casinos, and sports betting in New Jersey, Michigan, and Pennsylvania was divided as follows:

• iGaming: $1.52 billion
• Land-based Casinos: $1.84 billion
• Sports Betting: $317 million

Conclusion

New York has attracted significant attention as a potential new market for iGaming due to its large population and proximity to existing online casino states like New Jersey and Pennsylvania. However, despite the interest, the legalization of online casinos in New York is not expected in the near future. If iGaming were to be legalized in the Empire State, the Vixio report estimates it could generate nearly $1 billion in annual tax revenue.

The study also concluded that if all 44 states currently permitting any form of legal gambling were to legalize iGaming, the industry could generate an estimated $47.86 billion in annual revenue. This would represent a substantial boost to state and tribal government revenues, making iGaming legalization an attractive proposition for lawmakers seeking new sources of income.

As more states consider the potential benefits of iGaming, this report underscores the significant economic impact that online casinos could have on public finances across the U.S.