AUG 11, 2022
Legalizing internet gaming could bring in over $200M annually for Illinois, report finds
Illinois’ gaming industry has seen a major expansion in recent years with legalized sports betting and additional casinos.
Illinois could bring in an extra $273 million if it takes a step only six other states have and legalizes internet gaming, according to a report released this week.
A new report by VIXIO Gambling Compliance, a London and Washington, D.C.-based company that analyzes the gaming industry, found most states including Illinois could gain from passing legislation to allow residents to gamble and play casino games from the comfort of their own homes.
“Patrons of casinos also like to play the online games and it helps reinforce that business for the casinos, just like any other brick and mortar business tends to have an online business,” Howard Glaser, government affairs director for Light & Wonder, the organization that commissioned the study, told The Daily Line.
Only seven states — Michigan, New Jersey, Connecticut, Delaware, Pennsylvania, West Virginia and Nevada — legalize some form of internet gaming, also known as iGaming. Based on the number of adults who gamble online in those states, researchers calculated Illinois could bring in $273.7 million by legalizing iGaming at a 20 percent tax rate for the state.
“That approximates what the tax rate is in other states,” Glaser said.
Illinois has two bills in the pipeline that would legalize internet gaming, though neither has received a committee hearing since they were filed last year.
Internet gaming allows adults to play games they normally would play at a casino online from their phones or computers, including slots and table games. In general, the table games are tied to a casino within the state and are managed remotely by a dealer, Glaser said.
In the four states without substantial limits on internet gaming—Michigan, Pennsylvania, New Jersey and West Virginia — it has been a mostly profitable activity for the state. Pennsylvania brought in over $450 million in 2021 from internet gaming while Michigan brought in about the same amount researchers expect Illinois to receive if the practice is legalized.
Illinois casino revenue increased in Fiscal Year 2022 for the first time in 10 years, according to a report released earlier this month by the Commission on Government Forecasting and Accountability. The state brought in $1.31 billion for the year, bringing it close to the $1.35 billion of receipts from Fiscal Year 2019 before the pandemic cut casino revenues below $1 billion during the last two years.
Since sports betting began in early 2020 and online sports betting began later in the year, the state has brought in $153 million, which Glaser said shows there is a desire for online gaming.
“If you applied the same 15 percent tax rate, you’d be looking at over $200 million in the same year [from internet gaming] and that’s just because it’s a broader entertainment product,” Glaser said. “Sports betting is sports fans, and it is around specific events at specific times. And people want to play games on their phone.”
Internet gaming also appears to be more profitable for states than sports betting, which has become widely popular throughout the country since 2018 when the Supreme Court ruled sports betting was legal.
In 2021, researchers found internet gaming brought in $970 million of revenue for six states while sports betting brought in $560 million for 30 states, according to the report. Pennsylvania, New Jersey and Michigan also brought in hundreds of millions of dollars more from internet gaming than sports betting.
“Generally speaking, sports betting is being digested very successfully and I think the assumption is once you have sports betting in place, iGaming would be the natural follow up behind that,” Glaser said.
In the Senate, SB2064 by Sen. Cristina Castro (D-Elgin) would legalize internet gaming facilitated by casinos and horse racetracks with the state getting a 15 percent cut of the revenue. However, her bill would only allow the practice for five years.
Rep. Bob Rita (D-Blue Island), who has been behind several gaming measures in the House, filed HB3142 which does not expire after five years. Under Rita’s bill, the state would receive 12 percent of the profits and direct the funds toward programs to treat gambling addictions, pensions, and education.
Rita and Castro were not available to comment Wednesday.
Glaser, a former senior official in former New York Gov. Andrew Cuomo’s administration, said he believes part of the reason that internet gaming has not taken off at the same rate as sports betting is lawmakers are unaware of the revenue it could bring in.
“I don’t think there is a broad understanding of the revenue numbers and it’s one reason we commissioned this report,” Glaser said. “It’s a business the state is already in through the casinos. It’s just turning on the online channel.”
Another reason he believes internet gaming has not gotten much attention from state legislatures is because most are not searching for more revenue after federal pandemic relief funds filled budget holes and left states like Illinois with surpluses. However, he believes internet gaming might be the next revenue source for many states once pandemic relief dollars dry up.
“As that fiscal stimulus begins to wear off and lawmakers begin to look for new sources for funding, iGaming is on the shelf without raising taxes on anybody,” Glaser said.
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