How Can Online Casinos Make Headway in America?

Currently, 40+ states have legalized some form of retail casino gambling. Conversely, only seven (7) states have passed iGaming legislation along with Nevada, a state that permits social online casino gambling where cash rewards can be given. Based on the popularity of casino gambling, one would have to question why there is a disparity between retail and online casino gambling nationwide. The answer is quite interesting.

As a point of reference, the seven (7) states that have successfully passed iGaming legislation include

• Connecticut


• Delaware


• Michigan


• New Jersey


• Pennsylvania


• Rhode Island


• West Virginia
  

It's also necessary for the following discussion to point out that many of these states do have Indian tribes and corporate gambling interests that participate in the overall casino gambling sector.

Why the Disparity?

In the seven (70 states where residents can play online casino games at home, lawmakers were able to navigate some of the issues with which other states struggle. The three (3) biggest issues are problems related to appeasing Indian Tribes, navigating around corporate interests that run other types of gambling, and cultural sensitivity. Let's take a look at these issues because they are all interfering with the iGaming sector's ability to make headway in America.

1. Tribal Interefence

In 1988, Congress passed and the POTUS signed The Indian Gaming Regulatory Act (IGRA). This law was put forth to protect the ability of U.S. Indian TRibes to secure income by offering retail casino gambling. The law even went so far as to give Tribes exclusive control over such activities. The law also established the National Indian Gaming Commission under the control of the Department of the Interior.

The law was never challenged before the advent of online casino gambling. State-by-state, it was generally accepted that Tribal entities would run brick-and-mortar casinos without competition. Rest assured, Tribes like the Seminoles in Florida have greatly benefited from IGRA with some Tribes being able to fully support their people with gaming revenue.

The fireworks started in May 2018 when the United States Supreme Court lifted the country's ban on sports betting. At the same time, a general ban on internet gambling was also lifted, clearing the way for online sports betting, lotteries, and yes, online casino gambling.

In many states, Indian Tribes reacted by reminding everyone that they have control over all forms of casino gambling and were leery about sharing any of that pie. The pie they are talking about goes beyond gaming revenue, which is quite substantial in states like California and Florida. The pie also includes all of the resort income that comes in from hotel and restaurant operations.

To the nation's Tribal community, this fear of cannibalization of gaming revenue is very real. However, the data suggests the fear might be a little overblown. Recently, the American Gaming Association released the final casino revenue data for 2024. The overall casino sector reported annual revenue of almost $50 billion with significant contributions from both retail and online casino operations.

The minimal effect of cannibalization was further supported by data released by MGM Resorts. MGM Resorts is one of the few large casino operators with both retail and online operations. For the year-end December 31, 2024, the revenue reported from retail operations was flat compared to the same period in 2023. That indicates very little cannibalization. There is no reason to believe that MGM is an outlier.

2. Dealing With Corporate Interests

While Indian Tribes are battling to protect their gaming revenue stream, other corporate interests also take issue with the possibility of iGaming cannibalization in their respective states. Corporate interests refer to companies and organizations that operate race tracks, non-tribal casinos and poker rooms, and lotteries.

This is a major issue in states like Indiana, New York, and Kentucky. All three (3) of these states generate a lot of revenue from horse racing operations. That's especially true in the "bluegrass state" of Kentucky where horse racing and the affiliated breeding industry are quite significant. Indeed, none of these corporate gambling operations is going to hand over its revenue without some form of compensation for doing so.

Cultural Sensitivity

Cultural sensitivity refers to states that tend to steer clear of all forms of gambling because of religious or cultural concerns. This is evident in states like Utah where the Mormon faith rules the Political landscape. Barring a sudden ideological change, there is no chance any form of gambling will ever get legalized in Utah.

Surprisingly, Texas has also veered away from passing gambling legislation. This is largely attributable to the state's Baptists who don't approve of gambling activities. We see the same thing happening in other parts of the deep South. It's also worth mentioning that Hawaii has proven to be a hard gambling nut to crack because Polynesian culture has always looked down on gambling as a disruptive force among communities.

One final comment under the cultural sensitivity category. More than a few states live in fear of problem gambling as a potential black eye. Time and again, this fear has led the way as a reason why some states don't want to go near the legalization of online casino gambling.

How to Deal With These Empasses

To unlock the opportunity to get iGaming legislation passed in the future, a look at how it came to be in the aforementioned states is necessary. It's worth noting that each of these states has created massive amounts of much-need tax revenue over the last few years. That alone should be the driving force behind fiscally challenged states passing iGaming legislation to help fill their tax coffers.

Currently, as many as six (6) states are taking another look at iGaming legislation. That includes Indiana, Illinois, Maryland, and even New York. The outlook is murky for 2025, but there is movement, which should be viewed as a positive sign heading into the future. With that said, compromise seems to be the only realistic way forward.

To get iGaming legislation passed, lawmakers have to be sensitive to the needs of Indian Tribes and race tracks. If legislators are willing to carve out enough of the revenue pie to compensate Tribes and corporate gambling operators for any potential lost business, they might be willing to listen. We know that because it's getting harder for all interested parties to ignore the increasing popularity of online casino gambling in America. The sector had a record-breaking year in 2024 and more of the same is expected going forward.

One way this issue is being mediated is by prioritizing the issuance of iGaming licenses to Indian Tribes and race tracks. It's the promise to relieve the potential for revenue loss from iGaming competition. It could work because Tribal leaders are good business people and they know there is another revenue stream out there to be tapped.

We'll know by the end of 2025v whether or not online casino headway is in the cards for American online casino gamblers.