Legalizing online casinos across most of the US could generate up to $15 billion in additional annual tax revenue for state and tribal governments, per a new Vixio report.
Prepared for global gaming supplier Light & Wonder (LNW), the report from London-based Vixio highlighted the untapped potential of online casino gaming on US tax coffers. The new forecast updates a previous Vixio report published by LNW in 2022, offering a conservative estimate of the tax potential of legal US iGaming.
In its US iGaming State Tax Revenue Potential August 2024 report, Vixio notes the US commercial gaming market earned $66.66 billion in gross revenue in 2023, citing the number produced by the American Gaming Association (AGA).
However, it predicts nearly $50 billion more “if iGaming were legalized in all 44 states” with existing land-based commercial, tribal casinos, or mobile sports betting.
States Missing Out on $9 to $15 Billion in Annual Tax
In 2024, only seven US states permit online casino gambling: Connecticut, Delaware, Michigan, New Jersey, Rhode Island, Pennsylvania, and West Virginia.
Nevada allows online poker but not casino-style games, which are available in other iGaming states.
In 2023, six online casino states generated roughly $1.61 billion in iGaming tax revenues for state and tribal governments. (Rhode Island is excluded from the total as it only introduced online casinos in May 2024).
In comparison, legal sports betting generated approximately $2.06bn in 2023 tax revenue from 29 states. Even with 23 more states, legalized sports betting only raised an extra $450 million in tax revenue.
According to Vixio, if all 44 states currently offering some form of legal gambling added online casinos, tax revenues could reach $14.98 billion annually. The report based its numbers on existing tax rates in current iGaming states. Here, the highest result reflects Pennsylvania rates.
From the report:
State and local governments could conservatively generate approximately $9bn to $15bn in annual tax revenue from legal internet gaming, or iGaming, if iGaming were permitted in each of the states that presently allows land-based casino gaming or mobile sports betting.
Taking the Lead From the Big Three
Importantly, Vixio notes that its numbers assume that states would generate average revenues per adult resident in line with established US markets.
- Connecticut
- Michigan
- New Jersey
- Pennsylvania
- West Virginia
The report also acknowledges that average revenue per adult varies across the five states noted above. And that the larger markets of Michigan, New Jersey, and Pennsylvania generally earn more revenue per capita.
Further, the report predicts that higher-populated, wealthier states would “similarly over-perform” compared to the blended revenue average if they allowed online casinos. As a result, Vixio calls its predictions “conservative.”
Indeed, 56% of the US population lives in states with at least as many residents as New Jersey, and 81% lives in states with 5 million residents or more.
To build its forecasts, Vixio assumed that new iGaming states would tax online casino revenues at rates equivalent to one of the US’s three largest iGaming markets.
Vixio used current applicable tax rates for existing online casino states to determine related numbers. The one exception was a 6.75% rate for Nevada, as that state has historically applied the same tax rate to all forms of legal gambling.
Average 2023 tax rates of the top three US iGaming States:
- New Jersey: 17.5%
- Michigan: 25% (20-28%)
- Pennsylvania: 33% (54% slots, 16% interactive table games)
Applying the above rates resulted in forecasts ranging from $8.96 billion (based on New Jersey rates) to $14.98 billion (using Pennsylvania’s average). The Michigan-based prediction offers a middle-ground estimate of $11.88 billion in unrealized taxes.
Conversation Moves to Linkedin
Howard Glaser, LNW’s global head of government affairs, summarized the report’s findings on LinkedIn.
In his post, Glaser noted the specific tax boosts expected for several states that have considered legalizing iGaming. Commenters pointed out that these revenues could benefit state social programs, including affordable housing and mental health.
Online Casino Tax Revenue Estimates (US$M) for selected states:
- Illinois: $367M to $693M
- Indiana: $194M to 367M
- Iowa: $91M to $172M
- Louisiana: $133M to $252M
- Maryland: $177M to $334M
- Massachusetts: $208M to $392M
- New York: $575M to $1085M
- Ohio: $342M to $645M
In a similar post to Glaser’s, industry stalwart John Pappas spoke about the opportunity online casinos present in the US.
Further, the public affairs & government relations consultant noted the importance of stakeholders’ contributions to the coming legalization conversations.
This report underscores the significant opportunity that iGaming presents for states considering legalization. As more states explore this revenue channel, it’s crucial for stakeholders to advance the conversation on how iGaming can drive economic growth while ensuring responsible gaming practices.
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