A study commissioned by the Rhode Island Department of Revenue (RIDOR) projects that Bally’s proposed single-operator online casino market would generate $69.3 million in gross gaming revenue (GGR) in the first year. It expects that to grow to $111.3 million by the fifth year. The state’s cumulative share over those five years would be $162.6 million, based on a 51% share of slots revenue and 18% of table games.
That new estimate is just 77% of what Bally’s suggested its proposal would bring to the state. Its number came from a separate study, which it commissioned from Spectrum Gaming. RIDOR’s analysis comes from Christiansen Capital Advisors (CCA), which, like Spectrum, specializes in the gambling industry.
The discrepancy is, perhaps, unsurprising. As young as it is, there are many uncertainties in the US online gambling market. Moreover, the Rhode Island proposal isn’t quite like anything that exists in other states. As a result, projections require a lot of assumptions, and those paid for by parties pushing for a particular outcome should be taken with a grain of salt.
Fortunately, RIDOR has made the study available for download, so we can examine what assumptions CCA made.
How CCA Arrived at Its RI State Revenue Estimate
The report begins by profiling each of the iGaming markets in the US, except for Nevada (which consists of a single poker site for which no direct revenue data is available).
CCA then selected what it considered the most relevant states to project various aspects of the market.
Rhode Island Per Capita Market Size = CT or WV?
CCA calculates the per-adult GGR in each state over the 12 months ending March 2023. It finds that these range from $19.10 in Delaware up to $263.05 in New Jersey.
However, it says it “relied primarily” on Connecticut and West Virginia for its calculations. These are smaller states with relatively few online casino brands and populations not much larger than Rhode Island’s 1.1 million. Both have similar per-adult GGRs: $103.13 for Connecticut and $98.28 for West Virginia.
If there’s anywhere that CCA is making assumptions that are charitable to Bally’s, it’s here. The report states that it regards Delaware as “anomalous” and therefore doesn’t take its per-adult GGR into account.
This has become common; no one wants to imagine new markets turning out like Delaware because it trails so far behind the others. Even the New Hampshire Lottery, projecting revenue for a proposed table-games-only online casino market, explicitly excluded Delaware from its calculations.
The trouble is that there are multiple likely reasons that Delaware performs so poorly. Some, like an oppressively high state revenue share and slow mobile roll-out, would not apply in Rhode Island (or New Hampshire, for that matter).
However, others would:
- Rhode Island’s population is closer to Delaware’s 1.0 million than to West Virginia’s, and
- Rhode Island would be the only state besides Delaware to choose a non-competitive monopoly model, with the lottery working in partnership with a single brand.
Even Connecticut has two operators, which makes a big difference. Promotional competition between them was fierce in the first year.
So, the big question mark here is how much of a factor each of these issues is. Would Rhode Island would, in fact, be more like Connecticut and West Virginia, more like Delaware, or somewhere in between? It’s very hard to know because there are no other data points to work from.
Growth Rate of 20% Dropping to 5%
CCA projects a somewhat slow first-year roll-out, leading to initially rapid growth that gradually slows over time. Its GGR predictions rise 20% from year one to year two. By the fifth year, it projects 5% growth.
If anything, this might be a little conservative. Bonus projected 21% total market growth for 2023 coming into the year, and a revised estimate taking actual numbers from January to April into account might be more like 19%. Much of this comes from New Jersey, which is still enjoying roughly 15% annual growth in its tenth year, and Pennsylvania, which is growing at nearly a 30% clip in its fourth.
Here too, there’s a lot of uncertainty. However, a large market size at launch would likely go hand-in-hand with slower subsequent growth, while lower revenue in the first year would tend to foretell faster growth as the state catches up with other markets. In other words, things would tend to balance out after a few years, regardless.
72% of GGR from Slots
The revenue split between slots and table games will matter greatly to Rhode Island because the proposed revenue share for each vertical is so different.
Only two states provide such a breakdown: Delaware and Pennsylvania. In this case, CCA includes Delaware, perhaps simply because it would otherwise be relying on a single data point.
The good news is that these two markets couldn’t be any more different, yet both see a similar share of revenue from slots: 74% in Delaware and 70% in Pennsylvania. (What difference there is can probably be explained by the fact that sports bettors who branch out into casino games tend to play more table games than pure casino users.)
Because the two have a similar split despite their other differences, it’s probably fair to assume a similar division of revenue in Rhode Island. CCA simply takes the average: 72%.
Long Odds for Rhode Island Online Casino Legalization in 2023
Lowered expectations might hurt Bally’s efforts slightly. However, they’re unlikely to be the deciding factor, as the bill faces a number of more significant challenges.
Online casino efforts in New York, Indiana, Maryland, Illinois, New Hampshire, and Maine have all failed. Many have called 2023 a write-off for iGaming expansion for that reason. Technically speaking, that isn’t quite true.
In Rhode Island, the push isn’t dead, but it is on hold. In the legislative world, that’s rarely a good sign.
Opponents worry about the potential impact of online casinos on problem gambling, especially since the bill would set the minimum age at 18, like other gambling in the state. Revising that to 21 to match other states would be an easy fix, but other issues are trickier.
Some worry about the bill’s constitutionality, including the Rhode Island lottery itself. The state’s constitution forbids any gambling expansion without a referendum. However, the bill’s proponents say that online casino games are implicitly part of general casino gaming, which voters already approved in 2012.
Of course, there is also pushback from operators other than Bally’s, who would be cut out of the market. The Sports Betting Alliance (SBA), representing BetMGM, FanDuel, DraftKings, and Fanatics Sportsbook, has proposed amending the bill to create a competitive marketplace. Bally’s and IGT would almost certainly reverse their position and oppose the bill in that event, as they currently enjoy a stranglehold on gambling in the state through their joint partnership with the lottery.