Spectrum Gaming Report — Legal Indiana Online Casinos Possible, Could Generate $881M by Year 3

Research by Spectrum Gaming Group could help Indiana’s chances of successful gambling expansion in 2025 or beyond. However, skepticism about the financial effects of legal Indiana online casinos is now only half of the problem. A negative fiscal assessment may have killed the 2023 effort, but a political scandal is what prevented legislators from trying again in 2024.

Spectrum had been working on the study before Indiana’s hopes for legalizing online casino gambling were dashed.

In February 2022, the Indiana Gaming Commission engaged Spectrum Gaming Group. The non-partisan consultancy that was founded in 1993 undertook the iGaming study.

However, Indiana’s effort to legalize online casinos in February 2023 took a hit when legislation failed to advance through a House committee. That happened due to what many in the industry considered “fiscal note poisoning.” State Sen. Jon Ford cited a flawed statement by the Indiana Legislative Services Agency on the fiscal impact.

Spectrum was re-engaged in May 2023 to update the study based on the most recent data available.

Then in November, When former Indiana House Rep. Sean Eberhart pleaded guilty to federal corruption charges. It sent ripple effects through the state. It did the same for Indiana’s chances of having legalized online casino operations in the near future. Leaders of both halves of the state legislature came to a mutual agreement that Indiana will not have legal online casinos in 2024.

Now, the promising results of Spectrum’s study may be the catalyst that Indiana needs to bring legalized online casino gaming back on the table in 2025.

Projected $880 Million in iGaming GGR by Year 3

Eight states have legalized iGaming, including Nevada (limited to iPoker). Also, Rhode Island iGaming is expected to start on March 1. The three largest iGaming states (Michigan, New Jersey, and Pennsylvania) each generate about $2 billion annually in gross gaming revenue (GGR).

Using that information, the Spectrum report considered three methods to project revenue over the first three years in Indiana. Those methods were based on results from other states that have legalized iGaming operations. These include estimated spend per adult, percentage of gross state product, and percentage of spend of a person’s disposable income.

The report uses three different forecasting methods. It found that GGR for the first year would be between $410 million and $636 million depending on methodology, rising to $629-756 million in Year 2, and $825-934 million in Year 3. Averaging the three methods gives a three-year total of just over $2 billion.

According to the report, Indiana would take in $98 million in Year 1, using the average spending estimate and assuming a 20% tax rate. This would grow to $139 million in Year 2 and $176 million in Year 3, all at a tax bracket of 20% on iGaming revenue.

At a 45% tax rate, the average spending estimate would give $220 million in taxes for Year 1, $313 million in Year 2, and $396 million in Year 3. However, the most optimistic scenario would increase these numbers by up to 30% in the first year and a smaller (sub-10%) margin in subsequent years.

Impact on Retail Casinos

One of the key goals of the Spectrum report was to identify the intangible impact that legalization of online casinos would have on retail casinos, especially after a flawed fiscal note was released in 2023.

The report indicated that its analysis of iGaming in other states did not appear to have a negative impact on other forms of gaming. However, the report cautioned that it is possible that iGaming may be limiting growth of retail casino revenue.

The report also states that the addition of iGaming, which involves operations without live dealers, should have no significant negative impact on direct employment. In fact, it would likely increase available jobs in iGaming operations when operators launch gaming with live dealers.

Spectrum’s report also stated that Indiana is, “well positioned to integrate iGaming with its existing responsible-gaming measures.” This is due to Indiana’s mature casino industry and that sports betting legislation is already in place.

Corruption Scandal Still Carries Heavy Weight

Despite promising signs for the legalization of online casinos in Indiana, the weight of the corruption scandal in 2023 is still fairly heavy. Eberhart, who pleaded guilty in November 2023, was promised a job with Spectacle Entertainment Group and a $350,000 annual salary in return for supporting House Bill 1015.

That case, along with the flawed fiscal note earlier in 2023, all but guarantees that legislation will not be moving forward in 2024 in Indiana for online casinos.

In November 2023, Indiana Senate President Pro Tempore Rodric Bray told WBAA that the corruption charges “taint the Statehouse.”

Bray continued:

It diminishes the confidence that people have in the integrity of the Statehouse. It causes an awful lot of problems and it makes it particularly difficult to engage in that kind of policy.

Fiscal Note Cannibalization Claims

The 2023 fiscal impact report suggested that passing an online bill would cannibalize Indiana’s retail casinos by 30% or more. That report cited a 2011 study from the UNLV Gaming Research and Review Journal. At the time, online casinos hadn’t launched in the US.

As noted by the Spectrum report, Nevada was the first state with legalized online casino operations. Those started in April 2013 with only poker. Delaware was the first state to have full iGaming operations, which began in November 2013.

The Spectrum report has also indicated that legal iGaming operations do not appear have a negative effect on other forms of gaming, including retail casinos.

Despite this report, there is a long road back for online casino bills in the House. The possibility of significant revenue for Indiana along with other intangible benefits via iGaming operations remains high.

However, there will need to be substantial progress in 2024 for Indiana to seriously consider legalizing online casinos. If that happens, the marketplace could plausibly launch as soon as 2025.

About the Author

Nikhil Kalro

Nikhil Kalro

Nikhil Kalro writes about the online casino industry for Bonus and about sports betting at Gaming Today. He has an interest in game strategy and mathematics, which he applies to his news coverage. Nikhil’s previous experience includes five years working for ESPN.
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