States to Watch in 2024: Rhode Island — How Much Will Bally’s Monopoly Be Worth?

Rhode Island is set to become the first state since 2021 to launch a legal online casino market, but questions hover over its chosen regulatory model. Sticking with the same plan they used for retail casinos and online sports betting, lawmakers awarded exclusive market access to a single operator — Bally’s — in partnership with the state lottery. As of July, Bally’s said it anticipated a March 2024 launch for slots, with table games following in April.

The state estimates iGaming will produce nearly $70 million in gross revenue in the first year. However, the only current US example of an online casino monopoly is Delaware, which has performed notoriously poorly. The Bonus forecast for Rhode Island’s first year is lower, at a little under $50 million. 

For all operators other than Bally’s, 2022 and 2023 were disappointing years on the legislative front. The industry will look toward Maryland, New York, and a few other states in 2024, hoping for a competitive multi-license market. In the meantime, lawmakers in smaller states may be watching to see how Rhode Island fares to decide whether the monopoly iGaming model might have some merit after all.

Rhode Island’s Unique Approach to Online Casinos

Rhode Island is one of many states with a constitutional prohibition on gambling. This means that legislation authorizing new forms of gambling typically requires a referendum. In recent years, however, Rhode Island policymakers have found ways to stretch previously passed laws to accommodate new options.

In 2019, Rhode Island extended its retail sports betting law to include mobile wagering. No referendum was required because the betting servers were hosted at the retail casinos that had already received approval for retail betting.

The following year, the Rhode Island Lottery began offering online instant games. It didn’t need a referendum to do so, or even a new law, because of the wording of the mobile sports betting bill. This allowed the lottery to partner with private companies to offer its products online without limiting that power to sports betting.

Rhode Island’s 2023 online casino bill employed the same logic as the mobile sports betting authorization. Lawmakers said that retail casinos had already received approval to offer casino games and that the online versions were not technically a different form of gambling.

There were concerns that this would face a challenge, however. Ultimately, lawmakers decided that a court might deem digital table games to be different from their retail equivalents due to the lack of a human dealer. To avoid that possibility, they amended the bill to allow online slots and live dealer table games only.

So, not only will Rhode Island be the first state in a decade to try to make an iGaming monopoly work. It will be the first state to launch online casinos without purely digital (“RNG”) table games.

Official RI Revenue Estimates Likely Too Optimistic

As part of the lawmaking process, the Rhode Island Department of Revenue commissioned Christiansen Capital Advisors (CCA) to forecast the potential revenue from an online casino.

CCA produced an estimate of $69.3 million gross and $58.9 million net revenue in the first year, rising to $111.3 million gross and $94.6 million net by year five. It based this projection on the performance of two other small iGaming states, West Virginia and Connecticut, leaving out Delaware on the assumption that it is an outlier and that there is no chance that Rhode Island will perform so poorly.

That forecast is 23% lower than what Bally’s Corporation (Bally’s Corporation 11,22 -4,67%) suggested it would make. However, I believe the CCA estimate for the first years is still too optimistic. That said, it uses a conservative growth estimate for subsequent years. By Year Five, the market could be catching up to or even exceeding the CCA forecast.

Having done my own calculations, I would expect something like $49 million in gross gaming revenue by the end of 2024. That assumes that slots launch on March 1 as planned and live dealer games from Stakelogic follow in April.

CCA overestimates the market because it relies on known quantities. Several factors will lead Rhode Island to underperform compared to West Virginia and Connecticut, but accounting for them requires guesswork because there is no reliable precedent to look at.

Rhode Island Has a Very Small Population

The relationship between population and gross revenue isn’t linear in other states. Smaller states make less revenue, even on a per capita basis.

Michigan has roughly triple Connecticut’s population and has made 78% more per capita over the past 12 months. Granted, it has 15 licensed operators to Connecticut’s two, and the market has been open longer. However, West Virginia also has more operators and a longer-running market than Connecticut, but about half the population. Connecticut’s duopoly nonetheless makes 24% more per capita than West Virginia.

Rhode Island is smaller still, at about 1.1 million residents compared to West Virginia’s 1.7 million. We need to revise our revenue expectations downward accordingly.

Lack of Direct Competition Is a Problem

According to economic theory, monopoly markets tend to be a little smaller than those with multiple operators. The extent to which that’s true depends on the type of product and consumer behavior.

In the case of online gambling, no monopoly is absolute. Customers who are unhappy with their legal options turn to the black market. However, the lack of reporting means those players are invisible to the legal operators, who consequently have difficulty adjusting their business strategy accordingly.

Delaware’s monopoly model isn’t the entirety of its problem, but it is a part of it. It’s hard to know how much smaller Rhode Island’s revenue will be because of the monopoly, but there should be at least a small effect.

Direct and Indirect Impact of RNG Table Games’ Absence

The lack of RNG table games will hurt Bally Casino at least a bit. Based on Pennsylvania data, those products account for about 10% to 12% of total online casino revenue.

However, the bottom-line impact could be smaller if players move to live dealer games instead. On the other hand, it might be larger if the players who want those games reject the site entirely and turn to the black market.

Compounding this is the fact that Stakelogic is a very new supplier with an untested product.

There’s no quantitative way to estimate how any of this will play out.

Bally’s Isn’t a Top Brand in Other States

Finally, there are questions about the Bally Casino product itself. It’s only a minor player in New Jersey and Pennsylvania. Conversely, the two operators in the Connecticut market — DraftKings and FanDuel — are national top-three brands.

Will Bally’s perform as well as those companies when it doesn’t have to compete with them directly? Or are there underlying issues with its product and marketing that will hurt it even when it holds a monopoly? This is another factor we can only guess at until the market is up and running.

More States to Watch in 2024

Bonus News Managing Editor Alex Weldon created several forecasts for States to Watch in 2024.

Check out the other installments:

* New Hampshire Online Casino Hopes Likely Dead for 2024

About the Author

Alex Weldon

Alex Weldon

Alex Weldon is an online gambling industry analyst with nearly ten years of experience. He currently serves as Casino News Managing Editor for Bonus.com, part of the Catena Media Network. Other gambling news sites he has contributed to include PlayUSA and Online Poker Report, and his writing has been cited in The Atlantic.
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