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Tax revenue is the biggest incentive on the table for states considering legalizing online casino gaming in the US. While sports betting has already proven to be a lucrative source of tax revenue, iGaming can generate up to three or four times as much, as demonstrated in the few states that have legalized online casino gaming, making it a tax goldmine. Besides tax revenue, consumer protections are another driving factor in the push to regulate online casino gaming.
The iGaming legalization discussion
While online sports betting is legal across 31 U.S. states plus Washington, D.C. and Puerto Rico, only eight states have legalized online casino gaming. However, more states are considering expanding to iGaming, with several states currently engaged in legislative efforts to legalize online casinos.
On September 18, three state lawmakers – Virginia Sen. Jeremy S. McPike, Ohio Rep. Brian Stewart, and Massachusetts Rep. David K. Muradian, Jr. – participated in an iDevelopment & Economic Association (iDEA) panel. The roundtable, dubbed “State Lawmakers on the Front Lines of the iGaming Debate,” was moderated by iDEA state advocacy director John Pappas.
The legislators discussed ongoing efforts to legalize online casino gaming in their respective states. Among other things, the discussion focused on whether and how they can make it coincide with other forms of gambling, especially land-based casinos. “Legislatures are just now starting to think about their priorities in 2027, and I believe iGaming will be part of the discussion in several states,” Pappas said.
Tax revenue and player protections driving the discussions
Tax revenue is the strongest incentive driving discussions on the legalization of online casino gaming across multiple states. Online sports betting is making many states millions of dollars in annual tax revenues.
However, these figures pale in comparison to the potential revenues from online casino gaming, as demonstrated by various states. For example, in Pennsylvania, while mobile sports betting generated $130 million in taxes over the last fiscal year, iGaming generated about $750 million. The trend holds in various other states – $40 million compared to $360 million generated by Michigan online casinos, and $110 million compared to $300 million in New Jersey. Overall, iGaming can generate up to three or four times more in tax revenue.
In Ohio, studies have shown that establishing legal Ohio online casinos would generate upwards of $400 million per year in tax revenues at full market maturity. Interestingly, while many of the conservative lawmakers in the state oppose online gambling, they support the elimination of the income tax. Ideally, tax revenue from online gambling could replace revenue from the income tax.
“People are warming up to the idea that if there are individuals who want to participate in this activity, you can tax it at a fairly aggressive rate. That’s an awful lot of money we can use to eliminate our income tax,” said Rep. Stewart. He also noted that many lawmakers in Ohio are open to the idea of legalizing iGaming primarily based on the standpoint of increased revenues.
Lawmakers in Massachusetts are grappling with the same situation. A recent ballot initiative to reduce income tax from 5% to 4% failed. If passed, the state would have seen a revenue shortfall of $4billion. Interestingly, tax revenue from iGaming had been considered as one of the solutions to bridge that shortfall.
Besides the potential money to be made, the need to protect residents is also a major talking point. As Rep. Muradian notes, many residents in Massachusetts – and elsewhere across the country – already engage in online casino gaming via offshore or unregulated platforms. To this end, the lawmaker argues that it is a simple premise, as lawmakers must determine whether residents should continue feeding an unregulated iGaming market, or whether the state should step in, regulate the market, offer protections, and benefit from tax revenues.
The lawmaker noted that the same was the case with sports betting. However, he says that the Massachusetts Gaming Commission has now established one of the safest and well-regulated sports betting markets in the country. “iGaming seems to me to be the next logical step in progression. We want to provide a proper and safe avenue for people to participate,” he said.
Fears of cannibalization holding states back
Notably, the fear that online casinos could push brick-and-mortar casinos out of business is one of the biggest hurdles holding back the push to legalize iGaming. “Certainly there are concerns around cannibalization. At some point we’re going to saturate some of the cumulative gaming market,” said Sen. McPike.
Notably, Virginia, Ohio, and Massachusetts all have brick-and-mortar casinos and racinos. Interestingly, in Ohio, Rep. Stewart proposed tying licenses and online casino promotions to land-based casinos as a way to drive footfall to the latter. In Virginia, Sen. McPike noted that it is difficult to accurately project iGaming revenues, cautioning that it is prudent to be conservative with the estimates.
However, Pappas pointed to New Jersey as a good example of how online casino platforms and land-based casinos can co-exist and grow side-by-side. Notably, retail casinos in Atlantic City reported record-breaking revenues in 2025. In the first eight months of 2026, the casinos have generated a combined total of about $2.01 billion in revenues, about 1.8% more than the same period last year. “Here, we have a very clear example of a market where the land-based industry and the online industry are growing together,” Pappas said during the roundtable.
