Why Haven’t More States, Like New York, Legalized Online Casinos Already?

Written By Dan Holmes on December 28, 2023
phones with hands exchanging money for story on why new york hasn't legalized online casinos yet

If New York State Sen. Joe Addabbo is successful, online casinos will be a reality in his state in 2024.

The lawmaker has been crusading for expanded legal gaming in New York, including NY online casinos and online lottery. But, New York is among many states that have seen such efforts stall.

Why has legal iGaming not spread as quickly as online sports betting across the United States? As of the end of 2023, six states have legal online casino markets, and a seventh, Connecticut, expects to launch in 2024.

Yet, in spite of the obvious tax revenue benefits of legal online casinos, New York has yet to even vote on legislation that would legalize online casinos and poker. Even online lottery ticket sales have yet to be legalized in New York.

NY online casinos could generate an additional $1 billion in tax revenue

As one of the largest states, New York could potentially gather hundreds of millions in taxes or more from online casino (or iGaming) activity. Addabbo seems bent on introducing a bill during the 2024 NY state legislative session that would place the issue at the feet of his colleagues.

For some observers, 2024 is being categorized as the best year to finally legalize iGaming in New York.

Last year, Addabbo, a Democratic State Senator from New York’s 15th District, cited the $1.055 billion in tax revenue generated for the state’s education fund from online sports betting. Based on revenue from states with legal iGaming, online casinos could generate even more.

“Going forward, this is something I think the state should consider,” Addabbo told PlayNY last June.

“If you combine iLottery with iGaming, [New York is] sitting on top of a billion dollars in revenue.”

Only 6 states have active iGaming, compared to 31 with online sports betting

Currently, six states have online casino gaming: Delaware, Michigan, New Jersey, Pennsylvania, Rhode Island and West Virginia. One other, Connecticut, has passed an online casino bill and will launch its market in 2024.

By comparison, there are 31 states with active online sports betting in some fashion. Since 2018, when the US Supreme Court made a landmark ruling that cleared the way for states to legalize it, sports betting has popped up all over the map. Obviously the Empire State was among them, launching online sports betting in NY in January 2022.

In nearly 24 months with online sportsbooks, New York has shattered records for accepted bets, revenue and state tax revenue. Through November 2023, the state has collected in excess of $1.4 billion in taxes from sports betting operators.

But even that resounding success leaves room for the question of online casinos, and how New York may be the example of a state that would greatly benefit from such legal activity.

Some opponents of iGaming point to the negative impact it may have on land-based casinos. In fact, through November 2023, New York’s real-world casinos were behind the revenue pace of the previous year, even without competition from online casinos.

Common arguments against NY online casinos

These are the most frequent reasons opponents use to fight against legal online casinos:

  • Online casinos take revenue from land-based casinos.
  • Online casino play increases the number of people who suffer from gambling addiction.
  • iGaming is more serious “high stakes” activity that lends itself to habitual betting compared to sports betting.

It’s possible that the primary reason iGaming hasn’t spread quickly in the US is not among the list above.

The prioritization of online sports betting in most jurisdictions may be the true culprit. Perhaps due to the clamor in many parts of the country for legal sports betting, the immense popularity of sports in the US and the lack of a land-based sports betting alternative, online sportsbooks were first to be the subject of legislation in many states.

Howard Glaser, global head of government affairs and legislative counsel at Light & Wonder, is a leading voice in support of iGaming. Glaser claims online casino markets “stands out as the most lucrative revenue source from any gaming launch in history.”

Many industry observers feel 2024 may be the ideal year for several states to finally pass laws to legalize the activity.

Why revenue from iGaming could exceed sports betting

Casinos, both land-based and online versions, have an advantage over a sportsbook. That’s because the consumer wins far less often at slots, casino table games and poker than they do when wagering on a sporting event.

Typically, a sports betting operator may post a “hold rate” of 5-10%. That means the sportsbook (or “the house”) wins about 5-10% more than it loses.

In contrast, casino revenue can dwarf what’s produced by sportsbooks like BetMGM, Caesars and DraftKings.

In Michigan, for example, where both online casinos and sports betting are legal, $4.26 billion in revenue has been reported from online casinos since the state legalized. Sportsbooks have reported $1.08 billion in the same period.

As a result, online casino operators have paid $1.07 billion in tax revenue to the state, while sports betting operators have paid a tax tab of just $55.4 million. Even accounting for the different tax rates, the impact on state treasuries is much bigger from iGaming activity than sports betting.

According to the Associated Press and the American Gaming Association, states with legal online casinos have generated $16.3 billion in taxes combined. Eventually, the promise of such tax revenues may swing states toward legalizing iGaming for the much needed dollars in their coffers.

Photo by PlayNY
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Dan Holmes

Dan Holmes is a freelance writer for PlayNY. An author of three books about sports, he previously worked for the National Baseball Hall of Fame and Major League Baseball. Dan enjoys writing, running and lemon bars. He lives near Lake Michigan with his daughters and usually has an orange cream soda nearby.

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