The climate for iGaming legislation in 2025 is running cold for a number of reasons. Some industry analysts like Steve Ruddock suggest it might be time for some reframing of the pro-iGaming industry narrative and traditional talking points, including those around the cannibalization question.
As Ruddock and others (including a new iGaming study) point out, the question really isn’t whether there is cannibalization or not anymore. And actually, denying that some revenue that would otherwise go to retail casinos is shifting to online platforms prevents the possibility of fruitful discussion that could lead to compromises and policies amenable to both sides.
In reality, the issue is nuanced and complicated by the fact that every state gaming and economic context is unique. But once we agree that some amount of would-be retail revenue does divert to online, whether we should call it “cannibalization” or not, we can move on to the critical questions that legislators, operators, labor unions, and other gaming and community stakeholders need to better understand.
Questions like:
- How much revenue gets diverted?
- What are some potential trickle-down economic (and other) impacts from diverted retail casino revenue and the introduction of legal, regulated online casinos?
These two questions are the main ones that a recent iGaming impact study addresses through statistical analysis.
The Innovation Group official explains their motives
A critical source of opposition to iGaming expansion in the last few years has come from labor unions in several states, including, and especially, in Maryland. A number of employees, casino companies, unions, and legislators are concerned about job loss, for good reason. The complexity of the issue deserves further investigation, and it also demands consideration of local contextual variables.
A new economic impact study published by The Innovation Group and commissioned by the newly formed anti-online casino expansion group, National Association Against iGaming (NAAiG), highlights some valuable insights and critical topics worthy of further investigation. Brian Wyman, partner at the Innovation Group, appeared on Ruddock’s Straight to the Point gaming industry podcast on Feb. 22 to discuss the findings of the study.
While Wyman admits there are potential shortcomings with the methodology (“It’s not perfect,” he says), he maintains that his company (TIG) remains impartial, regardless of any biases held by entities that commission their studies.
“We’re invested in the legislators getting some fact-based analysis, saying, ‘Here’s how many jobs we have to worry about; here’s how much tax revenue we’re going to have’ to do whatever good they’re going to do with it,” Wyman said.
First, here are the key findings
The study finds an estimated 15.8% cannibalization effect from iGaming on retail casino revenue. That number comes from comparing retail casino growth numbers from 2019 to 2024 for a group of non-iGaming states vs. iGaming states, and normalizing for some population and economic growth variables. The study considers not just how the iGaming states fared compared to the non-iGaming states over this period, but how well casinos in iGaming states could have done if they didn’t have iGaming, using non-iGaming states as a proxy.
In this model, the net revenue gain for non-iGaming states from 2019 to 2024 averages out to 12.2% while iGaming states for the same time period saw an average revenue decline of 4.3%. Normalizing for population and GDP, the 16.5% disparity drops to 15.8%.
Retail casino revenue growth from 2019 to 2024 in iGaming states
Retail casino revenue growth from 2019 to 2024 in non-iGaming states
Economic impact analysis in the study is based on IMPLAN, described in the report as “a widely-trusted input-output modeling system that provides detailed economic impact analysis through a comprehensive database of industry relationships, with its methodologies and data being used by federal agencies, academic institutions, and private sector analysts for over 40 years to quantify the ripple effects of economic changes throughout regional and national economies.”
According to the study: “Viewed through a slightly different lens, iGaming revenue is comprised of around 78% new revenue, and 22% revenue shifting from land-based casinos — established businesses that support well-paying jobs, community engagement, continued infrastructure development, and of course a tax base of its own. By contrast, most iGaming jobs are headquartered out-of-state or even abroad.”
Concerns over certain aspects of the methodology
The study assumes these two groups are comparable, which could certainly be challenged. Logically, it’s understandable to compare the most recent full-year revenue figures with the last pre-COVID full year numbers (for 2019). But this also assumes that the COVID year affected these groups of states the same, which Wyman himself admits isn’t strictly true due to a number of factors — bumps he says should smooth out across the data.
Without going too far down this rabbit hole, it’s quite possible that the pandemic year had additional profound and lasting impacts on retail gaming in iGaming states, making the two groups all the more difficult to compare. An example would be adjusted marketing, investment, and customer acquisition strategies across retail and online casino operations for companies with and without iGaming. Casinos with iGaming operations saw online gaming accelerate rapidly during the pandemic, helping to offset brick-and-mortar losses. This fact was certainly not lost on operators in those states.
Revenue growth in the online sector continues to outpace retail casino growth, but part of that disparity could be intentional for strategies of diversifying revenue streams, future-proofing, or even pandemic-proofing businesses (or at least making them more resilient to crises or business threats of the sort). The casino companies in position to do so have already begun improving their omni-channel marketing and customer acquisition and retention strategies. As Ruddock pointed out on his podcast, gaming companies are still in the early stages of capitalizing on these types of integrations, but they will presumably get better at it.
All that to say, there are methodological challenges with this kind of research, and it’s important to understand that in analysis of the findings. The iGaming vs. non-iGaming groups aside, state-by-state differences in market structure, taxation, and consumer behavior make broad generalizations difficult.
Back to the results — focused on net tax impact
The TIG study certainly doesn’t argue against iGaming expanding the entire gaming revenue pie, though that is not the focus of the study. Instead, it aims to quantify a range of potential revenue impacts that iGaming has on retail casinos while also examining spin-off economic (and social) costs.
As a basis for the findings, the study projects annual iGaming revenue in a number of retail gaming states considering online casino legislation. Note that these numbers assume an iGaming tax rate of 20% based on recommendations by the National Council of Legislators From Gaming States, which is likely on the low end considering current iGaming tax rates and the ongoing trend of state legislators hiking tax rates on online gaming operators.
Using all of these figures, the study shows a net tax impact for each of the following states after subtracting estimated additional economic impact including labor income loss and value added GDP loss.
Projected net tax impact from adding iGaming
| State | Net tax gain ($m) | Job losses | Labor income loss ($m) | Value added (GDP) loss ($m) |
| Colorado | $154.80 | -1,739 | -$109.70 | -$313.10 |
| Illinois | $81.90 | -4,733 | -$292.90 | -$831.70 |
| Indiana | $37.70 | -2,149 | -$158.10 | -$428.60 |
| Louisiana | -$34.00 | -2,642 | -$163.60 | -$410.50 |
| Maine | $36.40 | -378 | -$22.00 | -$59.70 |
| Maryland | $19.40 | -1,451 | -$109.70 | -$372.50 |
| Mississippi | $37.80 | -1,906 | -$96.00 | -$302.60 |
| New York | $140.80 | -4,921 | -$449.30 | -$1,170.70 |
| Ohio | $233.90 | -2,818 | -$203.90 | -$602.00 |
Based on the models employed, the study projects net tax gains for most of the states (were they to add iGaming), and a net loss for Louisiana. Again, how you interpret the net tax gains is a matter of perspective, and it’s not necessarily a question of good or bad (as Ruddock pointed out) — or at least it is not that simple.
One interpretation is that iGaming helps grow the entire gaming revenue pie, which could be a positive for regional casino operators (or the ones in best position to take advantage of the market growth) and a net positive for overall tax revenue for the state and local entities (depending how iGaming tax revenue is distributed in the state, of course).
But there are also the issues of job losses and other direct and indirect economic impacts on retail casino operations, as well as economic trickle-down effects (called “induced effects” in the study) on other industries or on local communities.
There is also the question of increased problem gambling resource needs, or social impacts of increased cases of gambling addiction deriving from the accessibility of regulated online casinos. This topic exceeds the scope of this article, but it’s another complex issue worthy of much more research and investigation.
The potential net job losses and additional impacts are key points from the study worth considering further, especially with regard to local, state-specific contexts.
Job loss and spin-off economic impacts
When retail casinos see reduced foot traffic and revenues (or just slower growth), they understandably require fewer in-person employees. Meanwhile, the TIG study points out, iGaming operations don’t replace those jobs in equal numbers as they typically require small teams for customer support, compliance, and marketing. The study also notes that iGaming jobs are typically filled out of state, which doesn’t help offset any retail jobs that may become redundant. Positions like in-state live dealer studio jobs would be an exception.
Fewer jobs also means reductions in would-be payroll taxes for the state, and other spin-off economic impact from in-person casino net revenue declines. A major finding of the study is that iGaming generates additional tax revenue but offsets other tax sources. With diverted revenue from land-based casinos comes reduced:
- Land-based gaming taxes
- Tax revenue from hotel rooms
- Sales taxes (from reduction in food and beverage sales)
- Payroll taxes from lost jobs
The study also mentions that lower retail casino revenues could lead to less community investment via charitable partnerships, and less reinvestment in the gaming facility, hotel, etc. Less reinvestment would cut into potential construction-related job creation as well as additional hotel and food and beverage-related job creation. In Ruddock’s podcast, Wyman also points out that job losses in one sector can have ripple economic effects throughout the local economy as well, due to less discretionary spending and so forth.
One of TIG’s goals in the current study was to address and quantify some of those downstream effects.
Context matters, and not all states are built the same
While the TIG study provides a number of useful insights, I would still caution against drawing sweeping conclusions based on findings derived from averaging these samples of states, due to the diversity of state gaming contexts.
Case in point: New Jersey has around 30 different online casinos. Delaware and Rhode Island have one online casino brand each and Connecticut has two. The retail gaming context in these states are also wildly different in terms of number of retail casinos (or racinos etc.).
In a state like Pennsylvania, with a mature retail casino market with 17 casinos (and VGTs and other forms of legal gambling), it’s reasonable to expect less growth in this sector over time. The issue with conflating revenue growth or averaging across these markets is that it doesn’t take into account market saturation or state-specific casino industry history and trajectory.
The study does exclude Rhode Island, the newest iGaming market, but it includes relatively small iGaming market states Connecticut, West Virginia, and Delaware. Of those, Connecticut (-23.5%) and West Virginia (-11.8%) contribute net growth numbers heavily in the negative, as adjusted for GDP and population growth. Considering the minimal revenue of iGaming in these states, it’s questionable whether they should be looped in with the other iGaming states.
The state-specific gaming contexts, with COVID-impact factors baked in, make each casino context far too unique to be able to aggregate for comparison purposes. It’s possible that gaming operations in iGaming states are fundamentally different in the post-COVID world, making them difficult to compare to states without regulated iGaming.
The fact that Michigan didn’t launch iGaming until Jan. 2021, and the state’s tribal casinos don’t report direct net revenue to the state, complicates that market for this time period as well. We also don’t know how much of potential retail casino drops are attributable to other local economic factors like inflation, reduced travel among some segments of the population, lasting effects of a casino workers’ strike (Michigan), less disposable income, safety and security concerns (i.e. Atlantic City Boardwalk), and so on. But those economic factors play out differently in each state as well.
The sheer range in net casino revenue growth we see across iGaming and non-iGaming states could also be an indication that it might be problematic to average net casino growth across these two very diverse groups of states. It also points to a need to study and consider each state individually, while considering lessons from states with contextual similarities.
Regulated iGaming: Good or bad?
As Ruddock pointed out on his podcast, whether the introduction of regulated iGaming is good or bad is not really the question — and it depends on the perspective of who you ask. In general, the addition of iGaming seems to lift the entire industry in terms of the overall gaming revenue pie, and bring net positive tax revenue to states. But that is just a small piece of the complex picture. The TIG study addresses several downstream economic effects that aren’t always considered in the top-level tax revenue numbers game. For casino and indirect casino employees and companies, job loss is a real threat that must be addressed in policy considerations.
For some operators, in certain states, the addition of iGaming revenue is an overwhelming net positive. For others, it can be neutral or negative. From an operator perspective, a wide range exists in how one iCasino skin might contribute to their bottom line, based on factors like:
- Whether the brands of online skins are in-house (like BetMGM for MGM) or imported (i.e. partners like DraftKings or FanDuel)
- Market share of online partners
- Details of revenue share deals
- Regulations like tax rates and what percentage of promo spend is untaxed
- Licensing and renewal fees and who pays them
- Integration and marketing strategies between online and retail
- iGaming competition — how many online casinos are in the state (and how many licensees)
And we haven’t even gotten to the potential social costs related to problem gambling, which clearly necessitates further research and resources in states with and without regulated iGaming. There are plenty of counter-points here related to the proliferation of offshore and gray market casino sites and the potential for iGaming revenue to help support underfunded problem gambling resources. But it’s abundantly clear that this incredibly complex topic, as well as state-specific economic impact, deserves more funding and investigation to help inform policy and practice in the iGaming industry.
