Why Legalizing Online Casinos is Harder than Online Sports Betting

Aside from the few regulated online poker markets, online sports betting is the first form of online gambling that many states have regulated. But some types of online gambling are more acceptable to voters and state legislators than others. Different levels of acceptability are why legalizing online casinos is harder than legalizing sports betting.    

While sports betting has become part of being a sports fan, sports wagers are viewed by some as a way to show off sports knowledge. (It’s not.) Some bettors think they can play sports wagers like high-risk investments. (They can’t.) Others still may think that it’s a harmless companion activity to sports. (Harm depends on protections for those at risk for gambling disorders.)

Casino-style games aren’t tied to any popular activity outside of itself like sports betting is. Online casinos are only about riding the high of chance. Slots games offer long-term losses in exchange for occasional short-term wins. Table games disguise the slot pulls, but operate the same way.

With the potential for increased gambling addiction and without a companion activity to offset its stigma, legalizing online casinos is more challenging than legalizing online sportsbooks.    

The One Perk Online Casinos Have Over Online Sportsbooks

Online casinos have two financial benefits over online sportsbooks. Online casino revenue is:

• Greater than online sportsbooks
• Steady throughout the year 

The sportsbook’s fiscal year is tied to sports seasons. The peak season runs from August to March and coincides with professional and college football and basketball. The summer in between is slower. 

In contrast, online casino revenue is steady throughout the year. So far in Michigan, online casinos paid between $19 million and $26 million in state tax revenue each month of 2022. During the same period, Michigan sportsbooks paid about $360,000 in state taxes in its lowest month and $1.9 million in its highest month. (Sportsbooks’ lowest tax month was February when they could write off Super Bowl promo credits.)

Online casino tax revenue can be several orders of magnitude larger than online sports betting revenue. However, that’s not enough to offset the stigma attached to online casinos. Land-based casinos can boast local low-skill job creation, entertainment, and food and beverage services. Online casinos don’t have those same perceived benefits to offset their gambling stigma. 

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Future of Online Casinos in Massachusetts

One factor is in online casinos’ favor in new markets. MA online sports betting can reduce anxieties about online gambling in general. This can reduce the resistance to online casinos. The Indiana House introduced two online casino bills after passing online sports betting. 

However, both bills died in committee. Indiana was near the end of its legislative session, and excess revenue dulled the argument that additional revenue was necessary. Politically, it would’ve been more convincing to legalize online casinos when state finances were more dire. Bringing any new industry out of the black market into a regulated one will generate new tax revenue without increasing taxes on regulator citizens.      

Legislators who want to pass an online casino bill in Massachusetts will have online sportsbooks, higher tax revenue, and steadier tax revenue to promote. 

But online casinos can only be launched responsibly if proper problem gambling protections are in place. The sports betting industry is going through a period of regulatory scrutiny in the wake of unfavorable New York Times coverage. New York has already introduced a bill intended to regulate welcome bonus language that it deems “predatory.” This could prompt Massachusetts to pay greater attention to its responsible gambling programs, funding, and potential shortcomings. 

Overall, the political environment is unfavorable to online casinos. While there are markets that have passed it, expanding it after introducing online sports betting is far from a guarantee.