States need only to look at New Jersey’s experience with online gambling for evidence of digital wagering’s potential financial impact. That helps explain why two states will soon join the relatively exclusive club and others are exploring it.

Michigan and West Virginia are moving forward with as little wasted motion as possible to get online casino gambling up and running.

The shutdown because of the coronavirus pandemic and the attendant loss of tax revenue for state and local governments, on top of the costs of addressing COVID-19, has injected new urgency into the move to iGaming.

“Like all states, when we come out of the pandemic we’re going to have budgetary pressures,” said Michigan state Rep. Brandt Iden, who was the driving force for sports wagering and online gambling there. “So I feel getting the tax revenue from iGaming is important. … We can still catch at least some of the NFL season (with online sports betting).”

When Michigan and West Virginia make online slots, table games and poker available to in-state players, they’ll join the handful of jurisdictions that already offer that suite of gambling options — New Jersey, Delaware and Pennsylvania. Nevada offers online poker sites but not house-banked games.

In addition, Michigan will also be expanding sports wagering, which debuted in its land-based casinos prior to the COVID-19 lockdown, to online. West Virginia already has online sports wagering through its best sportsbooks.

Other states, like California and Ohio, are considering sports betting legislation to help raise revenue, and South Dakota, Maryland and Louisiana will put the issue before voters in November.

Online Gambling Gaining Steam
The most recent revenue figures for Internet gambling illustrate how online gambling participation has been gaining momentum, especially with brick-and-mortar casinos closed and the public in various stages of lockdown.

In New Jersey, a revenue record for iGaming was set in March and that record was then broken in April. March revenue was $64.8 million and the April number topped that to $79.9 million. Online poker — not nearly the moneymaker as iGaming — stood at $5.1 million but even that figure represented an increase of 208% over the same period in 2019.

For April alone in New Jersey, the tax money from the windfall in iGaming revenue was more than $12 million — something other states may note.

Not surprisingly, with hardly any sports to bet on, sports wagering was slammed the last few months, dropping nearly 88% (compared to April 2019) to $2.6 million. However, for the first four months of 2020 when the sports world was fully engaged, at least for a while and sports wagering was far more brisk, the total tax revenue in New Jersey for all types of Internet gambling was more than $84 million.

David Rebuck, director of the New Jersey Division of Gaming Enforcement, forcefully made the case for online gambling at Clarion Gaming’s ICE North America digital conference in May.

The word Rebuck used regarding the iGaming revenues was “staggering.”

“If you continue to build out the monthly numbers and if (they) continue at the rate they are today, you’re looking at an industry that’s going to surpass $1 billion in gross gaming revenue just in the state of New Jersey,” Rebuck was quoted as saying at the digital conference. “Whether that continues or not when we have the retail side of the business back, I think that remains an unknown.”

However, Rebuck said that the experience in online gaming over the last few months indicates “a significant number of people entering the marketplace for the first time.”

West Virginia Closer to Offering iGaming
Of the two states expected to roll out iGaming by the end of 2020 — West Virginia and Michigan — West Virginia appears closer.

The Mountain State already has online sports wagering and the West Virginia Lottery hammered out its Emergency Rule for iGaming in May. Eventually, that was passed to the secretary of state’s office, which posts those rules for public edification and comment. The secretary of state’s office has no veto authority.

“The emergency rule was filed with the Secretary of State’s Office on May 15. We are not on an accelerated timeframe, this timeline has been our plan since the legislation allowing iGaming specified that the Emergency Rule be filed before July 1, 2020,” West Virginia Lottery director John Myers said in an email. “In fact, it was filed on the exact date that was agreed upon with legislators that sponsored the bill. We are currently working closely with our casino partners and Gaming Labs International in developing our minimum internal controls.

”Our plan is to have those ready for commission approval in June and that would allow our operators to begin when they are ready to make an application and receive licensing approval.”

John Pappas, a longtime gaming consultant who counts as a client iDevelopment and Economic Association, a non-profit that advocates for expansion of online interactive entertainment businesses thinks iGaming in West Virginia could be up and running by the end of the summer.

“Much of the same framework you see for online sports betting they can use for Internet Gaming so there’s not as much of a learning curve, plus you have a much smaller market and fewer stakeholders,” Pappas said.

Michigan Could Have Already Offered iGaming

In Michigan, iGaming could have been a reality by now but the former Republican Gov. Rick Snyder vetoed an Internet gambling bill at the end of 2018.

“Had that veto not happened, in all likelihood online gambling would have been alive and well and running when this pandemic hit in February,” Pappas said.

With new iGaming legislation approved by current Michigan Gov. Gretchen Whitmer, a Democrat, online gambling is finally set to happen there. Still, Whitmer has been reluctant to hasten the start of iGaming by allowing it to go forward on an emergency basis.

“In order for us to expedite this timeline … the governor would direct the (Michigan) gaming control board to promulgate emergency rules to get us online faster,” said Iden, the Republican state representative. “She decided not to do that so it’ll go through the normal promulgation process. Therefore, it will probably be November or December.”

Michigan’s road to getting as far as it has was complicated by the circumstance that the state has both commercial casinos (three in Detroit) as well as tribal casinos. Tribal casinos previously had not been subject to a great deal of regulatory oversight.

In addition to New Jersey’s impressive revenue numbers, Pennsylvania and Delaware also saw jumps in online gambling activity.

In Pennsylvania, the March iGaming figure was $24.7 million and April’s rose to $43.06 million. In much smaller Delaware, the March iGaming number was about $515,000 and April climbed to about $856,000.

States Need the Revenue After COVID-19

As states try to recover financially from the costs and the losses associated with the pandemic, Internet gaming becomes more attractive as a source of tax money.

“States are facing unprecedented financial challenges,” said Matt King, CEO of FanDuel Group, in an Associated Press article. “We are firm believers that mobile sports betting and online gaming legislation will be the type of common sense legislation that states will look to when legislatures return.”

Other states are in the wings. Illinois could approve online gambling by the end of the year.

As far as the concern that online gambling may cannibalize brick-and-mortar business, New Jersey state gaming official Rebuck insisted at the ICE conference that is not the case.

“We have people interested in online gambling and not interested in the retail environment and people who want to do both,” Rebuck said. “Cannibalization is a false positive by naysayers who fear change and fear they wouldn’t be able to successfully compete against the online gaming operations.”

Iden, who says he personally enjoys gaming, suggested that the online gambling experience, especially amplified by the pandemic lockdowns, is likely to take on a greater role in the future than even its advocates envisioned before COVID-19.

Iden reflected on the new brick-and-mortar casino environment: dealers and customers in masks and gloves, fewer players sitting at the tables and slots, constant sanitizing.

“What you and I are used to regarding casino gaming will change,” Iden said. “And I think, with those changes there will be a change in the way the consumer wants to be entertained. Some players who love Las Vegas and love the energy and love being on the floor are going to continue to go.

”Others, may just say, ‘I want to stay socially distant, it’s not the same for me, I still want to play so I want online options.’ And especially for our younger generations who are used to doing everything on their mobile devices, they are going to pick up those device and play.”

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