NJ’s $1B Betting Handle Nice, But iGaming Figures More Telling

NJ’s $1B Betting Handle Nice, But iGaming Figures More Telling
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One billion dollars.

Sort of rolls off the tongue, doesn’t it?

Maybe it’s all those Ls.

Anyway, it’s a number that was easy to latch onto and when New Jersey’s sports betting financials for September were reported and the state’s sports betting handle hit that 10-figure mark, news reports trumpeted it as a noteworthy milestone.

Certainly, it was a monthly high-water mark in the U.S. where sports betting is legal. And, yes it is a legit financial statistic considering that it marks growing enthusiasm among sports bettors to put their money where their opinions are. But handle isn’t revenue, and that slightly more than $1 billion in September handle yielded just $82.44 million in revenue for the month and about $10.1 million in taxes.

However, the New Jersey gambling figures as they measure bricks-and-mortar casinos and internet gambling had a more telling story to tell. That story had to do with the appetite of the public for gambling on the internet, and more specifically, playing casinos games — slots and table games — on a computer or mobile device. One might assume that’s happening in the privacy of people’s homes or while sitting in a coffee shop and maybe even while folks are supposed to be on the job.

 

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iGaming Revenue Nearly $1B in 2021

OK, so the circumstances are maybe an unknown, but what is clear is that there’s an appetite for online casinos. The numbers are crystal clear.

In New Jersey, the most mature of internet gaming markets in the U.S., of the total $3.44 billion won year-to-date by New Jersey’s 16 reporting gaming operators, casinos and race tracks, virtual and bricks-and-mortar, $989 million (almost 29%) came from online casino play.

Sports gambling revenue accounted for $558 million. In Jersey, online sports betting handle has typically been about 90% of the total. Understanding that handle and revenue can’t be seen as strictly a 1-to-1 comparison, conservatively, the overall ratio of online-to-retail action would justify an estimate of about $450 million in year-to-date online sports betting revenue.

 

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Online is Where it’s At

In a nutshell, online action, whether it’s hitting a button on a computer to play a virtual Blazing 7s slot machine or using a smart phone to make a seven-team parlay, New Jersey online casinos accounted for about $1.44 billion in total gaming revenue in the state year-to-date. That’s 42% of the total and without question, internet gambling is the reason Atlantic City halted its death spiral of just a few years ago.

The industry hasn’t been the only beneficiary. The state is doing quite well from internet gambling, both casino and sports.

Total tax revenue from all gaming year-to-date is $351 million, both from bricks-and-mortar and online. During those nine months, the tax from the online gambling, casino and sports, has been $213.million — that’s nearly 61%. Isolating the tax derived from online casino play alone, the state’s cut was about $148 million, or about 42% of total gaming tax collections.

By now, the financial math lesson should be pretty clear. Online casino gambling is a very robust business. And that’s the message that New Jersey’s experience should be sending to other jurisdictions who are considering legalizing online gaming.

 

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When Will More States Go Online?

So why do only a handful of states actually offer internet slots and table games — or what is known as iGaming? The roll call is short: New Jersey, Pennsylvania, Michigan, West Virginia, Delaware and recently, Connecticut. In contrast, sports gambling has been legalized in more than two dozen jurisdictions.

Put simply, iGaming is hard sell to state legislators and perhaps even to the electorate at large.

Now, it is true that lately whenever gambling expansion questions have been put on a ballot in a referendum, they have done well. In 2020, gambling ballot questions went undefeated in both blue and red states. But generally, the question was regarding sports gambling and as a speaker at a recent gambling industry conference in Las Vegas said he was told by one governor, “When people hear sports gambling, they hear ‘sports.’ When they hear online gambling, they just hear ‘gambling.’ ”

What the gaming industry is hoping for is that sports gambling, now in more than two dozen states, will soften the public resistance to online gaming over time.

Road to Profitability?

Frankly, that better be the case for the gaming industry because it appears to be a long road to profitability for most companies in the fiercely competitive online sports gambling universe.

DraftKings may be one of the better-known names in online sports betting but the publicly traded company has routinely reported losses of more than $300 million a quarter. In August, DraftKings entered into an agreement to acquire Golden Nugget Online Gaming. Golden Nugget Online is one of New Jersey’s top iGaming performers with $31 million in online casino revenues year-to-date, so maybe it’s a good fit.

The real question for the online gaming industry then is obvious — can it convince more states to adopt iGaming. That may depend on how hungry any given state is for the revenue that iGaming can bring. But that type of gambling is in its infancy in America while in the UK, continental Europe and elsewhere, it’s been more prevalent, and the international experience may inform the direction of iGaming in the U.S.

Considering the gigantic dollar figures that are at stake down the road in iGaming, the notion of a state having $1 billion in sports betting handle may soon be, well, quaint.

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