At the peak of the pandemic shutdown, iGaming accounted for 96% of online gambling revenue, and sports betting only 4%.

Sports Betting Is The Talk Of The Town, But For Revenue, Online Casinos Are King

In states with both legal iGaming and online sports betting, the former is king. Online casinos – with a bit of help from poker rooms – reliably produce more than twice as much revenue as sportsbooks.

This March, iGaming yielded more than $300 million in revenue for Michigan, New Jersey, Pennsylvania and West Virginia, according to reports from their respective regulatory bodies. During that same month, online sportsbooks brought in less than $150 million.

It may seem early to declare iGaming the winning revenue-generator for states, considering the pandemic is creating economic uncertainty for many industries. US online gambling is also a new phenomenon, and some of these markets are still maturing. However, iGaming led in New Jersey – the longest-standing market – since before pandemic-related shutdowns. In the past eight months, the ratio between the two has held quite steady. It’s also similar across the four states.

Now, some states with online sports betting, such as Illinois, are looking to expand their laws to allow iGaming. Online Poker Report predicts that online casinos will come to be the dominant force in those states as well.

Online Poker Report found that in full-featured markets, iGaming provides most of a state's online betting market

In full-featured online gambling markets, iGaming is trending towards a 70% share of revenue.

MI, PA reveal the widest divide

Michigan and Pennsylvania iGaming revenue was 75% or nearly three times that of their sports wagering revenue. Even though Michigan online casinos became legal only recently, their revenue is already similar to Pennsylvania’s.

Michigan’s legalization efforts presented both options to its residents simultaneously in January 2021. Its online casino revenue surpassed $95 million and its online sports betting went beyond $32 million in March 2021.

Among the more established full-service states, Pennsylvania showed the largest difference between online casino revenue – at $112 million in March 2021 – and online sports wagering revenue – which brought in $38 million.

[ Editor’s note: This is especially remarkable in light of the fact that, before launch, there were fears that Pennsylvania’s online casinos would underperform due to the state’s high tax rate on slots. ]

On Pennsylvania’s eastern border lies the veteran of the full-service group – New Jersey. The Garden State is prominent in the gambling world because Atlantic City is the biggest casino city outside of Las Vegas. The state now has a formidable online casino presence, too, at nearly $114 million in revenue for March 2021. That figure was 67% of New Jersey’s total online wagering revenue for that month, while sportsbooks contribued $56 million. In other words, its online casinos pulled in almost exactly twice as much as sports.

West Virginia is the smallest of the four states, and has been the most volatile as a result. Its sports betting industry also had a considerable head start. Even so, iGaming has pulled ahead and seems on course for the same situation as the other states. In March, WV online casino revenue was 1.5 times that of sports. The two verticals generated $4 million and $2.6 million, respectively.

Online Poker Report found that in full-featured markets, iGaming provides most of a state's online wagering revenue, as well.

Even with professional sports in full swing again, online casinos are rapidly outpacing sportsbooks.

Despite this dominance, online gambling will probably never replace retail casinos

As impressive as New Jersey’s nearly $114 million in March 2021 iGaming revenue is, total gaming revenue that month was $359 million. That means gamblers are generally staying in their lane, and there are still far more retail casino gamblers than online casino bettors.

Even as states continue to legalize online casino gambling, lawmakers will notice newer, younger gamblers entering the stream. That’s why representatives for the operators were quick to tell an Illinois lawmaker that online casinos won’t cannibalize customers from retail casinos.

After all, operators like BetMGM and WynnBet are relying on the reputation of their retail casino brands to be familiar to online bettors and draw them to the apps. These companies’ enthusiasm for the online channel suggests that they see it as complementing rather than cannibalizing their retail business.

The online channel was key during the pandemic

There was a lengthy period last year when gamblers couldn’t venture into land-based casinos and sports teams weren’t playing due to the pandemic. During that period, online casino and poker revenue soared. Even online sportsbooks still found a way to make a little bit of money. Mostly, that was by offering lines on what few events hadn’t been cancelled, like darts and eastern European table tennis.

Still, that was just a trickle. The worst part of the shutdown for gambling was from mid-March through the end of April. Online casino revenue was the hero during that period, bringing in 96% of the combined revenue for the four states.

For states that had these online options, it was a life-saver. States with only retail options saw their gaming tax revenue drop to near zero, yet New Jersey, with its well-established online market, saw its total revenue down only about one-quarter year-over-year, as gains in iGaming offset the casino closures.

- Heather Fletcher is the lead writer with OnlinePokerReport. She's a career journalist, with bylines in The New York Times, Adweek and other publications. Reach her at [email protected]
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