Studies Expect US States to Generate Billions of Dollars in Taxes If iGaming Becomes Legal

At the time of writing, online gambling is legal in six US states. Connecticut, Delaware, Michigan, New Jersey, Pennsylvania, and West Virginia. The legalisation of iGaming in the United States has long been a complex issue influenced by a variety of factors. Indeed, both negatives and positives have been posed by parties on both sides of the argument, but one of the most significant things to contemplate is how the revenue generated by iGaming could affect the country. 

Insights from the International Landscape

For countries that have fully legalised iGaming, the tax implications have been seismic. If we use Sweden as an example – one of the most well-regulated iGaming markets in Europe – it’s clear to see how legalisation can significantly impact national revenue streams. Established under the Swedish Gambling Act of 2019, Sweden’s framework has provided a structured approach to taxation – something that can undoubtedly be learned from – with the iGaming sector generating approximately SEK 6.9 billion last year alone. These taxes are subsequently spread between various public sectors and initiatives, including the public health and social services, education, research, and the government. Even casinos without Swedish license contribute to the broader tax landscape, with their operations in alternative jurisdictions still generating revenue that indirectly benefits Sweden’s economy – through both cross-border financial flows and international trade. 

The US is seeing the benefits of this right now – despite iGaming only being legal in a handful of states, casinos without a US licence are actively generating revenue in the country – but the revenue could be far greater. 

Studies Expect Billions of Dollars in Taxes

Earlier this year, an analysis group undertook a study evaluating the potential economic impact of iGaming in five states if it were to be legalised. According to this study, iGaming has the potential to generate revenues of $18 billion for New York, $9.2 billion for Illinois, $5.3 billion for Virginia, $5.5 billion for Maryland, and $3.9 billion for Louisiana between 2025 and 2029. 

This was based on three key sets of data – the impact of iGaming in the six states where iGaming is currently legal, the relationship between iGaming revenue and sports betting revenue, and consumer research. When you consider that thirty-nine states are still left untapped, it’s clear to see that iGaming could generate billions of dollars in taxes if it were to be legalised across the country. But whether that will happen or not remains to be seen.

When Will the US Legalise iGaming?

Predicting the exact timeline for when nationwide legalisation of iGaming in the US might happen is tricky – as mentioned previously, there’s an ongoing interplay of legal, political, and economic factors – but that’s not to say it isn’t on the horizon. Looking at the first set of data that the studies used to come to a conclusion, the impact of iGaming in the states where online gambling is currently legal has been seismic, with each state working by its own regulatory framework and tax structure. The success and revenue generated here could easily influence other states to consider the same measures – in other words, forming the groundwork for a more nationwide adoption. 

There’s also growing market interest to consider. The increasing revenue and popularity of iGaming in the US – and around the world, for that matter – provides a strong incentive for other states to explore legalisation, and there are ongoing efforts and discussions in many of them regarding the possibility of introducing iGaming bills. 

A notable example of a region that has recently legalised iGaming and has seen substantial tax benefits is Ontario, Canada, which legalised in 2022, only to report nearly $2 billion in revenue for the year of 2023. This is another example that politicians will use when arguing for the potential economic benefits of legalisation – California, Texas, and Florida are all significant players in the gambling debate, with efforts and lobbying ongoing from various stakeholders – helping them to build a compelling case toward legalisation in the near future.

Conclusion

There is political opposition, however. The US political landscape is fragmented, of course, which means there are different states and political figures with varying stances. This, in turn, has led to legislative gridlock, with some politicians opposing the expansion of the iGaming market due to concerns about social impacts, as well as the cost associated with regulating the industry and setting up frameworks – costs that will need to be balanced against the expected tax revenues. 

Some stakeholders are also concerned that legalising iGaming could negatively impact land-based casinos and other already-existing gambling markets. With all of this in mind, the future of complete legalisation remains uncertain. There are arguments on one side and arguments on the other, with multiple jurisdictions making it harder to form a consensus compared to countries like Sweden or Spain, where a unified regulatory framework has streamlined the process. But one thing is for sure, the potential tax benefits are significant. 

As mentioned previously, in five states alone, they could generate more than $40 billion in just four years, so this is certainly something that will be considered as talks inevitably keep going.