Coronavirus Should Fast Track Legal Online Gambling (But Probably Won’t)

Coronavirus shutdowns have blown holes in state budgets across the country. Most of the lost revenue is unavoidable, but some financial strains are self-inflicted wounds stemming from protectionist attitudes when it comes to modern technology. Nowhere is this more evident than in the gambling sector.

States with online lotteries and states with legal online casino industries have kept revenue flowing, albeit at a fraction of normal levels. Unfortunately, online lottery and online casino states are the exceptions and not the norm.

As iDEA Growth highlighted in a recent infographic, 43 states have casinos closed by COVID-19. Yet, only three (New Jersey, Pennsylvania, and Delaware) have been able to leverage their online casino industries to keep valuable tax dollars flowing during the shutdowns.

The running tally in 2020 already amounts to $84 million in tax revenue. And as iDEA Growth notes, that’s the equivalent of 15 million N95 masks or 35 million school lunches.

That raises two questions. Why have other gaming states been reticent to legalize online gambling, and will the current shutdowns change their thinking?

No Love for Online Casino and Poker  

Based on the experiences in the three early adopter states (New Jersey, Delaware, and the online-poker-only state of Nevada), there isn’t a single reason for states with existing retail gambling not to legalize online gambling.

• There’s no discernable spike in problem gambling rates.
• Nor is there evidence of rampant underage gambling.
• There’s no sign of organized crime or terrorists using it to launder money.
• And there’s zero evidence that online gambling cannibalizes land-based gaming. What the evidence shows is it bolsters the land-based gaming industry.

So why do certain interests fight so hard to prevent online gambling legalization?

The Opposition’s Point of View

There are a few reasons entities oppose the legalization of online gambling.

The opposition can stem from:

• A legitimate (misplaced or not) moral concern;
• feeling they’re at a competitive disadvantage to competitors; or
• an effort to protect their land-based business interests.

Say what you will about online gambling’s biggest naysayer, Sheldon Adelson, but his concerns that online gambling represents a societal harm appear sincere. The same can be said for people like Les Bernal, who heads up the Stop Predatory Gambling group. Bernal regularly provides testimony against gambling legalization at hearings.  

Competitive disadvantages can range from having inferior online partners, not wanting to dedicate as many resources to online as other operators, or being late to the party and left playing catchup.

Protectionist reasons are slightly different from competitive disadvantages.

For example, a casino opposing online casino or online poker for protectionist reasons would be thinking about its current advantages like a prime location. The reason is, the internet is the great equalizer when it comes to access, allowing a casino located in a rural area to compete with one in a densely populated area. So it’s not surprising to see some casinos oppose anything that levels the playing field.

Reasons two and three are also responsible for a lot of the head-scratching policies that have found their way into the numerous sports betting laws that have passed, as well as the smattering of online casino and poker legislation.  

Is 2021 Finally the year?

The shutdowns have exposed the chinks in the gaming industry’s armor. And as noted earlier, the situation in New Jersey, Delaware, and Pennsylvania is showing a lot of states and gaming operators the error of the ways.  

All of the operators and states that have watched their gaming revenue drop to zero could have very easily kept money flowing had they embraced online gambling.

But that doesn’t mean attitudes will change when things return to normal. It could, and I hope it does.

Additionally, online revenue is a drop in the bucket compared to land-based revenue, and passing legislation often requires bringing competitors to the compromise table. The protectionists tend to have a lot of lobbying power thanks to the revenue they generate and the number of jobs they support.

But the overriding hope is that the casino closures will help online gambling opponents see the light in 2021 and pass responsible online gambling legislation.