Online Casino, iGaming vs Sports Betting: Opportunity & Risk
Author:
Zach Lutz
Published:
Jul 26, 2024
,
04:41 p.m.
ET
Updated:
Sep 16, 2024
,
02:41 p.m.
ET
The landscape of legalized gambling in the United States is evolving rapidly. With the legalization of online sports betting (OSB) in many states, a new wave of potential revenue streams has opened up. However, the real game-changer for operators isn't sports betting – it's iGaming and online casino products. These platforms present significantly higher profit margins, but they also come with greater risks and potential societal impacts.
What are iGaming and Online Casinos?
iGaming, or interactive gaming, refers to the wagering of money on games or events via the internet. This can include poker, bingo, lottery games, and online casino games like slots and table games. Online casinos are platforms where these games of chance are offered, replicating the experience of a traditional casino but accessible from any internet-connected device.
Online casinos offer a wide array of games that one would typically find in a physical casino. This includes:
Slot Machines: Digital versions of the classic slot machines, offering various themes and payout structures.
Table Games: Virtual versions of poker, blackjack, roulette and baccarat.
Live Dealer Games: Real-time games where a live dealer operates the game via a video stream, providing an immersive experience.
Where are Online Casino games legal?
As of now, online casino games are legal in only seven states. Connecticut, Delaware, Michigan, New Jersey, Pennsylvania, Rhode Island and West Virginia have regulated and legalized online casino gaming. In these states, operators can offer a full suite of online gambling options, from slots and table games to live dealer experiences.
Comparing iGaming and Sports Betting legalization
The path to legalization for iGaming and sports betting has varied significantly across the United States. Sports betting has seen a more rapid and widespread acceptance, largely due to the 2018 Supreme Court ruling that struck down the Professional and Amateur Sports Protection Act (PASPA). This decision allowed states to legalize sports betting if they chose to do so.
In contrast, iGaming has faced more resistance. This is partly due to the broader scope of gambling it encompasses and the increased potential for problem gambling. According to the American Gaming Association, nearly 9 in 10 Americans find casino gambling acceptable for themselves or others. While both forms of online gambling offer substantial revenue opportunities, iGaming's association with casino-style games often triggers more stringent regulatory scrutiny.
Why have some states legalized online sports betting but not iGaming?
The discrepancy in legalization between online sports betting and iGaming can be attributed to several factors. Many legislators view sports betting as an extension of traditional sports culture, making it more palatable to the public and easier to regulate. While casino games are met with widespread public acceptance, in contrast, iGaming is often seen as a more significant departure from existing norms, with higher potential for addiction and financial harm. Additionally, there’s a fear of cannibalizing brick-and-mortar casinos.
New Hampshire Republican Senator Timothy Lang, a proponent for igaming legalization, experienced this fear firsthand. “This year, I put in my iGaming bill and while it got through the Senate, the House has 400 members and the [incumbent charitable gaming] operators had a knee-jerk reaction to it,” Lang said. “While senators understood what was going on and that’s good, [those operators] went heavy on the cannibalization argument.”
Beyond this fear, difficulty in progressing iGaming legalization may also be attributed due to a lack of understanding in some instances. Head of government affairs for Fanatics Betting & Gaming and former Michigan State representative Brandt Iden says, “We go to talk about igaming and they think we are talking about video games,” he said during a panel at iGaming Next in New York on 6 March. “I start with [using the phrase] ‘internet casino’. You have to call this what it is, otherwise you have lawmakers that don’t know what you’re talking about. And then you have to lead with consumer protections.”
Similarly, Iowa Republican Representative Jacob Bossman added, “I think there is still a lot of education that needs to be done. I think we will make a lot of progress next year. But with a lot of gaming bills it takes multiple years.”
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What’s more profitable for operators? iCasino or Sports Betting?
From a profitability standpoint, iCasino products offer significantly higher margins compared to sports betting. The profit margins for iCasino can be substantially higher due to the nature of the games and the lower payout percentages to players. For example, slot machines, which are a staple of online casinos, often have a house edge of anywhere from usually 7-15%, whereas sportsbooks typically operate on a margin of about 4-5%.
According to data from the iGB, iGaming in New Jersey in June generated a 25.2% higher year-on-year total revenue figure of $186.8M, compared to $60.1M for sports betting. This stark difference highlights the lucrative nature of online casino games.
Increased dangers and risks of iGaming and Online Casino
Despite the financial benefits, iGaming and online casinos carry significant risks. These include:
Increased Problem Gambling: The accessibility and anonymity of online gambling can exacerbate addiction issues. The constant availability of online casinos means players can gamble 24/7, which can lead to problematic behavior. The games are also quicker and more constant. Think: the 5-second spin of the reels of an online slot machine versus waiting the length of a baseball game for your bet to win or lose.
Financial Risks: Players can lose large sums of money very quickly with online casino games, particularly with high-stakes options. This can lead to financial distress and other related problems.
Regulatory Challenges: Ensuring fair play, preventing fraud and protecting minors are ongoing challenges. Robust regulatory frameworks are necessary to address these issues, but implementing and enforcing such regulations can be complex and costly.
