How Online Gambling Affects States and Casino Operators

With an economy in crisis, state governments are struggling mightily to find new sources of revenue. Online gambling is seen as a new breath of revenue. When New Jersey state passed and implemented a bill to allow online gaming, Governor Chris Christie boldly predicted $160 million in fresh revenue from its first year.

No Quick Answer

The skepticism which this prediction drew was justified when Fitch Ratings Service calculated actual results at almost 45% below those optimistic expectations.

Of course, gambling is illegal in most states, but allowing virtual online gambling to take place is much easier than legalizing land-based gambling, which requires construction and operation of physical sites.

However, land-based casinos are costly to operate, and obviously require a large amount of overhead that takes away from net profits, which is spurring private casino operators to shut down operations across states where gambling is legal, such as in New Jersey and Mississippi.

Online Casino Benefits

Online casinos have far less expenses, but would not approach the ambitious revenue figures predicted by Christie. Profits may be proportionally higher because of minimal operating costs, but the volume of proceeds would be much lower than land-based casinos.

Online casinos are also more convenient, played from mobile devices or home pc's from which players can change games with the click of a button.

Land-based Casinos Benefits

First off, the online environment requires gaming operators to rigorously confirm the location of their players before allowing them to enter games.

Further, land-based casino benefits are more substantial and readily visible in a state's economy. For example, in Mississippi, the 29 operating casinos employ approximately 23,000 professionals, ranging from blackjack dealers to slot technicians to law enforcement. More employees equates to more taxable income, and more revenues for states—despite the fact that private organizations that operate casinos would prefer to reduce the operating costs that employees represent.

States Interests versus Casino Operators'

Still, most people prefer the experience of the land-based casino, so trying to crack both nuts at once is a time-consuming task that financially prudent individual operators will recognize as inefficient. And the preferences of state government and casino operators may not be identical.