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In recent years, online sports betting has experienced an explosive growth across the United States.
However, online casinos have not experienced such a surge.
Despite the success experienced by states that have legalized internet gaming, some states still maintain hesitations.
Despite concerns about online casinos taking away business from brick-and-mortar establishments, Michigan has proven that this is not the situation within its local context.
Six states with online casinos
Michigan has now joined the ranks of states that have legalized internet gaming, including Connecticut, Delaware, New Jersey, Pennsylvania, and West Virginia.
Over 20 states have legalized online sports betting, in contrast.
In 2021, sports betting was legalized in 10 distinct states, while the legalization and expansion of internet gaming has been comparatively more gradual and widespread.
In 2012, Delaware became the pioneer, followed by New Jersey in 2013. Pennsylvania joined the ranks in 2017 after a gap of four years, and West Virginia followed suit in 2019.
Internet gaming was legalized in Michigan in late 2019, and it finally debuted in late January 2021. Connecticut, on the other hand, became the most recent state to legalize internet gaming in October 2021.
Including online casinos was always part of Michigan’s plan when they chose to pursue legalized sports betting.
According to David Murley, Deputy Director of Michigan Gaming Control Board, certain lawmakers displayed keen interest in this matter well before the state was granted the right to engage in sports betting by the Supreme Court. Their primary focus in the legislature was to advocate for iGaming bills.
Fears of online cannibalizing retail casinos
Many states embraced the launch of online sports betting without hesitation, as it was not a well-established industry in those regions.
The situation with casinos is different.
The tax revenue generated by retail casinos plays a significant role in several states. Concerns have been raised by both casino operators and legislators regarding the introduction of online gambling, as they fear it may have a substantial negative impact on the retail sector.
That has not been the case for the states that have legalized internet gaming.
According to Andrew Winchell, Director of Governmental Affairs at FanDuel, the states recognize that legalizing online gambling is advantageous for both land-based properties and the overall state revenue. He believes that it does not harm the retail market, but rather contributes to its growth. Winchell emphasizes that there is a mutually beneficial relationship between online and retail gambling, as customers can easily switch between the two platforms.
Sheldon Adelson’s impact on online casinos
Late Sheldon Adelson, the founder, chairman, and CEO of Las Vegas Sands and a significant political donor, strongly emphasized the concern of cannibalizing the retail market. As of September 2020, Forbes estimated Adelson’s fortune to be worth $33.5 billion.
After amassing his wealth through retail casinos in Las Vegas, Adelson developed a strong dislike for online gambling. In 2014, he played a crucial role in establishing the Coalition to Stop Internet Gambling. This group continues to oppose the Department of Justice’s interpretation of the Wire Act, aiming to impede the rapid expansion of online gaming.
Before his passing in January 2021, Adelson made a commitment to invest any necessary resources to prevent the legalization of online gambling in states. His legacy still exerts a lasting influence on the industry’s expansion.
Murley stated that while this situation was not observed in Michigan, he believes that in other markets, the strong influence of Sheldon Adelson and his opposition to iGaming, along with his political engagement to halt its progress, has had a significant impact. Overcoming this influence may require a considerable amount of time in certain states.
A look at the numbers
Determining the exact influence of online casinos on traditional retail is challenging. The retail industry has already faced significant setbacks in recent years, and the pandemic has further exacerbated the situation.
Before the pandemic, the total adjusted revenue collected in 2019 from Detroit’s three retail casinos (MGM Grand Detroit, MotorCity Casino, Hollywood Casino at Greektown) amounted to…
- The cost of MGM Grand Detroit amounts to $623.5 million.
- The total amount for MotorCity Casino is $493.6 million.
- The Hollywood Casino at Greektown has amassed a whopping $337.2 million.
MGM Grand and MotorCity achieved their highest records ever, whereas Greektown witnessed its highest total since 2012.
Due to the complete closure of casinos for several months in 2020, the numbers from that year cannot be considered in the discussion. Additionally, the restrictions on patrons and the mandatory mask requirements imposed on casinos in 2021 have also had an impact on the numbers. However, it is worth examining the retail revenue generated by the three casinos throughout the year, considering the launch of online casinos for the majority of 2021.
- The cost of MGM Grand Detroit amounts to $554 million.
- The MotorCity Casino boasts an impressive revenue of $438.3 million.
- The Hollywood Casino at Greektown has a value of $274.5 million.
The revenue figures for the initial five months of 2022 have been disclosed, indicating the current standing of the three retail casinos and their estimated progress for the entirety of the year.
- The revenue for MGM Grand Detroit has reached $257.6 million and is projected to reach $618.2 million.
- MotorCity Casino has generated a remarkable $169.1 million in revenue and is on track to reach an impressive $405.8 million.
- The revenue of Hollywood Casino at Greektown stands at $111.9 million, while its total earnings amount to $268.6 million.
What the numbers indicate
MGM is set to achieve a similar outcome as in 2019, which is a positive indication considering its dominant position in the online market in Michigan. BetMGM Michigan holds a significant 35% share of the state’s online casino market overall, and this figure has consistently exceeded 40% for the past three months.
As of 2022, BetMGM MI has accumulated $214.1 million in AGR. With this current rate, it is projected to reach $513.8 million by the end of the year. Consequently, MGM’s total revenue will surpass $1 billion for the year when combined with other sources.
In 2022, MotorCity is projected to experience an approximate 18% decline in retail revenue as compared to its 2019 figures. Additionally, it has formed a partnership with FanDuel, which currently holds the second position in terms of online casino revenue in Michigan.
As of now in 2022, FanDuel MI has accumulated $90.6 million in AGR, indicating a projected annual revenue of $217.5 million. When adding this to the estimated revenue from retail, the total surpasses $620 million, exceeding the highest retail figure achieved in 2019.
Greektown is anticipated to experience the largest decline in retail, projected to be around 20% compared to its 2019 level. Meanwhile, its online counterpart, Barstool, has generated $20.5 million in AGR (Annual Gross Revenue) in the current year of 2022, indicating a projected total of $49.1 million for the year.
Greektown is expected to have a combined revenue of $317.7 million, which falls short of its peak retail revenue of $352.8 million in 2011. However, Greektown has experienced a decline in revenue since then.
Tax revenue a big asset
There is no denying that Michigan has seen a significant increase in tax revenue for the state ever since the introduction of internet gaming.
In 2019, the retail casinos in Detroit contributed a total of $117.8 million in state tax revenue and $184.2 million in city/local taxes.
The trio produced a total of $102.6 million in state taxes and $160.8 million in city/local taxes in the year 2021.
Incorporate an additional $112.1 million in state tax revenue from online casinos, along with $55.3 million in taxes generated at the city or local level.
These three online casinos have generated over $60 million in state tax revenue during the first five months of 2022.
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