Michigan generated more than $14 million in tax revenue in February from online gaming and sports betting – showing online gaming to be a viable option for revenue generation. However, as Biden signs a $1.9 federal trillion stimulus package into law, legislators may think twice
By Buck Wargo, US correspondent for SiGMA News.
A $350 billion bailout of state and local governments will slow down legislators’ turning to online gaming to shore up revenues reduced by the economic fallout of COVID-19, analysts said.
The $1.9 federal trillion stimulus package that included the $350 billion aid to states was signed into law last week by President Joe Biden after it was passed exclusively by Democrats.
That is expected to deemphasize the expectation that following Michigan’s launch of online gaming more states would consider iGaming along with mobile sports betting. The numbers released this week by the Michigan Gaming Control Board were impressive, with $79.7 million in revenue generated in the first full month iGaming was activated and $9.5 million in revenue from internet and mobile sports betting.
Michigan, which launched online gaming January 22nd, is the fifth state to have full-fledged iGaming – and follows New Jersey, Pennsylvania, Delaware and West Virginia. State legislators are considering online casinos in Connecticut, Illinois, Kentucky, Massachusetts, New York, North Dakota, South Carolina and Missouri. Legislation died in committee in Indiana.
Some 20 states and the District of Columbia have sports betting while 15 jurisdictions offer mobile sports wagering.
Michigan generated more than $14 million in tax revenue in February from internet gaming and sports betting, the Michigan Gaming Control Board reported.
Michigan’s iGaming numbers were extremely strong and well ahead of expectations,” said Barry Jonas, a Wall Street analyst with Truist Securities (seen left). “Other states are probably paying pretty close attention to these numbers as they start thinking about how meaningful iGaming could be for them. That said … with the Biden stimulus package you wonder if there’s less urgency there. It lessens the narrative that budgets need to be plugged because the stimulus more than plugs them.
Jonas touted Michigan as being one of the top sports betting states already, saying that it should spur on other states who are considering approving sports wagering by “getting confidence to proceed down this path.”
Michigan’s online sportsbook handled nearly $302 million in wagers in February, buoyed by the Super Bowl. That compares to nearly $24 million in the state’s retail sportsbooks, according to the Michigan Gaming Control Board.
“It solidifies other states for sports betting and solidifies iGaming though we still have doubts about how meaningful the penetration will be in states notwithstanding the strong Michigan numbers,” Jonas said.
He added that sports betting is seen as more mainstream and publicly acceptable than online gaming, which some regulators and legislators may see as a gambling addiction and a concern it will cost jobs in land-based properties.
Brendan Bussmann, director of government affairs with Global Market Advisors (seen right) – which tracks state legislatures, said the Michigan numbers show that online gaming is a viable option and should be considered a supplement to land-based casinos. There’s an uphill climb now with the federal aid to states coming, he said.
A revenue grab is important as states face budget shortfalls, but it’s not as much as an issue since they got a federal bailout,” Bussmann said. “In some cases, I don’t know what they’re going to do with all of that (federal) revenue. New York has a $15 billion shortfall, but it’s going to get $26 billion from the federal government. Gaming should always be viewed by states as a long-term revenue solution and not a quick fix. A lot of people thought it was going to move because of a revenue shortfall in a lot of these states, but the impetus isn’t there anymore.
Bussman said that could be good in a way because it took two years of debate in Michigan to implement iGaming. Now that states aren’t faced with budget shortfalls they can implement it without charging exorbitant fees to operators as some lawmakers were discussing, he said.
In Michigan in February, BetMGM was the leader with nearly $27 million in online gaming revenue or a little more than one-third of the market share. FanDuel had $16.6 million, followed by DraftKings with $14.5 million, PokerStars/Stars Casino with $5.7 million and Barstool with $5.2 million. BetRivers was fifth with $4.3 million followed by WynnBET at $2.5 million.
FanDuel had $87.2 million in online sports wagers followed by BetMGM with $75.7 million, DraftKings with $72.9 million and Penn National with $40.3 million.
Jonas said the market share in Michigan has been concentrated in the top four players who have an advantage to sustain losses and continue to undertake an intense marketing campaign. That creates challenges for smaller players to emerge unless they increase marketing or differentiate themselves on the products or technology, he said.
“The top four players, excluding Penn, have seen less of a focus on profitability and more about spending,” Jonas said. “The thought is down the road they can convert to profitability. That is really a big question, but the way this market is trending we will have a few years to figure that out. These companies are well capitalized to be able to afford spending a lot of money and incurring a lot of losses to set themselves up as early leaders.”
Bally’s hasn’t launched its online product and Caesars Entertainment is waiting on its acquisition of William Hill to close before it moves forward in a bigger manner, Jonas said. William Hill had $360,484 in revenue in February.
“They are a little behind in launching the full offensive if you will but not to be written off,” Jonas said.
As for WynnBET, he said it’s a great brand in Las Vegas and Asia but “out of the gate is not a huge presence in Michigan. The market doesn’t perceive them as a top player yet.”
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