U.S. online gambling in 2025 faces revenue growth and industry shake-ups

February 19, 2025

U.S. online gambling in 2025 faces revenue growth and industry shake-ups

2025 could be a jackpot year for the U.S. online gambling market. Or it could hit a wall. Sports betting is growing fast, but iGaming is still stuck in neutral. States are clashing over legislation. States like New York, Maryland, and Louisiana are battling over iGaming laws. Banks are blocking payments. Operators like BetMGM and DraftKings have flagged banking restrictions as a hurdle, and smaller operators are getting squeezed. Some will cash in. Others could fold. So, who’s got the winning hand?

In part one of this three-part series, we examined the shifting landscape of U.S. sports betting, from states leading the charge to rising tax pressures and efforts to rein in offshore operators. Part two turned to iGaming, where progress has slowed. We explored the states pushing for legalisation and the union concerns that continue to hold things back. This final article in the series will tackle the bigger picture and look at market consolidation, payment challenges, and the rise of sweepstakes platforms as regulators race to keep up.

The numbers behind U.S. online gambling growth

Industry forecasts show the U.S. online gambling market will reach $26.8 billion in gross revenues by the end of 2025. This is a jump from $23.4 billion in 2024. Looking ahead, projections suggest the market could surpass $41 billion by 2028.

New York remains a powerhouse. The state’s mobile sports betting market exceeded $2 billion in revenue over the last 12 months, making it the first to cross this threshold. New Jersey, Illinois, and Florida are also expected to generate over $1 billion in annual online sports betting revenue.

iGaming, however, remains highly concentrated. New Jersey is on track to surpass $2 billion in annual iGaming revenue based on recent monthly results. In October 2024, New Jersey’s online gaming revenue overtook land-based casino revenue under non-pandemic conditions for the first time (Vixio). Pennsylvania and Michigan continue to show strong growth, exceeding $200 million in monthly revenue at times. Efforts to expand iGaming beyond these states have faced strong resistance.

The potential for more states to join the iGaming market remains. States like New York, Maryland, and Louisiana continue to explore legislation. If any of these states legalise online casinos in 2025, market projections could climb even higher. Industry insiders believe that if New York legalises online casinos, neighbouring states may feel pressured to revisit their bans. While no state has formally linked its plans to New York, its market power could shape regional attitudes. Though obstacles remain, Colorado and Wyoming may attempt to break into iGaming.

Some industry insiders suggest that if even one of these states breaks through the resistance, it could trigger a domino effect. Success in a state like New York could prompt neighbouring states to reconsider their opposition. The revenue potential is simply too large to ignore, and state deficits could speed up the push towards legalisation.

Connecticut, North Carolina, West Virginia, and Massachusetts included iLottery in its 2025 budget, but officials expect a 2026 launch. This digital shift is not as contentious as iGaming, but it shows increasing ease with online gambling products across these states.

Market leaders and the battle for dominance

The online gambling industry is consolidating. FanDuel and DraftKings dominate the sports betting market, leaving smaller operators struggling to compete. As tax rates rise and regulatory requirements increase, mid-tier platforms could face an uphill battle to survive.

In the iGaming sector, established casino operators are fighting for control. While MGM, Caesars, and BetMGM are major players, they face increasing pressure from digital-first brands. Companies that blend land-based operations with a strong online presence will likely maintain long-term success. FanDuel and DraftKings are also eyeing iGaming dominance, leveraging their sports betting platforms to cross-sell online casino products where permitted. Operators that fail to adapt risk being swallowed by larger rivals or pushed out of the market entirely. In 2024, several smaller brands struggled to gain a foothold, with some exiting the market altogether. That trend is expected to continue into 2025.

Partnerships could play a key role in determining the winners. Traditional casinos can team up with tech-savvy operators to update their services. Joint ventures and strategic partnerships can help land-based brands transition online. This would boost customer retention and digital engagement.

The tax squeeze on operators

More states are increasing taxes on sports betting. Ohio and Illinois raised rates in 2024, setting a precedent for other states to follow. Operators continue to lobby against these changes, but states see gambling as an easy revenue source.

Higher taxes could force smaller operators out of the market. Larger companies may absorb the costs, but smaller sportsbooks could struggle to remain profitable. In iGaming, states that legalise online casinos could impose steep tax rates, similar to New York’s 51 percent sports betting tax.

Operators warn that excessive tax rates could reduce customer acquisition and innovation investment. Some suggest that states imposing lower tax rates, like New Jersey, have cultivated more competitive markets with better player offerings.

When you look further afield, high gambling taxes in some European countries have decreased competition and encouraged offshore betting. U.S. operators worry that vigorous tax regimes may push players towards unregulated sites. This would harm consumer protection efforts.

***Source: Vixio Regulatory Intelligence.***

Payment processing problems

Banking headaches are still slowing the U.S. gambling boom. Visa and Mastercard continue to block gambling transactions, causing player frustration with delays and declined payments. Some operators, BetMGM and DraftKings among them, say these barriers have pushed them towards alternatives like digital wallets, prepaid cards, and even cryptocurrency.

Those options help, but they’re not perfect. Not every player trusts them, and regulators worry that these workarounds could expose the system to fraud and money laundering.

Lawmakers are watching. Some are hinting at tougher rules for payment providers. If that happens, operators could face even tighter restrictions. According to insiders, the fix lies in better cooperation between banks and the gambling industry—a smoother payment journey would help businesses and give players a safer, simpler experience.

A smoother payment process could also help reduce gambling problems. Some states are exploring ways to integrate responsible gaming tools directly into payment platforms. Spending limits, cooling-off periods, and transaction alerts could be embedded within payment systems to give players more control over their gambling habits.

As traditional online gambling faces hurdles, sweepstakes and social casinos are booming. These platforms operate outside traditional gambling laws, allowing users to play for virtual currency that can sometimes be redeemed for cash prizes.

Fliff, Prophet Exchange, and Novig have expanded aggressively, launching sweepstakes-based sportsbook models. Success comes with a price, though. Because regulators have voiced concern, some lawmakers may move to restrict sweepstakes gaming, seeing it as an unregulated loophole.

Sweepstakes casinos like Chumba and LuckyLand continue to attract players in states without regulated iGaming. These platforms invariably market themselves as entertainment products, but their cash prize redemption models blur the lines with traditional gambling.

California’s tribal operators are closely monitoring the growth of sweepstakes-based platforms like Fliff. With sports betting legislation delayed in the state, tribes view these platforms as a potential challenge to their gaming sovereignty and long-term market influence.

Legal battles over sweepstakes gaming could intensify in 2025. Regulated operators see these platforms as unfair competition. States may respond by introducing bans or stricter regulations. If lawmakers crack down, sweepstakes operators could face an uncertain future.

What’s next for U.S. online gambling?

The market is developing quickly. Some states are warming to iGaming, but expansion remains difficult. Looking ahead, the operators that survive will be those who can ride the wave—keeping up with regulations, absorbing tax hikes, and adapting to shifts in how players bet.

Staying ahead means more than just keeping the lights on. Innovation could separate the winners from the also-rans. Seamless payments, smarter, responsible gaming tools, and mobile-first platforms will define the industry’s top players.

However, lawmakers are watching closely. The tug-of-war between protecting players and boosting state revenue is far from over. That battle will shape the market for years to come.

Companies embracing technology and focussing on keeping players happy are more likely to stay on top for the long haul. But for those slow to change? The market could leave them behind. Budget pressures could push iGaming forward. States facing deficits could turn to online casinos as a revenue source. Avoiding high-tax models like New York’s may encourage more operators to support these efforts. As 2025 unfolds, the biggest question remains: Will the industry grow sustainably, or are new challenges on the horizon?

One thing is sure—change is coming, and not everyone will survive it. Industry watchers suggest that those who innovate fastest and navigate regulations most effectively will lead the next wave of growth.

*This was the third in a series of articles based on the Vixio Regulatory Intelligence U.S. Sports Betting & iGaming Outlook January 2025.