Safe, regulated, and legal iGaming’s 10th birthday is November 8. Since it started, six states have legalized iGaming (with Rhode Island joining in 2024) with unique regulations and tax laws. Comparing and contrasting the differing tax arrangements, spending agreements, and revenues can be pretty fascinating. Often, I ask: Do different legislation and tax regimes affect gaming revenue? So, I recently did a deep dive to find out:
The First State, Delaware, was the first to launch online casinos in the US through the state lottery in November 2013. It levies a high 56% tax on electronic gaming revenue and 20% on table games gross revenue.
In 2022, this led to $9 million in tax revenue, the lion’s share of which was put directly into the General Fund for public services. Delaware’s approach yielded a small per capita revenue of around $9, potentially showing that a higher tax rate doesn’t necessarily mean greater revenues, especially when combined with the small market size and no commercial casino launches.
The Garden State has a deep-rooted casino heritage thanks to the history of Atlantic City and was the second state to launch legal iGaming in 2013. By keeping its tax rates relatively low, at 15%, New Jersey has created an environment that encourages online casinos to launch, with 29 currently in operation.
This competitive tax rate translates into a per capita tax haul of $29, which is a decent haul considering the popularity and maturity of the market. New Jersey ring-fences these funds exclusively for the well-being and care of senior citizens and disabled residents.
In addition, 2.5% of casino revenue is used to support economic development and community projects in Atlantic City or municipalities hosting racetracks as part of the community investment obligation. This totaled $85.9 million in 2022 and is projected to be as high as $89 million in 2023.
When it launched online casinos in 2017, Pennsylvania established a unique tax arrangement with different rates for game types. The state registered an astonishing $652 million in revenue in 2022/23, yielding a per capita tax haul of $50, an impressive bump to the state’s public finances.
Significant chunks of these funds are rerouted towards reducing school taxes, increasing funding to law enforcement, and underpinning responsible gaming programs that help citizens navigate the world of gaming safely. I believe providing a tangible benefit to legal online gambling, like these commendable programs, is crucial to the safe expansion of the iGaming industry.
Connecticut has one of the most unique online casino agreements in the US, with one operator licensed by the Connecticut Lottery and two operating under local Native American tribes, the Mohegan and Mashantucket Pequot. Currently, the Connecticut Lottery license is vacant after Rush Street Interactive’s PlaySugarHouse left the state.
While an 18% tax rate on revenue may appear small, especially compared to states like Delaware, it actually provides $16 per capita. The Connecticut General Fund uses these funds for state programs like education, policing, and emergency services.
With its 15% iGaming tax rate, West Virginia directs most of its gaming tax revenue towards schools, tourism initiatives, senior citizen services, and even the niche sectors of locally-owned horse and greyhound racing. However, this tax rate only provides a per capita figure of $11.
Michigan’s graduated tax structure for iGaming revenue shows how a state can cater to local and broader governmental interests. The tiered structure taxes revenue below $4 million at 20%, while anything surpassing $12 million sees a 28% rate.
Furthermore, internet casinos in Detroit must contribute a 1.25% municipal fee. The City of Detroit uses the revenue to fund public needs, from law enforcement to economic development. The wider state earmarks most of its gaming tax revenue for the Michigan School Aid Fund, buttressing K-12 public education.
Detroit amassed $77.83 million in 2022/23, while the whole state was boosted by $289.24 million. This totaled $367.07 million, translating to a per capita figure of $28. However, Detroit residents enjoyed a higher per capita rate of $149 thanks to the additional city funds.
After diving into the taxes of US iGaming states, it’s clear that taxation regulations are as diverse as the nation itself. Beyond the numbers lies the question: How should these states use revenues? Are states using these funds for the greater good?
Every state used funds for local communities through schools, law enforcement, and support for people with disabilities and older people. Michigan and New Jersey stand out thanks to their commitment to helping communities that host gambling establishments through city taxes and the use of funds.
As we step into a new decade of legal online gambling, I sincerely hope that these shared commitments to community welfare remain at the heart of each state’s strategy, ensuring that the world of online gambling is beneficial to local communities and not just profitable.