The Indiana Gaming Commission commissioned Spectrum Gaming Group to study the effects of online casinos in the Hoosier State. Spectrum’s results showed that online gaming operators could earn $880 million annually in a mature market.
However, bettors must wait at least a year before Indiana online casinos are legalized.
Indiana lawmakers are not slated to consider an online casino gaming bill in the 2024 legislative session. A corruption scandal involving a main proponent of online casinos has helped shelve the topic for now.
In the wake of the scandal, leaders from both chambers of the legislature said gaming bills are off-limits for now.
Yet, Spectrum’s report shows the potential for huge revenue. By the third year, operators could earn close to $1 billion. Operators could crack the 10-figure mark in subsequent years.
Indiana has a leg up on other states, report says
The report commissioned by the IGC predicts that “Indiana will ramp up i-gaming more quickly than the legacy states.” Since Indiana already has a brick-and-mortar casino industry and online sports betting, the market is primed for online casinos.
In other words, the state’s user base is already knowledgeable about casinos and online gambling.
Those factors will help potential Indiana operators reach the $880 million potential quicker than in other states where educating consumers has a higher cost.
How Spectrum calculated the $880 million revenue figure
Several states, including neighboring Michigan, already have a legal and regulated online casino market. Spectrum looked at those figures and saw how much spending was taking place based on three models.
Then, Spectrum used those same metrics to arrive at Indiana’s revenue estimate. Here are the three spending models used:
- Per adult
- As a percentage of gross state product
- As a percentage of personal disposable income
Based on the spend per adult model, Spectrum estimates $410 million in revenue during the first year. It culminates with $825 million by the third. Spectrum believes the third year of operation is when a market is mature.
Estimates based on gross state product range from $636 to $934 million. That represents the largest third-year estimate.
Finally, the personal disposable income model rose to $881 million in revenue from online casinos by the third year. The average of all three third-year estimates is $880 million.
Tax revenue should be at least $176 million
Michigan, Pennsylvania, and New Jersey are most applicable when comparing Indiana’s potential for tax revenue based on gross or adjusted gross revenue.
In Michigan, online casino operators are levied under a tiered taxation system. The government taxes operators between 20-28%, depending on revenue.
New Jersey is most equitable with its operators, taxing online casinos at a flat 15% of gross revenue.
On the other hand, Pennsylvania is on the high end of the spectrum. The Keystone State taxes operators at a whopping 54% on online slot machine revenue. On the other hand, it taxes operators 16% on casino-style table games and 14% on revenue from internet poker.
Based on these states, a middle-ground estimate of 20% is a fair projection. Based on Spectrum’s estimate of $880 million for a mature online gambling market, Indiana could conservatively receive as much as $176 million in annual tax revenue annually by the third year.
State coffers could receive up to $400 million
But legislators could implement a much higher tax rate. For example, other states have flat rates as high as 45%. This could result in as much as $400 million in tax revenue as early as Year 3 of legal Indiana online casinos.
Taxes received from mobile app casino gaming could be earmarked for general state projects, local funding in and around physical casinos or large cities, the state’s education fund, responsible gambling initiatives, and more.
However, lawmakers have not indicated any plans for the direction of online casino tax revenue. Those details would be in whatever bill is submitted once legislators lift the informal moratorium on gaming legislation.
Only seven states have legal online casino markets, but a handful of others are deliberating on bills that would make the activity legal.