A new financial impact statement is increasing the state’s expectations for the future of online casinos in Indiana.
Indiana online casinos aren’t legal yet, but a bill in the state’s House of Representatives is planning to change that. The predictions from this new financial report are based on the current version of that bill.
Projections increase for Indiana online casino revenue
Online casinos have enormous potential in Indiana. The industry would generate hundreds of millions of dollars worth of revenue every year.
Because of that, the bill needs fiscal notes that predict how the legislation will change Indiana’s revenue. Internet casinos would affect a handful of different tax funds in the state, so this first fiscal note might not be the last.
The state’s Office of Fiscal and Management Analysis was responsible for putting the report together.
According to the projections, a fully mature Indiana online casino industry could create up to $812 million worth of revenue every year. The report predicts that it will take Indiana three years to reach full maturity.
That number is lower than some other projections. PlayIndiana predicts that online casinos could create nearly $1 billion in annual revenue. Another study conducted by Spectrum Gaming Group estimated that the revenue ceiling would be around the $836 million mark.
However, the report’s prediction of $812 million in annual revenue is a drastic increase from last year’s online casino bill. The first fiscal note for 2022’s bill predicted an annual revenue of $616 million for the industry, ramping up 32% this time around.
The only real difference between the structure of the two bills is their tax rates. 2022’s bill planned to tax online casino revenue at 18%, while the new bill increased that up to 20%.
Since a 2% difference isn’t enough to fill the nearly $200 million projection gap between the two bills, that suggests that Indiana’s analysts are more optimistic about the potential of online casino gaming in general.
Despite that, the report predicts that online revenue will come at a cost.
Predicting cannibalization for Indiana’s casinos
The bill’s fiscal note predicts that internet casinos in Indiana will cannibalize land-based casinos to some degree. In other words, the report suggests that online games could take away some of the business from the in-person industry.
“Online casino games will displace some gambling activities occurring at brick-and-mortar casinos. Studies have concluded that up to 30% of new online gaming revenues are displaced from existing casino revenues. This figure could be higher for a saturated market like Indiana.”
The prediction differs from what’s happened in other states that already have online casinos. Michigan, for example, has been able to grow its online and retail casinos side by side. That’s largely because the two sides of the business are different products.
Retail casinos can’t beat the convenience of online, but they don’t have to in the first place.
Visiting a casino in person is about more than just playing the games in the building. It’s often a method of socialization. Extra features like bars, restaurants, entertainment venues and other amenities give in-person casinos a leg up over their online counterparts.
Although the types of gambling are similar, the experiences are very different. That helps internet casinos grow hand in hand with the retail industry instead of cannibalizing it.
Spectrum Gaming report differs from fiscal note
The same Spectrum Gaming Group study that predicted the potential revenue for Indiana online casinos also dove into the likelihood of cannibalization.
The study doesn’t expect any cannibalization from Indiana online casinos, which puts it at odds with this new report.
“Based on the evidence from the states where iGaming has been introduced, there is little, if any, cannibalization of revenue from established casinos. This is particularly true in states where the in-person gaming options are easily accessible to most of the population, such as in Delaware and West Virginia. Based on the results in other iGaming states, Spectrum believes implementing iGaming in Indiana will have little impact on retail casino gaming revenues in the state.”
Spectrum’s report was commissioned by the Indiana Gaming Commission earlier this year.
Half a billion dollars in online Hoosier Lottery sales
The third piece of the puzzle from this latest report involves online lottery tickets. Indiana’s online casino bill would also legalize internet lottery games.
The fiscal note has high expectations for the online side of the business.
By year three, the report predicts that Hoosiers could be purchasing up to $548 million worth of online tickets every year. According to the projections, that would translate to about $82 million worth of new profits.
The Hoosier Lottery racked up over $340 million worth of profits last fiscal year, so adding another $82 million to the pile is a significant increase.
However, it’s important to remember here that nothing is set in stone. Just like the report’s online casino predictions, the projections for online lottery aren’t firm commitments.
Indiana’s online casino bill still has a long way to go before it becomes law. During that time, all sorts of changes could take place that could flip any predictions on their heads.