While Indiana state legislators have self-imposed a moratorium on bringing any online casino gaming bills to the statehouse floor in 2024, that has not stopped the state’s gaming commission from continuing to examine the possibility of adding the discipline to an already robust market.

The state agency requested an updated study from Spectrum Gaming Group, which delivered that shortly before the end of 2023 and estimated the Hoosier State could receive tax revenues ranging from $413 million to $929 million in the first three years of iGaming. Those figures were slightly higher from the study Spectrum conducted in July 2022, which provided a range from $392 million to $883 million.

In November, former Indiana Rep. Sean Eberhart agreed to plead guilty this month to a federal charge of conspiracy to commit honest services fraud filed by the U.S. Attorney’s Office for the Southern District of Indiana. Prosecutors said he used his position and voted in favor of “terms favorable” for Spectacle Gaming to relocate two casinos in the state in exchange for a position with Spectacle for a $350,000 annual salary.

Eberhart’s plea resulted in state legislators agreeing not to bring forward any gaming legislation in the statehouse in 2024. The Hoosier State has long been tipped as a prime marketplace for expansion into iGaming, yet previous bills have languished in committee each of the past three years.

Last year, a bill authored by Rep. Ethan Manning was the latest to fail to advance despite him heading the House Public Policy Committee that has jurisdiction over gaming. The biggest stumbling block proved to be a fiscal note from the Office of Fiscal Analysis and Management that estimated iGaming revenue could displace “up to 30% of existing gaming revenues.”

What has changed over the past 18 months

One of the main concerns that comes with the process of legalizing internet casino games is the cannibalization of revenue from brick-and-mortar venues. Indiana casinos halted a nine-month streak of year-over-year declines in December with $192.7 million in adjusted gross revenue spanning their 10 casinos and two racinos, which was also up 8.6% from November. That total does not include sports wagering, which delivered a monthly all-time high of $50.6 million in AGR for December.

Spectrum again addressed concerns about potential cannibalization early in its study, pointing out New Jersey had similar concerns in 2013 when some Atlantic City casino operators viewed internet casino gaming as a threat when it launched. Those concerns have come to pass largely without being realized, evidenced by iGaming in the Garden State generating close to $2 billion in operator revenue in 2023 after a record $180.3 million was reported in December.

The Spectrum study went one step further, citing a source at Caesars Entertainment that “iGaming immediately boosted enrollment in its player loyalty program and casino visits.” It also noted five states that had iGaming for at least one year from 2019-23 had relatively flat casino revenue, though four had increased retail gaming revenue from 2019-22. Michigan proved to be the exception, as tribal and commercial casino revenue was down 6.1% compared to 2019 pre-pandemic levels.

One other factor is that an additional 18 months of data have provided some insights into the types of players who participate in online casino gaming versus those who play at brick-and-mortar casinos. Spectrum cited vast differences in the demographics of two operators that participated in the study: One had nearly half its database from the 21-39 age group, while the other had two-thirds of its roster over the age of 40; one had more than half its database comprised of women, while the other had more than 50% men. The second group also noted that 85% if its players wagered online at least once weekly.

But within those differences there was one commonality of how iGaming could bring about more revenue for an operator — that a person who participates in both digital sports wagering and online casino gaming is more likely to generate more revenue than one person who participates solely in one discipline or the other.

The study also pointed to the potential of job growth with iGaming in the form of live-dealer, in-state studios outside of direct casino employment. Evolution told Spectrum it could create as many as 800 jobs with in-state studios, which include behind-the-scenes production and support gaming staff in addition to on-air talent.

Business methods and revenue estimates

Spectrum again provided three different types of iGaming models to consider — an “open” model in which all gaming companies are eligible to participate provided they have no other gaming interest in Indiana, a “closed” model in which licensees can only come from existing casinos, and a “hybrid” model in which casinos can offer online skins. The hybrid model is currently used in New Jersey, Michigan, Pennsylvania, and West Virginia, while Connecticut has a de facto duopoly with FanDuel and DraftKings via tribal agreements.

Tax rates of 20%, 30%, and 45% were again used, with the higher levies compared to sports wagering reflective of the relatively quicker ramp-up following launch. It also utilized three methods — “Spend per Adult” wagering in relation to the “Gross State Product”; and wagering based on a “Disposable Personal Income” method.

In the first method, Spectrum made adjustments for the lower adult population and the higher iGaming spend per capita. That resulted in a Year 3 iGaming revenue estimate of $825 million based on revenue of $165 per adult, slightly more than double the $82 per adult in Year 1.

Revenue in relation to spend as a percentage of Gross State Product of $934 million in Year 3, representing 0.18% of the state’s overall $518.9 billion GSP. This was the most aggressive revenue estimate of the three methods, with Year 1 revenue totaling $636 million. Spectrum cites the existing digital infrastructure for sports wagering as a key reason the Hoosier State can ramp up iGaming in rapid fashion compared to states that had to build its databases.

Internet casino gaming revenue as a percentage of disposable personal income was estimated at $881 million in Year 3 based on 0.2% of DPI spent on iGaming. This method had the most explosive growth track, with Year 1 figures totaling $420 million based on 0.11% of DPI before climbing to $629 million in Year 2 at 0.16%.

In taking the averages of the three methods, revenue totals ranged from $489 million in Year 1 to $880 million in Year 3. Taking the lowest tax rate of 20%, the minimum first-year tax estimate was $82 million, while the 45% rate on low-end revenue total would generate $286 million. Those numbers climb to $126 million and $340 million, respectively, in Year 2, and $165 million and $420 million in Year 3.

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