A year ago, Iowa casinos celebrated 12% gains in Fiscal Year 2022. Now, those numbers have plateaued, generating $1.75 billion in gaming revenue in FY 2023, down 0.7% from a year earlier.
Meanwhile, neighboring Nebraska legalized state-licensed casinos in November 2020. The state saw its first casino open in September 2022. Three Nebraska casinos are now open, and at least two more are on the way. That means Nebraskans no longer need to travel to Iowa to play their favorite casino games. As more casinos open, that trend will continue.
Is Iowa in danger of losing more gaming revenue moving forward?
Loss of revenue a real threat
Iowa has 19 state-licensed casinos, a number which has not grown since the Wild Rose opened in Jefferson in 2015. Iowa online casinos are still prohibited.
Iowa’s retail casinos came out of the 2020 pandemic strong, reporting $1.58 billion in revenue in FY 2021 (July 2020 through June 2021). Business continued booming for the next year, reaching $1.77 billion in FY 2022.
FY 2023 revenue fell $11.7 million short of that record after March (-2% YoY), April (-6% YoY), and May (-5% YoY) combined for revenue drops of $21 million YoY.
And while the year closed on a higher note – June’s $141.8 million revenue was up 3% YoY – Iowa casinos face a real threat of a down year due to their own stagnation and a growing presence from its western neighbor.
Iowa sports betting revenue grew by 34% in FY 2023, earning a record $182.8 million. However, handle fell by nearly 9%, punctuated by three straight months of double-digit drops.
After March’s $232.6 million handle, the following three months plummeted:
- April: $172.6 million (-25.8%)
- May: $147.7 million (-14.4%)
- June: $115.5 million (-21.8%)
Football season could turn this around, but either way, it’s a concerning trend.
The growing Nebraska casino market
Nebraska’s casinos have generated nearly $41 million in revenue since Jan. 1, based on the reported $8.2 million tax bill—the Nebraska Racing Commission taxes gaming revenue at 20%.
This is less than 5% of Iowa’s $877.6 million revenue total for the same period, which may not raise eyebrows initially. However, these figures come mainly from two casinos, Lincoln and Grand Island. Harrah’s Columbus opened on June 12, representing three weeks of data.
All three casinos serve their local markets and deter residents from making a trip to Iowa, with Lincoln the closest of the three, an hour from the retail casinos at Council Bluffs.
Lincoln’s roughly 300,000 residents represent Nebraska’s second-largest market. As for the largest market, Omaha’s 500,000 population sits a stone’s throw from Council Bluffs. Its first casino, War Horse Omaha, is expected to open in the summer of 2024.
When it does, Iowa casino revenue will feel its most significant hit yet. Additional casinos in South Sioux City and Ogallala are also in the works.
A small solution: Expand retail casinos
To stave off Nebraska’s growing casino economy and grow alongside it, Iowa must stop resting on its laurels and begin looking for ways to add to its revenue streams.
The first glaring solution is to build more retail casinos, most pressingly in Cedar Rapids. The first attempts to make that happen date back to 2014 and have recently been hampered by a two-year moratorium signed into law by Gov. Kim Reynolds in 2022.
The earliest a casino could be approved is 2024, but efforts still move forward. As Iowa’s second-largest city, a new Cedar Rapids casino would immediately boost revenue totals. As well as bring in more jobs, boosting the overall economy of the city.
Des Moines, Iowa’s largest city and metro area, has one casino. If a new wave of growth occurs, it presents another prime market for expansion.
The real solution: Legalize online casinos
Online sports betting in Iowa was one of the first legalized markets in the US and has generated over $30 million in tax money since 2019.
This is a small fraction of the $300-plus million the state has received from annual retail casino profits, despite Iowa sportsbooks accepting over $6 billion in lifetime wagers.
Online casinos are legal in seven states, six of which are live. Although states like Michigan, New Jersey, and Pennsylvania have larger populations, their online casino revenue (and tax bill) is multitudes greater than from sports betting.
Of course, it doesn’t have to be an either-or situation. Should Iowa legalize online casinos, that’s now a possibility, it could have its cake and eat it, too.
And the momentum has grown on that front after three years of failed initiatives. More recently, Iowa came up around industry discussions as one of the most likely states to legalize online casinos in 2024.
Some retail casinos still oppose their online counterparts, but reports of at least one more state entering the online casino market in 2024 will only bring about another nationwide boom, just like sports betting.
The list of online casino states will rise to ten or more in the coming years. It’s on Iowa legislators, casinos, and residents to determine if and when it will join that list.
