Iowa Online Casinos Could Offset Revenue Losses From Nebraska Casinos

Written By Hill Kerby on August 3, 2023
Iowa Online Casinos

Iowa online casinos could play an important role if the state wants to avoid a significant dropoff in casino-generated tax revenue.

The biggest hub for Iowa casino games is found in Council Bluffs, where three casinos dot the city landscape. Nebraska is starting to catch up to its more progressive neighbors, however.

Omaha and Lincoln are both adding massive casino projects to once-modest racetracks. That will keep brick-and-mortar casino dollars west of the Missouri River and out of reach for future Iowa budgets.

Members of the Iowa General Assembly know this. Online casino legislation has a pocket of support, but bills introduced over the past three legislative sessions have merely tested the waters.

It might be time to jump in with both feet.

Iowa has been a step ahead with online sports betting and retail casinos. It’s time online casinos come on board, too.

Legalizing Online Casinos in Iowa could still be years away

One main reason for the slow progress on the legislative side is due to lawmakers’ hesitancy to expand gambling so soon after sportsbooks went online in 2019. Additional concerns exist over responsible gambling and underage gambling.

Rep. Bobby Kaufmann worked with the Iowa Gaming Association to craft legislation, but the online casino betting option doesn’t have enough support from lawmakers and retail casinos. Rep. Jacob Bossman added to the sentiment at last month’s National Council of Legislators from Gaming States conference in Denver.

“I expect it will make progress. It would be nice if we could get it passed next year, but I’m a little bit pessimistic.”

At the same conference, Howard Glaser, global head of government affairs and legislative counsel for Light & Wonder, mentioned Iowa among five candidates for online casino legalization in 2024.

Rhode Island is the 7th state to offer online gaming

Even if Iowa online casinos seem unlikely in 2024, they should come eventually. Rhode Island recently became the seventh state to pass online casino legislation, bringing us closer to the tipping point we saw with online sports betting nationwide. The US has a great chance of having at least 10 states with legal online casinos by the end of 2025.

As more states legalize online casinos, Iowa lawmakers will see the financial opportunities they’re missing out on. Each passing year gives neighboring states a stronger foothold.  Eventually lost revenue will give an online casino bill the momentum and support it needs to be signed into law.

So far, none of Kaufmann’s bills have made it past the committee. Bossman thinks that could change but that we’re still a ways away.

“I expect it probably will be considered in Ways and Means and might come out. But with these types of bills, it takes multiple years before people become aware and comfortable.”

Iowa online casinos could bring in tens of millions of dollars to the state every year

Iowa’s favorable 6.75% sports betting tax rate brought in $13 million during FY 2022-23. Millions more remain on the table.

With no chance of immediate expansion, Iowa faces threats to its business – especially for its three casinos in Council Bluffs – as Nebraska casinos begin to open. Lincoln and Columbus already have casinos, and Omaha will pose a direct threat when its first casino opens next summer.

Online casinos can offset any business lost from Nebraska. On top of that, they bring about an offering unavailable in The Cornhusker State, meaning they can attract Nebraskans just like retail casinos have for nearly 30 years.

Plus, the online casino business is growing at an astounding rate. The six states with operational casinos in April generated $532 million in online casino revenue during that month, up 20.9% year-over-year.

Case study: West Virginia

West Virginia, the second-smallest online casino market, generated $13 million of April’s revenue from its 1.7 million population. While that’s a small relative number, it represented the best YoY growth in the industry at 51.6%.

Yearly growth has outpaced that through the last three fiscal years, too.

  • FY 2020/2021: $33.8 million revenue; $5.1 million taxes
  • FY 2021/2022: $86.2 million revenue; $12.9 million taxes
  • FY 2022/2023: $139 million revenue; $20.8 million taxes

If West Virginia is putting up those numbers, what would Iowa produce with a population of nearly 3.2 million?

Online casinos are a bigger draw than sports betting in every market, and Iowa sports betting was a $182 million industry in FY 2023. Online casinos could bring in at least $250 million from the beginning and grow to at least $500 million annually.

And if legislators tax online casinos like retail ones (22-24%, as opposed to under 7% for sportsbooks), we’re looking at $55 million plus in additional tax money for the state annually.

Will retail casinos support online casinos?

Retail casinos will be the last domino to fall in legalizing their online counterparts. Kaufmann confirmed this in an interview with PlayUSA, saying the chances of passing any legislation are zero until that happens.

West Ehrecke of the Iowa Gaming Association said 13 of Iowa’s 19 casinos favored online casino legislation at the start of the year, divided between industry giants and local casinos.

You’d be right if you expected companies like Caesars, which owns four Iowa casinos, to support online casinos. The regional Elite Casino Resorts, which owns three Iowa casinos, does not.

Smaller casinos remain concerned about cannibalization, or online casinos poaching their retail business. Numerous studies have proven that false, but their concerns remain valid since the major industry players make up most of the online casino market share. If any casinos fail to partner with these beasts, their bottom lines will suffer relative to the competition.

Even still, the prospects may be great enough for all to benefit. Glaser thinks so.

“It’s a big enough pie for every constituency that we have and every stakeholder that we have in these casino states.”

Photo by Shutterstock
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Hill Kerby

Hill Kerby is a proponent of safe, legal betting, and is grateful to be able to contribute to growing the industry. He has a background in poker, sports, and psychology, all of which he incorporates into his writing. He now brings his experience to PlayIA.

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