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Despite widespread belief in the U.S. gaming industry that internet casino gaming will drive significant revenue growth, efforts to expand the legal market beyond just a few states continue to be blocked over concerns about cannibalizing land-based casino and increasing gambling addiction.

An inability to reach consensus among key lawmakers stalled several bills looking to legalize iGaming in 2024 in several state legislatures, from Maryland to Illinois and New York.

That inability to overcome legislative obstacles is the reason behind the efforts of the National Council of Legislators from Gaming States (NCLGS) to develop draft legislation that could be used as a framework for states looking to legalize iGaming.

“It’s not easy getting gaming legislation passed; it’s not easy getting any legislation passed,” said Representative Shawn Fluharty, a Democrat from West Virginia and president of the NCLGS. 

Fluharty said Thursday (July 18) that a NCLGS committee and industry stakeholders have been meeting over the last several months on the draft legislation that could be used as a framework for states looking to legalize iGaming. However, no version of the draft was circulated during NCLGS’ four-day summer meeting in Pittsburgh.

“We looked at what we could do with iGaming legislation,” Fluharty said. “Lets try to make it easier to build a foundation for what can happen in states looking to have iGaming. That’s the goal here.”

Fluharty noted a tax rate of between 15 percent and 25 percent will be among the recommendations. But other details will have to wait until a draft of the legislative proposal is circulated among NCLGS members.

Although no states legalized iGaming this year, Fluharty said the plan is to have a final version approved by NCLGS members before the start of the upcoming state legislative sessions in January.

The draft legislation will cover crucial topics such as revenue generation, advertising, responsible gambling and data sharing with researchers.

Currently, New Jersey, Delaware, West Virginia, Pennsylvania, Michigan, Connecticut and Rhode Island are the seven states with legal iGaming. Nevada has authorized online poker only.

Steve Geller, NCLGS founder and general counsel, noted that the group is considering drafting model regulations along with legislation for consideration by state gaming commissions.

During a two-hour discussion on iGaming that featured several panels of regulators, lobbyists and gaming executives, David Rebuck, the former director of the New Jersey Division of Gaming Enforcement, said any new framework has to address various issues from embracing technology to cybersecurity and anti-money laundering regulations.

“From an operational standpoint, you have to embrace technology,” Rebuck said. “If you fail to embrace technology you will not be able to effectively regulate online gaming.”

Rebuck stressed that operators and suppliers are technology companies coming in and offering iGaming, not gaming companies.

“For an industry that didn’t exist until a short time ago, it is perhaps the most successful gaming product that has ever been produced,” said Howard Glaser, global head of government affairs and legislative counsel for Light & Wonder.

“You are running at a run rate this year of $6bn in gross gaming revenue from about six states,” Glaser said. “Compare that to sports betting, which is $11bn over the last 12 months. That’s from 38 states. So, it is an incredibly successful product, but it is running into challenges in state legislatures.”

The United States is poised to become the world’s largest regulated iGaming market this year, according to a recent report by 91����ԭ�� GamblingCompliance. Published last month, 91����ԭ��'s U.S. iGaming Outlook forecasts the U.S. iGaming market will experience 22.1 percent growth from 2023 to 2024, bringing the total gross gaming revenue (GGR) to $8.2bn by the end of the year.

Glaser said he thought there would be a tipping point when more legislatures pass iGaming measures but he declined to predict when he thought that tipping point would be.

Another topic of conversation was should the model legislation look like New Jersey’s original law from 2013.

Bill Pascrell III, founder of Princeton Public Affairs Group in Trenton, said the model legislation should, if not directly copy, then replicate what was accomplished in New Jersey.

“It has been bullet proof and successful,” Pascrell said about New Jersey’s iGaming law and regulations.

When the panelists were asked about how iGaming should be taxed, Pascrell was adamant that the “tax issue is a seminal issue, and it is a seminal issue because we are taxing legal compliant organizations where the bulk of the business is being done on the black market”.

New Jersey taxes iGaming revenue at an effective rate of 17.5 percent, comprising a state tax of 15 percent and an additional local investment tax.

Pascrell criticized a bill introduced by New Jersey state Senator John McKeon, a Democrat, during this year’s session that would raise the state tax rate on iGaming from 15 percent to 30 percent and the tax rate on online sports betting revenue from 13 percent to 30 percent.

has been referred to the Senate State Government, Wagering, Tourism & Historic Preservation Committee.

“We got taxes right in New Jersey,” Pascrell insisted.

Glaser admitted that people in the industry hate when he says it, but generally iGaming is not that tax sensitive.

“We are here in Pennsylvania where the tax rate is twice the New Jersey tax rate,” he said. “It is going just fine, thank you. They are going to bring in $900m in taxes” in 2024.

Pennsylvania taxes online slot revenue at 54 percent and table games and poker at 16 percent.

Glaser said the best solution to the black market is regulating iGaming more broadly in the U.S., which will have the biggest impact on tamping down the illegal market more than individual tax rates. 

When asked if a 15 percent to 25 percent tax rate was reasonable, Pascrell said he liked the New Jersey tax rate.

But Glaser said that “the best tax rate is the tax rate that gets you to pass iGaming in your state”.