iCrowdNewswire Feb 10, 2021 9:32 AM ET
Delaware was the first state to legalize online gambling in the US, authorizing slots, card games and lotteries in 2012. New Jersey joined the race a year later while Nevada and West Virginia permitted online casinos a few years afterwards.
Today, New Jersey is the biggest market for online casinos. Pennsylvania comes in second while Nevada, which permits online poker but not slots and card games, ranks third. So, what happened to Delaware’s online casinos? Does the state benefit from its online gambling laws?
DE Online Gambling Laws
As mentioned, Delaware became the first state to legalize online gambling in the country in 2012. The first online casino, however, launched a year later. The Diamond State permits all forms of online gambling from sports betting to casinos.
The state makes it fairly easy to open an online casino—licenses start at $50,000. However, the DE takes so much in taxes that many operators are afraid to operate in the country. To expound more, the Diamond State charges new online casinos 100% of their gross profits until start to make at least $3.75 million in profits.
After that, DE reduces its taxation to 43.5% for profits made from slots and 34% for money made from poker and other table games. If an online casino fails to meet the recommended profit threshold of $3.75M, DE can take away the operator’s license.
In light of that information, DE only features three online casinos. The businesses are tied to brick and mortar casinos. In other words, the Diamond State gives out iGaming licenses to operators with land-based casinos in Delaware.
Some charity organizations have licenses to provide a limited number of licenses. But this comes with a caveat—they must share 40% of their revenues with the state. Discover more about online gambling in Delaware at online-gambling.com.
Online Gambling Revenues
Although Delaware was the first state to permit online casinos, it often lags far behind in revenues compared to states that authorized the industry much later. Online casinos gather an average of $10 million in annual revenue, with the state permitting with about $4M of the money.
Although DE’s online gambling revenues are on the rise, they could be higher. Below are the reasons holding DE’s iGaming industry back.
- DE’s Taxation System
Delaware’s way of taxing online casinos is exploitive to say the least. First, it requires operate to pay for a license fee. Then it takes 100% of their gross annual revenues unless they make over $3.75M. If they do, it takes at least 40% of this money.
Most online casino operators wouldn’t agree to such a deal, which is why DE still hasn’t licensed more operators since 2013. To be fair, the state’s iGaming laws requires license applicants to own land-based establishments locally. But still, its high taxation rate shuns many potential applicants.
- Small Population
Delaware’s population is a few thousands shy of the one million mark. Still, this categorizes it as a small state, especially when compared to other jurisdictions with legal iGaming laws. Take New Jersey as an example. It has nearly nine million people, ten times that of DE.
By population size alone, NJ deserves to make at least ten times more than the Diamond State. But it makes a lot more than that. With annual tax income of over $400M from online casinos, Delaware doesn’t even come close.
The only state that can rival NJ is Nevada, which is ironic considering Nevada is the biggest market for land-based casinos. Pennsylvania also holds the potential to upsurge NJ now that it has a bigger population. But similar to NJ, it collects relatively high taxes—54% of slot revenue compared to 15% for New Jersey.
- Equally Small Sports Betting Industry
After becoming the first state to legalize online casinos in 2012, Delaware also became the first state to authorize sports betting in 2018. At the time, the Diamond State planned to permit both land-based and mobile sports betting.
Today, no sportsbook runs a mobile betting app in Delaware. However, there’s a handful of brick and mortar sportsbooks in the state. That said, DE averages an annual betting handle of $100 million. This is 50 times less than the $5B handle NJ’s betting companies recorded last, which shows the impact of mobile betting in today’s world.
New Jersey authorizes online betting. And as a result, over 80% of sports gamblers in the state choose to use their phones for betting. About 20% of this customer base comes from New York, though. That’s why the Empire State is in the process of expanding its betting laws to include mobile betting.
- Delaware’s Neighbors Permit iGaming
Besides being a small state, DE has the disadvantage of having neighbors with liberal gambling laws. To the North, DE neighbors Pennsylvania, where all forms of online gambling are legal. To the East, Delaware neighbors New Jersey, home the country’s biggest iGaming market.
DE’s only neighbor with conservative gambling laws is Maryland. And starting this year, Maryland might permit both land-based and online betting sites. If Delaware were surrounded by states with anti-progressive gambling laws, it would probably record higher revenues.
As we mentioned, NJ gets roughly $1 billion of its $5 billion sports betting revenue from New York-based punters. Its online casinos also collect millions of dollars from bets placed by outsiders. Unfortunately, there’s nothing DE can do about its neighbors besides changing its iGaming laws.
Is there Hope for DE’s Online Gambling Sector?
Although Delaware’s online gambling industry performs abysmally, it’s improving. Last October, iGaming brought in $643,714 in revenue. This represented a 161% rise from the same month in 2019. It was also a 66% market upturn compared to March, when the industry had a monthly income of $514,959.
Against that backdrop, not all hope is lost for DE’s online gambling industry. There’s a growing demand for online casinos and sports betting. The demand could get higher, though, if DE changes it gambling laws for the better. For starters, it should license more operators and lower its taxes.