Is The Latest Tax Revenue Estimate For CT Online Gambling Realistic? Based On The NJ Model, The Answer Is Yes


Connecticut has officially entered the mix as a strong candidate to legalize online gambling in the near future.

Last Thursday, the state hosted a public hearing with a focus on the future of gambling. Foxwoods Casino Resort, owned and operated by the Mashantucket Pequot Tribal Nation, came out as fiercely positive on expansion, particularly when it came to regulated iGaming.

Its support was evidenced by written testimony submitted by Executive Director of Online Gaming Seth Young, who cited that online gambling “is a more lucrative opportunity for the state than sports gambling.” This sort of indisputable encouragement from a powerful tribal gaming entity is nearly unprecedented for the industry, and a testament to the growing momentum iGaming has seen since Pennsylvania legalized the activity last October.

In his testimony, Young outlines the economic opportunity for Connecticut, citing that online gambling is worth “roughly $87 million in tax revenue” in five years, assuming a “pragmatic tax rate.”

This figure is noteworthy in that it represents a real attempt to provide an accurate picture of the prospective industry, standing in strong contrast to the bombastic numbers thrown around in the lead-up to the NJ iGaming market.

In tune with NJ

Through its first four years and three months, online gambling in New Jersey has generated $134.1 million in tax revenue. We project that by the time 2018 comes to a close this figure will swell to approximately $174 million.

Both online casino and poker games are taxed at 17.5% in the Garden State, which most industry analysts deem to be at the higher end of sustainable.

Interestingly, the five year tax revenue projections set forth by Young are exactly half of our New Jersey figure. From the testimony it is strong inferred that a modified New Jersey was used to come up with this rate, with several direct references made to that state’s market:

“In 2013, iGaming made up 0.3% of New Jersey’s overall Net Gaming Revenue. In 2017, iGaming made up 10% of New Jersey’s overall
Net Gaming Revenue, driving a total of $245.6m in new revenues.


With this in mind, we submit that iGaming is a valuable asset that can be leveraged, with the potential ancillary benefit of increasing slot revenue to the state.”

Initially, the $87 million figure strikes as a bit high, for a number of reasons:

  • The population of Connecticut is only 39.8% (3.588 million residents) that of New Jersey’s.
  • New Jersey supports seven brick and mortar casinos, and soon to be nine. By contrast, Connecticut has struggled mightily to bring its number of facilities up from two to three. This is significant in that it’s presumed only land-based casinos will be able to receive online gambling licenses.
  • A pragmatic tax rate is likely no higher than 15%.

However, there are even more reasons in support of CT’s iGaming industry generating at least this sum in tax revenue:

  • It’s likely that each Connecticut casino will support multiple online gambling brands, or skins, thus paving the way for brand recognizable out-of-state entities to enter the fold.
  • Connecticut boasts both a marginally higher GDP and median income than New Jersey.
  • A pragmatic tax rate could mean as much as 25%, which is what tribal casinos in CT currently fork over to the state. That said, we envision a rate no higher than 20%.
  • Mohegan Sun already has an established iGaming presence in New Jersey, and stands to be a player in the forthcoming Pennsylvania market.
  • More broadly, Connecticut operators will have (hopefully) learned valuable lessons from New Jersey, rendering them less prone to making grievous missteps early on.

The latter two points appear to have garnered significant weight in Young’s projections, as he states that the industry will only scale from $14.25 million in tax revenue in Year One, “escalating to roughly $20M in Year Five.” New Jersey traversed a much steeper trajectory, generating just $21.5 million in tax revenue in 2014, and nearly $43 million last year.

Given this, Young’s estimates do appear to fall somewhere along the spectrum of realistic.

Land-based industry in need of a shakeup

There’s little disputing that Connecticut’s land-based casino industry, like Atlantic City’s, has had difficulty attracting customers in the past decade.

Since peaking at nearly $205 million in slot revenue for fiscal 2004/05, Foxwoods has seen its revenue decline precipitously. The casino finally found a floor in fiscal 2015/16 when slot revenue was just $118.5 million. Fiscal 2016/17 saw slight improvement, to $120.1 million.

Mohegan Sun hasn’t fared any better, with slot revenue dipping from a high point of $229.1 million in FY 2006/07 to $150.6 million in FY 2016/17.

Young indicates (correctly) that online gambling may help to revitalize the state’s floundering brick & mortar casino industry:

iGaming has contributed to Atlantic City’s stabilization and turnaround in a market with new casinos right over the border in Philadelphia and other neighboring states, in a similar destination-style market as we have here in Connecticut.”

He also cites job creation, and safeguards that exist in the regulated space but not the black market, as reasons why Connecticut should strongly consider passing online gambling legislation.

Sports betting less lucrative

On a side, Young’s expectations for sports betting are modest. In his testimony he refutes the assumed $40 million to $80 million tax revenue projections that state lawmakers are being fed, replacing it with a figure where the state would average just $8 million per year from the vertical.

Again, this figure strikes as realistic, especially if tribes win exclusive rights to offer sports betting.

Young sees sports betting and online gambling combined creating $127.7 million in new tax dollars for the state over the industry’s first five years.

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Robert is a veteran writer and analyst for the gambling industry, with a particular focus on the emergent US online gambling market. An avid poker and gambling enthusiast, Robert offers unique perspectives from both the vantage point of the player and industry professional, and is fit to cover a broad spectrum of topics.

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