Online gambling has been booming in recent months in both New Jersey and a number of other states with regulated igaming, with record numbers in revenues generated and taxes paid set in several states in December 2023 alone.
As the revenues continue to rise and the operators pay record amounts in taxes, a new study by the National Economic Research Association (NERA) finds that those numbers may not be painting the full picture and that igaming might not be as big of a positive for New Jersey’s economy as it seems.
The online gambling sector — which includes NJ online poker along with traditional casino and slots gambling — has been increasing exponentially since online casinos they first legalized by the state back in 2013, while legalization of sports betting in 2018 only helped fuel the industry even more.
Yet, despite the revenues consistently going up and the taxation numbers looking pretty good, the report claims that the igaming industry may be a net negative for the state when taking into account the increased costs of social expenditures associated with problem gambling.
What’s even more, igaming industry contributes less to wages that could be reinvested into the economy than many other entertainment activities, further decreasing the value of the industry as a whole to state’s economy.
iGaming Is Not a Major Wages Contributor
The NERA report on New Jersey’s igaming industry shows that the sheer growth of New Jersey’s online gambling sector does not necessarily equate to a net positive for the state’s economy as a whole.
In fact, despite plenty of NJ online casino players flocking to the apps to play popular casino games, the low number of employees needed to maintain the operations means that less money gets reinvested into wages and subsequent spending than through other recreational activities, including live casinos.
For comparison, the report shows that only four cents on every dollar spent on igaming is paid in wages, compared to 12 cents for live casino spend and 39 cents for non-gambling recreational activities.
Less money getting reinvested into wages means less spending in the long run and the report estimates every dollar spent in igaming only generates 0.9 cents in new spending, compared to 8.3 cents generated by non-gambling recreational activities.
In 2022 alone, igaming operators paid $110 million in wages. And while this may seem like a
substantial number, the report estimates that the same amount of spend on other recreational activities could have potentially created a full billion dollars in wages in 2022 alone.
Social Costs Could Wipe Out Tax Contributions
One thing that is undeniable when it comes to igaming is that it provides a lot of tax dollars, as online casino operators are forced to pay hefty taxes on their revenue.
iGaming as a business generates a lot of revenue due to low maintenance costs and fast turnover, which has led to NJ online casinos consistently paying hundreds of millions in taxes a year.
However, the NERA report predicts that an increase in overall online gambling activities also leads to an increase in problem gambling, creating additional costs for the state.
Looking at numbers from the UK, NERA showed that the country pays £1.4 billion a year in healthcare and welfare payments associated with problem gambling while taking in £9.9 billion in gambling revenue.
Comparatively, New Jersey could be forced to pay some $350 million in new social payments every year, effectively wiping out the taxes paid by the sector.
Combined with the fact online casinos don’t contribute nearly as much of their revenue to wages as many other entertainment sectors, the report puts into question many of the numbers that igaming operators have been boasting with and puts some interesting questions on the table regarding the future of online gambling in NJ and other US states.
