In recent weeks, PlayVirginia has focused coverage on the possibility of the state legalizing online casinos. It’s time to look at three neighboring states that have made online casinos legal.
West Virginia, New Jersey and Pennsylvania each have well-established online casino markets. Online platforms have been legal in New Jersey for a decade, while Pennsylvania’s market has been in operation for six years. West Virginia’s market has been up for four years.
Each state offers lessons for the commonwealth as it considers legalizing Virginia online casinos.
What can Virginia learn from existing online casino markets?
There’s one major reason why Virginians should be optimistic that online casinos will be available in the state soon. It’s Virginia sports betting.
In just the first four months of legal online sports betting, Virginia became the fastest state to reach $1 billion in total wagers. The appetite for online casinos should be just as strong.
PlayVirginia has looked at online casino gambling in the state from a few angles over the last month. A possible timeline was discussed, how legislation from North Carolina could affect Virginia’s online casino hopes and speculation as to which one of the two states would legalize online casinos first were covered.
Today, we shift our focus to existing markets near Virginia and what they could teach the state.
- Online casinos become legal: 2019
- Launch date: 2020
- Number of current online casinos: 7
- Tax rate: 15% of gross revenue
- April revenue: $12.1 million
- State population: 1.8 million
We begin with West Virginia, the only legal online casino market sharing a border with Virginia. It can teach the state a few key lessons.
Lesson 1: Population matters
West Virginia has seven online casinos. The state allows 15. It’s telling that operators aren’t champing at the bit to scoop up those remaining licenses.
The reason is a lack of population. The state simply doesn’t have enough bettors to support more than a half dozen online casinos. That shows in the revenue. WV made less than a tenth in tax revenue than Pennsylvania or New Jersey made in April.
The good news for Virginia? With a population of 8.6 million, it’s much more comparable to NJ and PA than it is to WV. The state can aim high and offer many licenses to support demand.
Lesson 2: Player-friendly tax laws are possible
Gambling winnings are taxed. However, the vast majority of tax revenue from online casinos comes from the fees paid by operators. West Virginia acknowledged this with its recent law, which allows gamblers to deduct net losses from their state tax returns.
Virginia could take a page from its neighbor’s book and put a similar law in place, leaving most of the tax revenue to come from online casino license-holders. It could translate to more money for the state, because players will be more likely to play without restrictive taxes on their gambling.
- Online casinos become legal: 2013
- Number of current online casinos: 32
- Tax rate: 15% on gross revenue + 5% investment alternative tax
- April revenue: $158.9 million
- Population: 9.3 million
New Jersey was the first state to legalize online casinos. It remains a shining example of how to do online gambling the right way.
Lesson 1: Don’t reinvent the wheel
New Jersey has had online casinos for 10 years, and it consistently brings in heaps of money. The state has to be doing something correct, right? Virginia can use New Jersey’s existing legislation as a framework.
The states are fairly similar: they border many other markets, their populations are close and they both have plenty of retail casinos.
Virginia can get a head start with its legislation by learning from New Jersey’s success.
Lesson 2: Location, location, location?
We fully acknowledge that Virginia can’t just up and move. Instead, this lesson is more about understanding the state’s geographical impact.
New Jersey is lucky; it’s right next to New York (NYC in particular), where online casinos remain prohibited. It’s an easy journey for New York bettors who want to give online casinos a try.
Virginia doesn’t have the country’s biggest metropolis next door, but it does have plenty of nearby states without online casinos: Maryland, North Carolina, Kentucky and Tennessee among them.
Virginia should take advantage by making it as easy as possible for denizens of neighboring states to bet online within its borders.
- Online casinos become legal: 2018
- Launch date: 2019
- Number of current online casinos: 19
- Tax rate: Varies by game, starting at 14%
- April revenue: $167.2 million
- Population: 13 million
Finally, there’s Pennsylvania. The state lost the race to New Jersey thanks to political squabbling. The Keystone State launched online casinos in 2019. That hasn’t stopped it from becoming a massive money-making force in the industry.
Lesson 1: Less can be more
Pennsylvania has 13 fewer online casinos than New Jersey, but its operators regularly beat NJ in revenue. This is in part thanks to PA’s bigger population.
The lesson here is simple: Virginia doesn’t need to offer dozens upon dozens of licenses to succeed. A tight legislative framework and an operator-friendly market can yield amazing results.
Lesson 2: Think outside the (tax) box
Whereas most other states have a 15%-ish tax rate on operators, Pennsylvania takes a different approach. Online casino betting is taxed based on the game type:
- 14% peer-to-peer such as poker
- 16% table games
- 54% slots
Of course, Virginia doesn’t need to replicate this structure to succeed. Instead, it’s an opportunity to try something that works for the state.
Pennsylvania has seen huge tax contributions as part of this scale. If Virginia lawmakers have specific causes in mind for the state’s potential online casino revenue, a unique taxation structure could be the way to benefit those organizations.
Virginia online casinos have the blueprint
Without any current legislation in the works, Virginia online casinos likely won’t become a reality until 2025 at the earliest. Still, the existing markets in the region teach a lot of important lessons.
If the Virginia Lottery and state lawmakers make an effort to learn from them, the online casino market could prove incredibly strong, if and when it comes to the Commonwealth.