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Canada – Online gaming to dwarf sports betting in Canada

By - 1 April 2022

Online casino betting drove 153 per cent more operator revenue and 339 per cent more in tax revenue than sports betting last year in US markets where both are legal, according to a recent analysis by PlayCanada.com, which tracks the fledgling Canadian gaming market.

A similar revenue gap will likely be coming to Ontario, too, as the province prepares to open the market to private online sportsbooks and launch online casino gambling on April 4.

“Sports betting gets more attention, but it will be online casinos that deliver the truly eye-popping numbers,” said Robyn McNeil, lead analyst for PlayCanada.com. “In the US states where online casino gambling has been legalized and regulated, online casino revenue dwarfs online sports betting revenue.”

Ontario plans to open to private online casino and sportsbook operators on April 4. That will make the province the sixth jurisdiction in Canada and the US to legalise and regulate both online casino gaming and online sports betting, joining New Jersey, Pennsylvania, Michigan, West Virginia, and Connecticut in the United States.

When Ontario does launch, it can expect that online casinos will grab a much larger share in revenue.

In 2021, online casinos in New Jersey, Pennsylvania, Michigan, and West Virginia produced: $3.8bn in gross operator revenue. By contrast, online sports betting operators produced $1.5bn and $976.8m in state and local tax revenue. Meanwhile, sportsbooks produced $222.4m in state and local taxes.

The $3.8bn in casino revenue in 2021 in those four states was more than the $3.6bn in revenue that all U.S. online sportsbooks generated in the same year. Sports betting was legal in five times as many states last year.

Such a chasm is why operators known best for sports betting, including DraftKings and FanDuel, have joined other major North American brands, such as BetMGM, in investing heavily in their online casino products.

“Online casinos are not only more profitable than sportsbooks, but they are also less subject to the seasonal ebbs and flows that affect sports betting,” said Eric Ramsey, lead data analyst for the Play network of sites that includes PlayCanada.com and PlayOntario.com. “In the U.S., revenue from online casino betting has consistently grown month over month, and has done so for years in even the most established markets.”

Michigan, which allows online sportsbook operators to use promotional credits to offset their tax obligation, showed the greatest discrepancy in 2021. Michigan’s online casinos produced (U.S.)$1.3bn in operator revenue, which was 281 per cent more than the (U.S.)$292.2m that sportsbooks generated. The online casino revenue led to a (U.S.) $279.3m tax injection into state and local coffers, 2,364 per cent more than the $11.3m contribution from sportsbooks.

“The disparity in the US between online casino and sportsbook revenue is instructive for Canadian regulators,” Ramsey said. “Regulators should take care in creating rules around these promotional credits, which have really sapped the tax potential from sportsbooks in some US states like Michigan.”

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