A promised economic boom from online gambling’s rapid expansion across the United States may be a mirage, according to new research.
New Jersey, which led the charge for mobile sports betting’s legalization, has received hundreds of millions of dollars in taxes from the sector. But economists cautioned that the cost of higher problem gambling rates could be “roughly equal” to the state’s takings.
In a report seen by the Guardian, they estimated economic output, jobs and wages have been knocked by New Jersey’s digital gambling surge – calling into question industry claims that legalization can provide a boon to states nationwide.
The research, commissioned by the Campaign for Fairer Gambling, found that $2.4bn spent by people gambling online in New Jersey in 2022 “decreased New Jersey’s economic activity by about $180m”.
Had the same amount of money been spent on another activity, like shopping or dining, NERA Economic Consulting estimated that significantly more would have been paid out in wages, which employees would have then spent on other parts of the economy.
The online gambling sector paid some $110m in wages to New Jersey employees in 2022, according to NERA, generating $22m in new spending across the state’s economy. Had another recreational activity attracted the same $2.4bn, NERA projected this would have led to about $1bn in wages, generating $200m in new spending.
Digital gambling “does not yield the types of positive knock-on economic outcomes that other discretionary industries do”, the report said.
NERA estimated that online casinos in New Jersey contributed $385m in net taxes in 2022, up from $42m just five years beforehand. But using a UK study by the London-based National Institute for Economic and Social Research on problem gambling, and rerunning its calculations for New Jersey, NERA concluded the state could face $350m in social costs – including healthcare, welfare, homelessness and criminal justice – from issues linked to digital gambling.
The Campaign for Fairer Gambling – established to lobby for reform – commissioned NERA to appraise another report, which was itself commissioned by iDEA Growth, an industry advocacy group aiming to “shape legislative and regulatory outcomes” for its members, which include the gambling heavyweights FanDuel and DraftKings. It has sought to highlight how legalizing online gambling can boost states’ economies and create jobs.
The iDEA report said online gambling in New Jersey had “directly and indirectly” generated $2bn in economic output, 6,552 jobs, $401m in wages and $259.3m in state and local government taxes between late 2013 and 2018.
But the NERA economists found digital gambling had been “detrimental” to the state’s economy, and that the 2019 iDEA-commissioned report “fails to capture” what other industries would generate from the same levels of spending.
Derek Webb, who founded the Campaign for Fairer Gambling, argued the costs and benefits of legalizing online betting have not been sufficiently scrutinized. “America’s iGambling gold rush got out of hand quickly because the debate has been dominated by advocates for unfettered proliferation,” he said.
Online sports betting has grown rapidly since 2018, when the US supreme court struck down a decades-old law that prohibited the practice across much of the US. Mobile sports betting is now live and legal in 28 states and Washington DC.
skip past newsletter promotion
Our US morning briefing breaks down the key stories of the day, telling you what’s happening and why it matters
Privacy Notice: Newsletters may contain info about charities, online ads, and content funded by outside parties. For more information see our Privacy Policy. We use Google reCaptcha to protect our website and the Google Privacy Policy and Terms of Service apply.
after newsletter promotion
Some states have legalized digital gambling “based on false assumptions”, Webb claimed. “Only years later does the public come to learn that the sector’s sunny forecasts were overly optimistic.”
Jeff Ifrah, founder and general counsel of iDEA, said comparing the report it commissioned with the NERA report was “akin to comparing apples to oranges”. The research iDEA commissioned focused on the economic impacts of online gambling, while the NERA research focused on its “alleged social costs”, he added.
NERA’s analysis omits “many roles that are integral to the legal iGaming industry”, Ifrah said in a statement. “Without considering how jobs grew exponentially with the legal iGaming market in New Jersey, NERA is providing an inaccurate assessment and false conclusions.
“The NERA report is misleading for many reasons and betrays a basic misunderstanding of the most fundamental aspects of the legal iGaming industry: Without legalized iGaming, consumers turn to illegal, offshore sites that offer zero protection to players nor any economic benefits to the state.”
The office of New Jersey’s attorney general, which oversees the state’s gambling regulator, the division of gaming enforcement, declined to comment.