New Jersey iGaming GGR to Eventually Top Atlantic City Casino Revenue, Says Analyst

Key Takeaways:

• iGaming gross gaming revenue (GGR) in New Jersey is on track to surpass the traditional casino revenues of Atlantic City.
• In 2020, online casinos in New Jersey nearly matched Atlantic City's GGR, signaling a narrowing gap between digital and physical gaming revenues.
• The dominance of a few key players and potential tax increases could impact the future landscape of iGaming in the state.

It’s a matter of when, not if, iGaming gross gaming revenue (GGR) in New Jersey exceeds that of the nine casino hotels on the Atlantic City Boardwalk.

That’s the outlook offered by Deutsche Bank analyst Carlo Santarelli who in a recent report to clients estimated that internet casinos operating in the Garden State could generate as much as $2 billion in GGR this year. This projection confirms the notion that iGaming is the next significant growth frontier for the industry, especially considering that in 2019, online casinos operating in New Jersey notched just $483 million in GGR.

Last year, Atlantic City casinos combined to generate $2.85 billion in GGR, while online equivalents in New Jersey notched $1.9 billion. However, Santarelli notes the chasm between the two is narrowing, indicating a significant shift in the gambling landscape.

New Jersey is one of six states that permits iGaming. The other five are Connecticut, Delaware, Michigan, Pennsylvania, and West Virginia.

Atlantic City Could Be Vulnerable to iGaming

Some studies suggest that iGaming complements casino operators’ land-based venues. This is a plausible claim, particularly for large gaming companies that can leverage loyalty programs to entice bettors to occasionally visit brick-and-mortar properties to enjoy the benefits of points earned online.

However, issues were amplified last year when operating profits for the nine casinos there shrank on an annual basis, with just three — MGM Resorts’ Borgata, Ocean Casino Resort, and Bally’s — posting increases.

iGaming isn’t the only source of credible competition to Atlantic City. There’s the specter of three casino hotels eventually calling the New York City area home. A potential response to that scenario by New Jersey could be a new casino at the Meadowlands, but that would represent more competition for Atlantic City.

New Jersey’s internet casino market is robust in terms of the number of choices consumers have, but data indicate a small amount of operators dominate market share in the state. Those include Golden Nugget Online Gaming (GNOG), which is a unit of DraftKings (NASDAQ: DKNG). Resorts Casino, which uses the DraftKings iGaming platform in New Jersey, is also one of the leaders there as is Caesars Digital, which leverages well-known brands such as Harrah’s and Tropicana in the state.

Deutsche Bank’s Santarelli noted a wildcard for iGaming operators in the Garden State comes in the form of a proposal to lift taxes on that activity to 30% from the current level of 15%.

"While there are many blind spots with respect to promotional tracking … make no mistake, net revenue continues to grow healthily, despite the promotional acceleration, though the [current] 15% tax rate is important to facilitating this," observed the analyst.

This analysis paints a vivid picture of the shifting sands in New Jersey's gambling scene. The rise of iGaming is undeniable, but how it will reshape the future of traditional casinos remains an unfolding story. With the potential for increased taxation and the looming competition both within and outside the state, the dynamics of gambling in New Jersey are certainly in for some interesting times.