Why California Online Gambling Remains Illegal

We are all very much aware that California is one of the richest – if not THE richest – states in the United States, and it has the highest standard of living in any state in the US as well. In California, it seems, the rich only get richer. But what is perplexing is the continued stance of many Californians against iGaming – otherwise known as online casino gaming in all of its ways, shapes, and forms. Perhaps not making iGaming legal is the residents’ way of saying, “Hold up, we’re rich enough as it is, there’s no need to add gambling into the mix and unleash a powder keg of problems in an already-problematic state!” Well, we don’t want to speculate, but, whatever the case may be, we are left with a gaping hole of a question: what if we were to legalize iGaming in California? Imagine the possibilities! So we have one goal today: and that is to find out how much the state of California would generate by legalizing iGaming.

An introduction to California: luxurious living, personified

California, with its vast population and tech-savvy residents, stands as one of the most promising markets for iGaming in the United States. But despite this long-held potential, the state has yet to fully embrace online gaming, unlike states such as New Jersey and Pennsylvania, which have reaped substantial financial benefits from the very legalization of iGaming, including the proliferation of iGaming jobs, and continue to do so as time goes on, reaping even greater benefits as we speak. As discussions around legalizing online gaming in California continue, one of the most pressing questions is: How much revenue would the state generate by legalizing iGaming?

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The size of the huuuge California market

California is the most populous state in the US, with nearly 40 million residents. This population base alone makes it a highly attractive market for online gaming operators (we can almost see BetMGM and Caesars and all the others drooling as they think of the state). But more than this, California's economy is the largest of any US state, boasting a GDP of over $3.6 trillion as of 2024. Can you stop for a moment and think of that? Additionally, the state is home to a diverse and affluent population, many of whom are already participating in various forms of gambling, from the state's numerous tribal casinos to the California Lottery.

Given the state's demographic profile and economic power, it's reasonable to project that California could become one of the largest iGaming markets in the US, if not THE largest. To put this in perspective, New Jersey, with a population of just under 9 million, generated over $1.6 billion in online gaming revenue in 2022. Given that California's population is more than four times that of New Jersey, the potential revenue from iGaming could be astronomical, to say the least.

Revenue projections: an in-depth look at other states

But it’s best to put things in their proper perspective. To estimate how much revenue California could generate from iGaming, it's useful to look at the experiences of other states that have already legalized online gaming. We all know, for instance, that New Jersey and Pennsylvania are the most successful iGaming markets in the US, and their experiences can provide a blueprint for California.

New Jersey: As mentioned earlier, New Jersey generated over $1.6 billion in online gaming revenue in 2022, and in 2023, the revenue for iGaming climbed even higher to $1.92 billion (and for all intents and purposes, the iGaming revenue in the state is going to be even higher by the end of 2024 – analysts predict that it could rise to more than $2.3 billion by year’s end). Nevertheless, the state has a mature market with a wide range of online casino games and sports betting options available to residents. New Jersey's success can be attributed to its early adoption of iGaming and the state's more-than-robust regulatory framework, which has attracted top operators like DraftKings, BetMGM, and FanDuel, among many others (32, to be precise).
Pennsylvania: Pennsylvania, which legalized iGaming in 2017, generated approximately $1.4 billion in online gaming revenue in 2022. In 2023, it reached an overall revenue of $1.74 billion, beating the 2022 record by more than 27%. Like the state of New Jersey, Pennsylvania has a diverse range of online gaming options, including slots, table games, online poker, and many more. Since its inception in 2011, the state's iGaming market has grown rapidly, brought together by strong consumer demand and a favorable regulatory environment.

Now, if California were to achieve similar success, it could reasonably expect to generate a minimum of $5 billion in annual iGaming revenue. We base this estimate on the state's larger population and the assumption that California would adopt a regulatory framework similar to those in New Jersey and Pennsylvania, allowing multiple operators to compete in the market.

The real benefits of legalizing iGaming in California

Tax revenue potential

One of the most significant benefits of legalizing iGaming in California would be the tax revenue generated for the state. For one, states with legal iGaming typically tax online gaming revenue at rates ranging from 15% to 30%. For example, New Jersey imposes a 15% tax on online casino revenue, while Pennsylvania levies a 54% tax on online slots and a 16% tax on online table games and poker.

If California were to impose a tax rate of 20% on iGaming revenue - a rate that balances the need for state revenue with the goal of attracting top operators - the state could generate approximately $1 billion annually in tax revenue, assuming a $5 billion iGaming market. This revenue could be used to fund essential public services like healthcare and infrastructure, addressing some of California’s most pressing needs.

The economic impact beyond the revenue

In addition to direct tax revenue, legalizing iGaming in California would have several other economic benefits. Needless to say, the potential for the employment sector is great. The iGaming industry could create thousands of iGaming jobs in the state. The presence of a robust iGaming market could also attract significant investment from operators, payment processors, and technology providers, further giving the state's economy a boost.

Moreover, and this is perhaps the biggest benefit of all, at least from the perspective of the operators and stakeholders: the state could see a reduction in illegal or unregulated online gaming, as consumers would likely prefer to engage with licensed and regulated operators who offer greater security and consumer protections. This shift would not only generate additional revenue for the state but also protect consumers from the risks associated with unregulated online gaming.

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The top challenges and considerations

While there’s no denying the fact that the potential revenue from legalizing iGaming in California is truly worth considering, given the reasons outlined above, there are several key challenges to consider. The state's complex political landscape along with the powerful influence of tribal gaming interests could pose obstacles to legalization. In addition to this, there have been legitimate concerns about problem gambling and the social impact of online gaming. These would further need to be addressed through comprehensive regulatory measures, including responsible gaming initiatives and support for addiction treatment programs. But how do other states like New Jersey and Pennsylvania deal with these issues? Perhaps California could very well take a page from their book.

Legalizing iGaming in California presents a golden opportunity for the golden state to generate substantial revenue and create more jobs. It could even attract more investment, making the state a real force to contend with. Just imagine: with a potential annual market of $5 billion and $1 billion in tax revenue, the financial benefits are all-too-clear. However, achieving this potential will require careful planning, robust regulation, and collaboration among all stakeholders. But if it is done correctly, California could become the crown jewel of the US iGaming market, setting a whole new benchmark for other states and potentially changing iGaming legislation and regulations as we know it.