ANALYSIS: Why online casino makes a difference to a state’s Wedge Index score

The Wedge Index ratings show that states adding online casino to their suite of regulated products brings more than just cross-sell opportunities.

A key aspect of a state’s position on the Wedge Index score of consumer gaming accessibility is whether the regulations allow for multiple competitors to enter the market. 

Multiple brands bring obvious consumer benefits when it comes to competition in online gaming as much as it does in sports betting.

As it stands, only four states have to date allowed online gaming – New Jersey (1st in the Wedge Index), Pennsylvania (2nd), Nevada (8th) and West Virginia (5th).

As was proven during the spring and summer lockdown period, states with online casino fared much better than those where the product remains an unlicensed activity. 

The latest data from the New Jersey Division of Gaming Enforcement for the month of August showed that year-on-year online gaming win soared 113% to $87.8m.

In the year-to-date online gaming win was up 100%. In comparison, land-based gaming win fell over 50% in the year-to-date.

In Pennsylvania, meanwhile, revenues for online gaming soared – albeit from a low base – to over $55m. Pennsylvania only launched online casino just over a year ago while in New Jersey it now has been up-and-running for two years.

More option, more operators

Adding online casino to the product list immediately adds five points to a state’s Wedge Index score and is one of the more obvious ways to boost gaming accessibility. 

But more than that, having online casino also adds operators to the list of brands operating in a state.

So, in New Jersey on top of the five points gained for having online casino, a further 22 are added for each online casino brand that operates in the market. Meanwhile in Pennsylvania, the number of points gained from having online casino brands operating in the state is nine.

It is notable, perhaps, that one of the factors at play in the potential acquisition of Caesars Entertainment is the cross-sell opportunity. Analysts at Jefferies suggested in a note issued on William Hill in the immediate wake of the bid news late last week that they expect “legislative momentum as more states seek tax dollars” from regulated online gaming.

Hail Caesars

This helps explain why the number of states that Caesars potentially has access to both for online casino and sports betting is so important. If online gaming legislation gains momentum, then having that access across 25 states will be of huge benefit.

The next state slated to see online casino open up is Michigan. The state is current 13th in the index but the changes envisaged in the coming months will boost it to at least 8th

Throw in Delaware (which has limited online poker) and Nevada and a recent estimate from analysts at Macquarie bank suggested that online gaming US penetration now stood at circa 11% of the total potential addressable market.

The Macquarie note suggested that New Jersey will act as a “test market for future legislation.” 

The estimate from the analysts is that online gaming will be worth $1.18bn next year, rising to over $7bn by 2025. Clearly, this suggests the Macquarie team expects many more states to adopt online casino in the next four or five years.

Among the states they envisage opening up to online gaming before the end of next year are Iowa, Oregon, Ohio and Illinois.


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