Connecticut Online Gaming Could Cost the State Hundreds of Millions in Revenue

On December 23, 2011, the United States Department of Justice released a memo regarding the Federal Wire Act of 1961.  The DOJ was examining whether proposed lottery ticket sales in Illinois and New York would be in violation of the act.  Upon examination, the DOJ declared that the Wire Act only applies to sports betting.  After this decision, numerous states have begun to examine whether they should offer online gaming.

One of the states currently considering this move is Connecticut.  At present, the state has two Indian operated casino within the state, Foxwood and Mohegan Sun.  As part of the agreement between the state and the Indian tribes, the casinos turn over 25% of their slot revenue to the state.  Foxwoods alone has contributed over $3.29 Billion to the state in Revenue since 1992.

However, there is a huge stumbling block before the state in regards to passing a general online gaming law.  Per the agreement that the state has with the tribes, their contribution of 25% of slot revenue is contingent on the state not allowing other casinos within the state or even passing laws that would allow the possibility of other states to offer gaming.

What that means is that should Connecticut decide to pass an online gaming bill, they risk forfeiting 25% of their live casino tax revenue which equates to hundreds of millions a year in revenue for the state.  Even the healthiest estimates for online gaming in markets such as Nevada and California do not make up for that huge portion of revenue.

Of course, Connecticut has a couple of alternatives to this.  First, they could restrict online gaming to the casinos within the state.  This would effectively give residents just two US poker sites to play on.  The other alternative would be to renegotiate the contract with Indian casinos to allow for competition online.

Should Connecticut decide to pursue online gaming further, they will have to find a balance that would allow them to profit from the endeavor.  Their arrangement with Indian casinos has been a mutually beneficial one and it is hard to see them passing up massive revenue on a system yet untested.