Connecticut Exploring Expanded Gaming; Is Online a Possibility?

Foxwoods_Resort_CasinoWith revenues on the decline and competition about to spring forth on their northern and western borders, Connecticut’s two gaming tribes, the Pequots and Mohegans have joined forces in an effort to lobby the state government to expand gaming in the state.

Connecticut casinos have been hard hit in recent years, first by the recession and later by increased competition, which is only going to get worse as Massachusetts and New York are in the midst of expanding land-based gaming.

“Defensive” casinos

The tribes, which operate Connecticut’s two casino, Foxwoods and Mohegan Sun respectively, were initially playing their cards close to their vest, refusing to publicly state what type of gaming expansion they are interested in.

On Tuesday the tribes and a bevy of lawmakers announced that they will be backing a bill that would allow the construction of three “smaller” casinos operated by Mohegan’s or Pequot’s according to the Boston Herald. Gaming options at the new casinos would be primarily slots with some table games – the casinos would not have amenities or a hotel.

Slots parlors are not known as being great job creators, yet proponents of the measure are selling it as a way to save jobs in Connecticut and prevent cannibalization by the future casinos in Massachusetts in New York.

Additionally, these small “slots casinos” will be pitted against resort-style casinos. It seems Connecticut is bringing the proverbial knife to a gun fight.

Finally, the solution seems to fall short on creativity, but the safe bet was always an expansion of land-based gaming.

That being said, the better long-term play and the wiser decision for Connecticut, the Pequots and the Mohegans might be online gambling.

 Why slots get all the attention in Connecticut

Because Connecticut’s casinos are operated by Indian tribes the state only receives a portion of their slot revenue, therefore, the state is just as concerned over declining slot revenue at Foxwoods and Mohegan Sun as the tribes are, and not overly worried about gaming itself.

As the Connecticut Mirror notes, in 2007 the state’s cut of slot revenue was $430 million, while in 2015 Connecticut’s share of slot revenue is expected to be around $260 million. This number is expected to drop below $200 million when Massachusetts casinos open in 2017.

With Massachusetts and New York both in the process of adding land-based casinos, the proposed expansion (aimed at bolstering slot revenue), and the soon to open second tower at Mohegan Sun, may not help Connecticut, and would likely just exacerbate the saturation problem.

In fact, these slot parlors may do more damage to Foxwoods and Mohegan Sun proper than their competition over the border.

Is there an alternative?

There is another option for the state and tribes that would help bolster their dwindling revenue without impacting their current land-based casinos. Online gambling.

Online gambling is a time and money intensive undertaking, but pales in comparison to the amount of investment capital needed to build new casinos, or even renovate off-track betting parlors for expanded gaming.

Further, the state would be able to tax online gambling revenue generated by the tribe, and the two could work out a tax rate that would be agreeable to both.

Finally, online gambling has proven to be complimentary to land-based casinos, and not as was long feared, cannibalistic.

Is online gambling a good fit for Connecticut?

Connecticut is a relatively small state population wise, with just 3.5 million residents. Based on their population Connecticut would be unable to support an online poker industry without entering into interstate agreements with other states.

For comparison, Delaware’s online poker revenue is nearly nonexistent, but at the same time, Delaware’s online casino revenue has been decent. Delaware, with just under 1 million residents generated over $2 million in online gaming revenue in 2014, so theoretically Connecticut would see about 3.5-times as much revenue if they expand into online gaming.

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