Profits Not Revenue
Online gambling is boosting Atlantic City gaming revenue, but operating profits are trending in the wrong direction.
The Bulletin Board
THE LEDE: Atlantic City profits tell a different story from revenue.
ROUNDUP: CFTC running out of commissioners and several lottery updates.
NEWS: Arizona joins the Kalshi cease-and-desist cavalcade.
BEYOND the HEADLINE: Checking in on Kalshi’s legal battles.
AROUND the WATERCOOLER: It’s a top-heavy market.
STRAY THOUGHTS: Heretics.
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The Lede: AC Profits Trending in the Wrong Direction
I’ve been analyzing the New Jersey land-based casino market for well over a decade.
When casinos began closing up shop following the passage of online casino legalization, I highlighted that the land-based casino sector was struggling long before online casinos showed up. These struggles were easily seen in profit/loss reports.
When casinos began rebounding, and everyone was focused on revenue, I highlighted the growing operating profits, along with room and occupancy rates and employment numbers.
With the industry fighting over cannibalization, I would once again point to profits as the most vital metric to keep an eye on. Revenue is significant, but profit determines how much investment into these properties will be made. And unfortunately, it’s a vicious cycle. When land-based operators stop reinvesting, those profit numbers tend to decline.
With New York City casinos on the way, the current trend should be a bit worrisome. Collectively, Q1 saw the city’s nine casinos see operating profits decrease 15% year-over-year, the third consecutive YoY decline.
Before I look at the most recent Q1 report, STTP would note that the blame cannot be laid at the feet of online gambling. Atlantic City casino profits began to turn around when the market contracted. The market expanded (from seven to nine properties) in 2018, and there was an immediate impact on overall profits, which was somewhat obscured by COVID lockdowns and reopenings.
Here’s a look at Q1 operating profits over the past 15 years (notice what happens when properties open and close):
So, back to Q1 2025, only two casinos saw operating increases YoY: Hard Rock (2.9%) and Tropicana (7.1%).
Only a single property was in the red, Bally’s (-$6.6 million), but three others, Caesars, Golden Nugget, and Resorts, were just above water, with $3.5 million, $1.8 million, and $3.6 million in profits, respectively.
As Wynn CEO Craig Billings has previously said (I highly recommend rereading my writeup on Billings’ cannibalization comments):
“No matter which side of the “cannibalization vs. no cannibalization” debate you are on, assuming that the (positive or negative) impact will be uniformly shared by all regional casinos is pretty naïve,” Billings said. “There are almost 1,000 commercial and tribal casinos in the U.S. How many of them can actually avail themselves of the often-touted benefits of an “omnichannel” strategy?”
Yes, online gambling and sports betting are booming, but because of the deal structure, a sizable share of the revenue/profits lands in the coffers of the online operator, and not the land-based casino license holder.
“Another complicating factor is that online gambling partnerships favor the digital provider. For most casinos, $1 of online gaming revenue isn’t the same as $1 of retail casino revenue.
“Yes, operators with online divisions have bigger opportunities and keep more of that money, but again, this changes the debate from the market as a whole to individual operators’ share of the market.”
The current trend resembles the pre-online era, where casinos began to struggle and reinvestment dried up. The addition of online gambling helped (especially properties like Golden Nugget and Resorts), but it was market contraction that rescued the industry. Online was the life preserver, and casino closures were the rescue boat. As I’ve written in the past, six casinos is my best guess for the city’s Goldilocks zone.
The looming question is this: Is more contraction on the way? Unless something drastically changes in the next couple of years, that seems like an inevitability when New York City's casinos open.
For those interested, here are more of my thoughts on the Atlantic City market and the impact of online gambling, and the portending troubles the AC market faces.
Roundup: Another CFTC Commish Resigns and Lots of Lottery Updates
And then there was one? Another CFTC Commissioner is leaving [Bloomberg]: The same day I reported the CFTC would soon be down to two commissioners, another Commissioner is apparently planning to leave, Kristin Johnson, which would leave acting Chair Caroline Pham as the lone CFTC Commissioner… for now. Pham plans on leaving when Trump nominee Brian Quintenz is confirmed.
Texas Lottery fight is getting messy [Lottery Geeks]: In the ongoing saga with the Texas Lottery, the state Senate unanimously approved a bill (SB3070) to abolish the Texas Lottery Commission (TLC) and hand oversight of the state lottery over to the Texas Department of Licensing and Regulation for a two-year period, upon which lawmakers will review the change. The bill also prevents online sales of lottery tickets, as well as bulk purchases. Another Senate Bill (SB2402) would keep the TLC intact. However, lawmakers have already removed all funding for the commission from future budgets. In order for this bill to work, that funding would have to be reworked.
Casinos and sports betting catch strays in Texas [Covers.com]: “The potential termination of the Texas Lottery underscores the difficulty that more controversial forms of gambling face in attempting to enter the state,” Covers.com reports. “With the current political makeup in the legislature and its growing antagonism towards even widely popular existing forms of gambling, it could be far longer before any new gambling option comes to the Lone Star State.”
Louisiana online lottery bill dead, but could reemerge in 2026 [Lottery Geeks]: Louisiana filed legislation in April that would create an online lottery to include draw games and eInstants, but hopes for that passing in 2025 ended this week. On Wednesday, Rep. Vanessa Caston LaFleur voluntarily deferred her House Bill (HB228). However, LaFleur plans to further look into the subject with plans to attempt legislation again in 2026 that best fits what the state needs. “What we know for sure is that it’s on the horizon. Just not today. There is work to be done, and we are committed to doing that work because there’s money hanging out there for K-12 education,” LaFleur said during Wednesday’s House Administration of Criminal Justice Committee hearing.
Ohio online casino has an iLottery provision [NBC 4]: Last week, Ohio legislators introduced a bill that would bring iGaming and iLottery to the state. SB197 looks to legalize both forms of gambling, with 99% of revenue generated to go to the Ohio General Revenue Fund. Prospects of the bill passing are unclear, as there is division among lawmakers over expanding gambling. The bill was introduced with hopes of working toward a compromise in the coming weeks, according to NBC4 in Ohio. A separate Senate bill doesn’t include iLottery. Look for more STTP coverage tomorrow.
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News: AZ is the Seventh State to Issue a C&D to Kalshi
Arizona is the latest state to send Kalshi a cease-and-desist order.
“Kalshi is not licensed and its operation of event wagering in Arizona is illegal,” wrote Douglas Jensen, chief law enforcement officer for the Arizona Department of Gaming (ADG), in a May 21 cease-and-desist order obtained by InGame, which is addressed to Kalshi CEO Tarek Mansour.
The letter (available on the InGame site) also states:
“The Department requires that Kalshi cease gambling operations in Arizona and desist from engaging in those activities in the future. Failure to do so is further evidence of your ongoing knowing and willful violation of the law. Note that, among other things, Kalshi is subject to a potential restitution award for those who lost money, and an action forfeiting all monies it acquired, because of its illegal conduct.”
As was the case in most states, Crypto.com and Robinhood were also recipients of the Arizona cease-and-desist letter.
Current list of states that have issued Kalshi a C&D letter:
Nevada (also sent a letter to Robinhood)
New Jersey (also sent a letter to Robinhood)
Maryland (also sent a letter to Crypto.com and Robinhood)
Montana
Ohio (also sent a letter to Crypto.com and Robinhood)
Illinois (also sent a letter to Crypto.com and Robinhood)
Arizona (also sent a letter to Crypto.com and Robinhood)
Several other states, including Massachusetts, Pennsylvania, and Michigan, have announced they are looking into prediction markets.
Beyond the Headline: Kalshi’s Legal Battles
Kalshi has responded to the cease-and-desist letters in Nevada, New Jersey, and Maryland with legal challenges.
Nevada
Background: On March 4, 2025, the Nevada Gaming Control Board (NGCB) issued a cease-and-desist letter to Kalshi, alleging its sports and election contracts violated state gaming laws. Kalshi filed a lawsuit on March 28, 2025, in the U.S. District Court for the District of Nevada, seeking a temporary restraining order and preliminary injunction to block NGCB enforcement.
Court Rulings:
On April 10, 2025, Judge Andrew Gordon granted Kalshi a preliminary injunction, ruling that the CFTC, not the NGCB, has jurisdiction over Kalshi’s sports contracts, allowing continued operations in Nevada.
On April 23, 2025, the NGCB filed a motion to dismiss Kalshi’s complaint.
The Nevada Resort Association (NRA), representing 70 casino resorts, sought to intervene, claiming Kalshi’s contracts threaten their sports betting industry and tax revenue.
On May 19, 2025, Judge Gordon promised a swift ruling on the NRA’s petition, with Kalshi’s opposition due by May 22 and the NRA’s reply by May 28.
New Jersey
Background: On March 27, 2025, the New Jersey Division of Gaming Enforcement (NJDGE) issued a C&D letter to Kalshi and Robinhood, alleging their sports contracts, including NCAA basketball tournaments, were unauthorized sports wagering. Kalshi filed a lawsuit in the U.S. District Court for the District of New Jersey, seeking a temporary restraining order and preliminary injunction.
Court Rulings:
On April 28, 2025, Judge Edward S. Kiel granted Kalshi a preliminary injunction, ruling that CFTC jurisdiction likely preempts state laws, allowing Kalshi to offer sports contracts in New Jersey.
New Jersey appealed to the Third Circuit, which, on May 16, 2025, expedited the appeal, with briefs due by June 10, 2025, and filings by July 31, 2025.
On May 22, 2025, Kalshi and New Jersey agreed to stay the district court case pending the Third Circuit’s ruling, which the court approved.
Maryland
Background: On April 7, 2025, the Maryland Lottery and Gaming Control Commission (MLGCC) issued a C&D letter to Kalshi, claiming its sports contracts required a state license. Kalshi was given 15 days to comply but filed a lawsuit on April 22, 2025, in the U.S. District Court for Maryland’s Northern Division, seeking a temporary restraining order and preliminary injunction.
Court Rulings:
Judge Adam Abelson scheduled a hearing on Kalshi’s preliminary injunction motion for May 29, 2025, in Baltimore’s Courtroom 7D.
No ruling has been reported, but Kalshi cites Nevada and New Jersey rulings to support its case.
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Around the Watercooler
Social media conversations, rumors, and gossip.
If you’re considering spamming the marketing and promotion buttons or an entry into the US sports betting space, this chart from Citizens might give you some pause, as the top two operators have a 76% share of the market:
*Citizens OSB GGR market share is tallied from the following states: MD, CT, IN, IA, KS, MA, MI, NY, OR, NH, DE, DC, WY, PA, and NJ.
Stray Thoughts
I’ve watched dozens of 80s and 90s movies with my kid at this point, which means I’ve been going deep into the vault. The latest is a Christian Slater kick, starting with Pump Up the Volume (which he loved). Next up is Heathers and True Romance, probably in that order.
A random aside, Pump Up the Volume, released in 1990, has Soundgarden’s Heretic in it, which was originally part of a 1986 compilation of Seattle artists called Deep Six — the Pump Up the Volume version is much better than the Deep Six version.