iDEA Growth Challenges NERA’s Report On New Jersey’s iGaming Industry

The iDevelopment and Economic Association (iDEA Growth), a leading trade organization for online gaming in the U.S., released a comprehensive study this week that refutes the findings of a 2023 report by NERA Economic Consulting. iDEA Growth’s new analysis challenges NERA’s conclusions about the economic impact of legalized iGaming in New Jersey, contending that NERA’s findings significantly underestimate the benefits that the industry brings to the state.

The NERA study, commissioned by the Campaign for Fairer Gambling, questioned the results of a 2019 report authored by Meister Economic Consulting and Victor-Strategies, which found that legalized online gambling contributed $2 billion to New Jersey’s economy between 2013 and 2018. NERA’s report asserted that the financial impact of iGaming is much more limited, a stance that sparked controversy within the industry.

In response, iDEA Growth hired Meister Economic Consulting, along with Victor-Strategies and Regulus Partners, to scrutinize NERA’s analysis. Their findings, published in a 44-page report titled “A Comprehensive Analysis of NERA’s Study on New Jersey’s iGaming Economic Impact,” point to several fundamental flaws in NERA’s methodology, particularly in the areas of data selection, assumptions, and the handling of social costs related to gambling.

The most glaring issue, according to iDEA Growth’s analysis, is NERA’s reliance on a limited and incomplete data set. NERA based its wage data on only two licensed operators, ignoring the fact that many more licensees were active during the period under review.

The iDEA report notes that a variety of operators, with differing wage structures and employment scales, were involved in New Jersey’s iGaming industry. By relying on such a narrow data pool, NERA’s conclusions fail to reflect the broader economic realities of the sector.

Cannibalization? Quite the opposite

One of NERA’s key arguments is that iGaming cannibalizes revenue from brick-and-mortar casinos and other entertainment sectors. iDEA, which was formed in 2017 and counts as its members BetMGM, DraftKings, Ifrah Law, and others, disputes this. It cites existing research that indicates that iGaming complements, rather than competes with, physical casinos.

The organization argues that legalized iGaming helps divert revenue away from illegal online gambling sites, boosting both online and in-person gambling revenue. As evidence, iDEA points to studies showing that states with both online and brick-and-mortar gambling options tend to see stronger overall revenue growth than states that rely solely on physical casinos.

“NERA’s study on the economic impact of iGaming in New Jersey is deeply flawed and cannot be relied upon to inform public policy or business decisions. Our comprehensive review, supported by copious industry data and research, demonstrates that NERA’s conclusions are inaccurate and misleading.”

— Gene Johnson of Victor-Strategies

A separate report by Eilers & Krejcik Gaming, referenced in iDEA Growth’s rebuttal, supports this claim. The report found that in states where both iGaming and brick-and-mortar casinos are available, revenue at physical casinos often increased after the introduction of iGaming.

This directly contradicts NERA’s assertion of cannibalization. Moreover, the Eilers & Krejcik report included survey data from casino operators, all of whom reported that their physical casino revenue remained stable or grew once they began offering online gaming options.

Miscalculations and missteps

In addition to these economic discrepancies, iDEA Growth also criticizes NERA’s approach to measuring the social costs associated with gambling. NERA’s estimates are based primarily on a 2023 study from the National Institute of Economic and Social Research (NIESR), which examined the social costs of gambling in Great Britain. iDEA Growth contends that applying British social cost data to the U.S. market is not only inappropriate but also misleading.

iDEA Growth’s report further highlights a critical issue in NERA’s analysis of problem gambling, noting that many individuals with gambling problems also suffer from other psychological conditions. Studies have shown that gambling addiction often coincides with mood disorders, substance abuse, and anxiety. However, iDEA Growth argues that NERA, like NIESR before it, failed to account for this “comorbidity,” leading to inflated estimates of the social costs attributable to gambling. By not separating the effects of gambling from those of other mental health issues, iDEA Growth feels NERA’s report likely overstates the negative societal impact of legalized iGaming.

iDEA Growth’s report concludes that NERA’s analysis, plagued by incomplete data and flawed assumptions, paints a distorted picture of New Jersey’s iGaming industry. The trade association emphasizes the substantial economic benefits that legalized iGaming has brought to the state and takes the position that iGaming and brick-and-mortar casinos can coexist and thrive together.