The Impact of Legal Gambling in Texas On Neighboring States: Louisiana

Written By Tyler Andrews on June 14, 2022 - Last Updated on October 28, 2022
We examine the impact on Louisiana if Texas legalized gambling

In this three-part series, we’ll look at how Texas’s neighbor states – Oklahoma, Louisiana and New Mexico – could be impacted if the Lone Star State legalized gambling. Interestingly, all three states allow some form of legalized gambling.

Part 2: Louisiana

In Part 1 of this series, we examined the relationship between Texas and Oklahoma. In this installment, we examine the impact on Louisiana if Texas legalized gambling.

A recent survey by the Dallas Morning News and the University of Texas at Tyler found that 57% of Texans support legalized casino gambling. Only 29% oppose it.

The sportsman’s paradise

Louisiana opened legal retail sports betting in 2021 and mobile sports betting in 2022.

In a 2019 report, The Louisiana Department of Economic Development (LDED) broke the state into four main gambling sectors.

  • Lake Charles
  • Shreveport/Bossier
  • New Orleans
  • Baton Rouge

In the wake of COVID-19 and harsh storms that battered a number of Louisiana’s historic riverboat casinos, all four sectors have come back strong from two down years.

Gaming revenue and taxes: Comparing sliding and fixed tax scales

Louisiana is a case study in how states compete for financial viability in the gambling sector. According to the American Gaming Association, Louisiana’s 24 casinos and burgeoning mobile sports betting industry bring in a Gross Gaming Revenue (GGR) of $2.96 billion annually. That’s an average 40% increase in revenue from 2021.

Louisiana’s tax structure is significantly more costly to casino and sportsbook operators. That could ultimately limit growth in the state. It also provides insight into Texas lawmakers looking to establish sports betting in the Lone Star State.

Louisiana taxes both riverboat and land-based casinos at a fixed 21.5%, but various other local taxes, fees and payments significantly increase that percentage. The LDED noted this in comparing Louisiana’s tax structure to neighboring Mississippi.

“Mississippi casinos benefit from a significantly lower gaming tax rate than in Louisiana; after fees and taxes, a Mississippi casino pays an effective gaming tax of 11.6 percent vs. 26 percent in Louisiana.” 

In this case, what is true for Mississippi could easily be true for Texas. Mississippi’s tax rate applies a sliding scale to every gaming licensee, based on their GGR. The main benefit of the sliding scale is incentive for smaller-scale gambling operations.

Mississippi’s highest tax rate, 8% for a gaming site that makes over $134,000 a year, comes in far below Louisiana’s fixed rate. Should Texas legalize casino gambling, setting up a competitive tax structure incentivizes developers. Those with hotels in both Texas and Louisiana would invest more where taxes are lighter.

Further, it incentivizes those same developers to draw traffic away from their hotels in Louisiana to theirs in Texas.

Texas gamblers impact Lake Charles, Shreveport

Lake Charles and Shreveport/Bossier bring in the greatest GGR of the four sectors. With their proximity to Houston and Dallas, respectively, it’s no wonder.

In fact, at an October Louisiana Gaming and Control Board meeting, Chairman Ronnie Johns tipped his hat to Texas for the success of Lake Charles. The area has only two casinos but leads the other gambling regions in the state.

“I guess we have our neighbors in Texas to think,” he said.

Louisiana’s top grossing sectors, however, have struggled to serve these massive populations. 

The LDED estimated that Houston is worth about $1.2 billion in GGR, but Lake Charles casinos have only realized $713 million in total out-of-state GGR. This could be due to changing demographics or an overall lack of supply.

Looking north, the Shreveport/Bossier region has steadily bled traffic to Oklahoma, resulting in a 21% dip in GGR since 2007. That’s a significant date as one year prior, the Choctaw opened. Three years before that, the Winstar opened its doors. Both massive Oklahoma tribal casinos sit just 90 miles north of DFW and draw significant numbers of Texans. 

Despite it all, both sectors annually outpace the New Orleans sector by $100 million (Shreveport) and $300 million (Lake Charles). More importantly, though, from the standpoint of legalized Texas gambling, both sectors would be seriously impacted if gambling of any sort was made available in Texas. 

Shifting demographics could play a part

Over the next five to 10 years, Louisiana expects to see a significant drop in the 55 to 74 age range. That’s the core demographic playing traditional casino-style games.

As younger people, in the 25 to 45 age range, frequent casinos more, surveys suggest that the focus will shift from traditional casino gambling to dining and entertainment. The one exception being sports betting

Sports betting is booming in Louisiana. And mobile sports betting, which draws in a younger demographic, leads the way.

As a point of comparison, total wagers at all riverboat casinos in the state, per the Louisiana Gaming and Control Board (LGCB), sit at $161 million year to date. Compare that with a total handle of $193 million at all retail Louisiana sportsbooks and $643 million for all mobile sportsbooks.

It shows that sports betting outperforms traditional riverboat gambling. Also, the role of mobile sports betting in sustaining Louisiana sports betting is clear.  

While tracing the exact number of Texans placing bets is inexact, the LGCB figures that of the 22.5 million casino visitors in Louisiana, over two thirds come from out of state. In the Lake Charles sector alone, $600 million of the $761 million GGR comes from out of state. 

Mobile sports betting may be the saving grace for The Pelican State. Even if Texas legalizes gambling, the greatest impact will likely be on retail casinos, not on sports betting.

The Mattress Mack effect

While Jim “Mattress Mack” McIngvale, a Houston-based furniture magnate, may be an outlier, his effect on Louisiana sports betting is eye-opening. Consider some of the major known mobile bets Mack has made in Louisiana in the past year. 

  • Super Bowl in 2022: $9.5 million on the Bengals, including a one-time bet of $5 million that stands as the largest mobile wager of all time
  • 2022 March Madness: $6.5 million on first Houston and then Kansas to win the NCAA championship
  • 2022 World Series: $4 million (so far) on the Houston Astros to win the World Series

Louisiana taxes mobile sports betting at 15%, which means that Mack alone has contributed at least $3 million in tax revenue to the state. The way Mack operates is similar to many other Texans. He hops on the freeway, crosses the state line, and stops at a rest stop.

His record-setting Super Bowl bet was placed outside a bathroom in Vinton, Louisiana. For Texans in the Houston, Austin and DFW areas, this practice is as easy as picking up a 5G signal at a Louisiana gas station. As LGCB data becomes available in the fall around the opening of the NFL season and the World Series, Louisiana could see more than $30 million in state revenue for the year.

The clock is ticking for Louisiana

With legal gambling in Texas still a major uncertainty for the 2023 legislative session, Louisiana has some time. But the clock is ticking. Regardless of the format, though, Western Louisiana – the Lake Charles and Shreveport sectors – stand to lose most if and when Texas legalizes gambling.

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Written by
Tyler Andrews

Tyler is the Managing Editor for PlayTexas, covering sports, sports law and gambling for the Lone Star State. He has also covered similar topics for a number of Catena Media's regional sites including NCSharp, PlayCA, PlayFL, PlayOhio, and PlayMA. Tyler is a Texas resident and currently specializes in covering gambling legislation and news in emerging US markets.

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