US Commercial Gaming Revenue Climbs 4.6% in February as Sports Betting Struggles

US commercial gaming revenue posted a 4.6% year-over-year increase in February, reaching solid growth across most sectors. However, the gains masked underlying challenges, particularly in sports betting, where revenue declined 6.4% to $1.17 billion. US gambling revenues February reflected a tale of two industries: iGaming surged 25% to $976.3 million, while land-based casinos grew a modest 3.9%. The contrasting sector performances highlighted shifting consumer preferences and operational headwinds affecting sportsbooks. Overall, regulated gaming generated $1.42 billion in tax revenue for state programs, marking a 10.5% increase despite the sports betting softness. The mixed results raise questions about sustainability and market saturation in certain segments.

US Gambling Revenues February Show Mixed Sector Performance

Traditional casino gaming reached $4.00 billion in February, marking a 3.9% year-over-year expansion driven by strength across both gaming floor segments. Slot machines accounted for the majority of casino revenue at $2.95 billion, posting 5.0% growth. Table games contributed $805.70 million to the total, likewise advancing 5% from the previous year[8].

Notably, the table game performance represented the first monthly increase since October, signaling potential stabilization for retail casino operations following a challenging 2025. The recovery in table game revenue provided operators with optimism that foot traffic patterns might be normalizing after sustained pressure on brick-and-mortar properties.

Meanwhile, iGaming continued its rapid ascent, generating $976.30 million in February revenue. The 25% year-over-year surge demonstrated accelerating consumer migration toward digital platforms[8]. Online casino revenue now represents nearly 25% of the $4.00 billion produced by traditional casinos, underscoring the fundamental shift in gaming preferences.

In contrast, sports betting revenue totaled $1.17 billion, declining 6.4% despite a handle of $12.66 billion that edged up 0.9%. The revenue drop stemmed from a hold percentage that fell 73 basis points to 9.24% in February[8]. More troubling for operators, nationwide handle declined sequentially for the fourth consecutive month[4].

Sports Betting Decline Signals Broader Industry Challenges

Hold percentage volatility extended beyond February’s weakness. In fact, licensed operators posted a 6% hold rate in March, down from 8% the previous year. The decline stemmed from March Madness outcomes, where higher seeds won 82% of tournament games, the highest rate in history. DraftKings reported a Q1 hold of 9.5%, falling short of the 10.4% structural hold expected under typical conditions. Similarly, New Jersey sportsbooks posted a hold of only 5.2% in December, compared to 8.5% the prior year.

Market maturation signals suggest exponential growth has ended. More concerning, prediction markets emerged as an unexpected competitive threat. Platforms like Kalshi and Polymarket derive approximately 90% of their volume from sports-related contracts, operating under federal Commodity Futures Trading Commission oversight rather than state gambling regulations. This regulatory gap enabled them to expand offerings without paying state taxes or adhering to local licensing requirements.

The competitive impact proved substantial. Prediction markets cost states roughly $800 million in tax revenues, affecting pension plans and responsible gaming programs. Eight jurisdictions issued cease-and-desist letters or opened investigations, while at least 20 lawsuits argue prediction markets offer unregulated gambling. Sports betting also cannibalized lottery sales by 5% on average, problematic because states capture 25 cents per dollar on lottery tickets compared to less than 1 cent from sports betting.

Tax Revenue Impact and March Outlook

Legal, state-regulated gaming generated $18.09 billion in gaming tax revenue throughout 2025, supporting education, infrastructure, and other state services nationwide. This represented a 15.1% increase over the previous year. Despite the record performance, prediction markets offering sports event contracts diverted more than $500 million in potential sports betting tax revenue.

March will prove critical in determining whether February’s sports betting weakness signals a lasting trend. Prediction markets ramped up their advertising presence for the NCAA Tournament. Given that March Madness ranks among the most important sports betting events of the year, any significant encroachment by prediction markets on state-licensed sportsbooks could become evident in upcoming reports.

The potential for expanded legalization remains substantial. If all 50 states established legal, open, statewide sports gaming markets, aggregate gross gaming revenue would increase by $15.60 billion annually. Assuming a 10% tax rate, this expansion would generate an additional $1.60 billion per year in tax revenue. California alone could collect $570 million, with Texas adding $326 million and Florida contributing $199 million.

State tax rates vary considerably, ranging from 6.75% in Iowa and Nevada to 51% in New Hampshire, New York, and Rhode Island. Sports betting tax revenues have soared 382% from $190 million in Q3 2021 to $917 million in Q2 2025.