U.S. commercial gaming remains a growth story on the surface. According to the American Gaming Association (“AGA”), commercial casino gaming revenue reached $78.7B in 2025, up 9.2% year-over-year, marking the fifth consecutive annual record for the industry.
Much of that growth has been driven by sports betting and online gaming (iGaming), which have expanded rapidly since the Supreme Court’s 2018 decision in Murphy v. NCAA allowed states to legalize sports betting. As of early 2026, sports betting is legal in 39 states and Washington, D.C., and iGaming comprises an ever growing share of industry revenue.
However, the headline numbers obscure a more uneven reality. Beneath the topline, regulatory burden, labor costs, capital intensity, and competitive dynamics are narrowing margins across sectors. In our view, the industry is increasingly exhibiting a K-shaped pattern: well-capitalized, diversified operators continue to perform, whereas those with higher leverage, concentrated exposure, or thinner margins face mounting pressure.
Regulatory Expansion Comes With Structural Cost
The legalization of sports wagering has created a meaningful new revenue opportunity, but it has also resulted in a highly fragmented regulatory structure. Each state sets its own tax rates, licensing frameworks, and compliance obligations. For example, New York taxes mobile sports wagering revenue at 51%, Pennsylvania imposes a sports wagering tax of 36% and New Jersey taxes at 20%.
While legalization expands the addressable market, these high tax rates significantly compress operator margins. Multi-state operators must also manage state-by-state licensing requirements, reporting obligations, and compliance costs, which increase administrative complexity and operating expense.
In practice, incremental revenue in high-tax jurisdictions does not necessarily translate into incremental cash flow. For operators expanding across multiple states, tax drag and regulatory overhead directly affect free-cash-flow conversion and valuation assumptions.
Labor and Promotional Intensity Are Pressuring EBITDA
Labor costs persist as one of the largest expense categories for casinos and resorts. Wages in the leisure and hospitality sector have increased materially since the COVID-19 pandemic. Average hourly earnings rose from $16.66 in 2019 to approximately $23.28 in December 2025, nearly a 40% increase over six years. A significant increase when labor costs can represent roughly 30% of revenue at casino properties, making wage inflation a meaningful constraint on margins.
At the same time, competition for customers has increased promotional spending as operators frequently offer free bets, deposit matches, and loyalty incentives to attract customers. FanDuel owner, Flutter Entertainment, reported that sales and marketing expenses accounted for approximately 22% of total revenue for fiscal year 2025, demonstrating the scale of promotional spending required to compete.
For operators, the implication is straightforward: small increases in labor costs or promotional spending can materially erode margins even when revenue is growing.
Capital Intensity Is Non-Optional
The United States alone has nearly 1,000 commercial and tribal casinos, creating intense regional competition for customers. Preserving one’s market position requires ongoing investment in hotel renovations, gaming floors, technology, and entertainment amenities. In markets with multiple nearby casinos, delaying property upgrades or gaming-floor refreshes can quickly shift customer traffic to competing venues. For lenders and investors, underestimating reinvestment requirements is a common reason projected free cash flow fails to materialize, particularly when properties require periodic large-scale renovations.
Digital Growth Expands Reach but Increases Complexity
Online gaming continues to expand rapidly and is reshaping the industry’s revenue mix. According to the AGA, sports betting generated $16.96B in revenue and iGaming generated $10.74B, together accounting for more than 35% of total U.S. commercial gaming revenue in 2025. Although digital channels tempt operators with the expanded geographic reach, they introduce several challenges.
First, as noted above, the regulatory framework remains fragmented across states, necessitating management of multiple tax structures and compliance frameworks. Second, illegal and offshore sportsbooks and prediction markets continue to capture a significant share of iGaming activity. Industry estimates suggest these operators handle tens of billions of dollars in wagers annually, competing directly with regulated platforms. Third, digital platforms require ongoing investment in marketing, promotions, and technology infrastructure. As we begin 2026, we already see these pressures affect sectors: sports betting revenue has contracted 2.7% year-over-year and handles have declined for four consecutive months.
Demographic and Substitution Shifts
Long-term demographic trends are also reshaping the gaming landscape. According to the U.S. Census Bureau, Americans aged 65 and older now total more than 61 million people, representing approximately 18% of the U.S. population, compared with roughly 12% in 2004. While older customers remain an important base for many regional casinos, younger consumers increasingly favor mobile and online gaming platforms.
Casino operators now rely heavily on data analytics to monitor player behavior and optimize marketing investments. Common performance metrics include:
- Theoretical win per player
- Player reinvestment rate (the percentage of gaming revenue returned through promotions or complimentary benefits)
- Customer lifetime value
These metrics help operators evaluate whether promotional spending is producing sustainable long-term revenue.
Macro Sensitivity Remains an Amplifier
Gaming demand is closely tied to discretionary consumer spending and tourism. Although the industry has proven resilient, casino operators carry high fixed and semi-fixed costs including labor, taxes, regulatory compliance, and ongoing capital reinvestment. Consequently, even moderate revenue declines can have a disproportionate impact on profitability.
Macroeconomic conditions entering 2026 continue to illustrate this sensitivity. While U.S. real GDP grew at a moderate pace in 2025, growth slowed meaningfully in the fourth quarter, and early 2026 data suggests only modest reacceleration. Slowing economic momentum can translate into softer discretionary spending on travel and entertainment, particularly for higher-cost destination markets. Destination gaming markets are particularly exposed to changes in tourism demand. Las Vegas welcomed approximately 38.5 million visitors in 2025, down 7.5% year over year, while hotel revenue per available room declined 8.8%, reflecting the high fixed-cost nature of resort operations, where revenue declines translate quickly into margin pressure. Although tourism numbers have rebounded to begin the year, numbers are mixed when one looks at properties off the Strip.
Geopolitical uncertainty may add further pressure. Rising tensions in the Middle East involving Iran have increased volatility in global energy markets and heightened concerns about inflation and consumer confidence. Sustained geopolitical instability could reduce discretionary travel and entertainment spending, creating additional headwinds for destination gaming markets. Regional casinos tend to be somewhat more stable because they rely primarily on local customers rather than tourism. However, they remain exposed to broader economic cycles and shifts in consumer discretionary spending.
A Margin Discipline Environment
The U.S. gaming industry is navigating structural headwinds that require disciplined capital allocation and proactive liquidity management.
Operators and owners should:
- Strengthen 13-week cash flow monitoring
- Stress-test multi-year projections for tax, labor, and capex sensitivity
- Reassess promotional return on investment
- Evaluate selective closures of hotel towers, restaurants, or amenities during periods of low midweek or off-convention demand
- Align reinvestment plans with financing assumptions
- Evaluate regulatory exposure across jurisdictions
Although revenue growth remains strong, sustainable profitability will depend on disciplined forecasting, thoughtful reinvestment, and strategic navigation of structural headwinds.
Jeffrey Perea, a managing director with Getzler Henrich, a Hilco Global company, based in Los Angeles, has advised casinos, racinos, and hospitality businesses for more than 25 years, with expertise in forecasting, restructuring, valuation, and operational planning. He works with stakeholders to assess plan feasibility, manage liquidity, and support strategic decision-making in complex regulatory environments.
Tasha Yektayi is a Senior Associate with Getzler Henrich, a Hilco Global company, with over eight years of experience in turnaround and restructuring, distressed credit, and middle-market finance. She advises management teams, sponsors, and lenders on liquidity management and operational turnarounds in both in- and out-of-court situations.
