US Commercial Gaming Revenue Grew 4.6% in February — But Sports Betting Is the Problem Child

U.S. commercial gaming revenue grew 4.6% year-over-year in February 2026 — healthy by most industry standards — but the AGA’s Commercial Gaming Revenue Tracker published this month reveals a market increasingly carried by iGaming while sports betting posts its fourth consecutive month of handle decline. The problem isn’t the overall number; it’s where the growth is and isn’t coming from.

The Numbers Behind the Headline

February’s overall 4.6% growth was supported by a land-based casino segment that rose 3.9% year-over-year, with table game revenue up 5%, and an iGaming sector that continues to be the industry’s standout performer. Online casino revenue surged 25% in February to $976.3 million — a figure approaching $1 billion in a single month that was not so long ago considered aspirational. iGaming now generates nearly a quarter of the $4 billion that traditional brick-and-mortar casinos produce, and it’s growing at multiples of the land-based rate. Sports betting is where the story gets complicated. Sportsbook revenue fell 6.4% year-over-year to $1.17 billion in February. Hold came in at 9.24%, down 73 basis points — a lower hold rate driven by player-friendly outcomes reduced operator margins. That’s a normal part of sports betting seasonality. What’s less normal is handle declining for a fourth straight month. Handle is the leading indicator. Revenue volatility from hold rates is expected; declining handle is a structural signal.

The Prediction Market Variable

The AGA did not bury the lead on the same day it published the February tracker. The association posted on X that prediction markets have cost state-regulated sportsbooks an estimated $800 million in tax revenue — funds that would otherwise support state pension programs, responsible gaming initiatives, and public services. The AGA’s framing is self-interested but the underlying economics are real. DraftKings and FanDuel have each built sports prediction market products that allow U.S. users to wager on sports outcomes outside the licensed sportsbook framework. These products operate under CFTC oversight rather than state gaming licenses, meaning they don’t pay state gaming taxes or contribute to state consumer protection funds. If even a fraction of handle is migrating from licensed sportsbooks to prediction market platforms, it would explain the persistent handle decline while the overall consumer appetite for sports wagering remains strong. The licensed sports betting market in 2025 generated $16.96 billion in revenue on $166.94 billion in handle — a record year. February’s numbers suggest 2026 may not replicate that trajectory.

What the Divergence Means for the Industry’s Investment Case

The February data crystallizes a dynamic that operators, investors, and regulators will be navigating throughout 2026. iGaming is expanding. Land-based casino is stable. Sports betting — the vertical that drove most of the narrative around US gaming expansion since PASPA repeal in 2018 — is showing strain. The causes are layered: prediction market competition, market maturation in early-adopter states, and promotional rationalization by the major operators who are no longer purchasing market share as aggressively as they were in 2020 through 2023. DraftKings and FanDuel have both shifted toward profitability rather than growth-at-all-costs, which compresses handle growth. For the AGA and state regulators, the policy implication is clear: the debate over whether prediction markets constitute a taxable gambling product is no longer abstract. The February revenue figures give regulators a concrete data point to argue that unlicensed handle migration is measurable and costs states real money. For operators, the question is how long they can run dual-track strategies — funding ballot initiatives to expand licensed sports betting while simultaneously operating prediction market products that may be cannibalizing it.