With consumer spending at state-licensed commercial casinos totaling $35 billion in 2011, gaming offers states and municipalities a welcome source of budget relief, while increasing the potential for revenue volatility, according to a Fitch Ratings report.

"Gaming expansion has winners and losers, as states with an established footprint have to grow operations in response to new entrants," said Marcy Block, Senior Director. "Fitch expects the private sector to be a greater determinant of future market growth as developers consider the cost of capital and tax payments."

Fitch estimates operations at state-licensed commercial casinos in 2011 produced almost $7.5 billion in direct gaming revenue to states through licensing fees, gaming taxes, and other required allocations.

Delaware, Nevada, Rhode Island, and West Virginia derive approximately 5% or more of total governmental fund revenues directly from casino gaming revenues.

A market evolution, instigated through regulatory changes that consider alternative forms of gaming, such as sports and Internet betting, could present additional opportunities to market participants.

For strategic and political reasons, gaming expansion has often been focused on state borders, seeking to draw consumers from beyond enabling state boundaries, creating fierce inter-state competition.

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