Internet Gaming in New Jersey: First the Garden State, Then the World

Colleen O'Dea | November 22, 2013 | More Issues
Online gambling in NJ is just one day into its 'soft play' trial, but 'optimistic' Senator Lesniak says state can be home to international Internet gaming

online gaming
Before New Jersey even tested its first online games, a state senator unveiled his proposal to expand the state’s Internet gambling reach across the world.

Sen. Raymond Lesniak (D-Union) yesterday announced he is introducing a bill that would make New Jersey the first state to license casinos to conduct online wagering restricted to people who live outside the United States in an effort to “make New Jersey the leader in online gambling.” (Read a draft version of the bill.)

Lesniak said the bill would bring revenue and jobs to New Jersey and further boost Atlantic City, which has been suffering with the growth of gambling in nearby states.

“I was approached by some international gaming companies who would like to set up shop in New Jersey because of the long history of stable gambling here . . . because of the talent pool here,” said Lesniak, who announced his proposal during a press conference in Atlantic City and later on a telephone conference that included a number of writers with gambling news publications.

Lesniak spoke just hours before seven Atlantic City casinos began a trial run of Internet gaming at 6 p.m. Gov. Chris Christie signed the bill Lesniak had co-sponsored to allow New Jerseyans to play casino games over the Internet just nine months ago. The move could generate as much as $1.5 billion in new revenue for the state. Lesniak said yesterday the bill has been “a lifeline for Atlantic City’s casinos,” preventing the closing of two casinos and keeping between 5,000 and 10,000 people employed.

The state Division of Gaming Enforcement listed 17 websites authorized for the “soft play” five-day trial. Each is able to offer limited play to 500 players at a time and DGE is monitoring the play, according to spokeswoman Lisa Spengler.

Following the trial period, DGE Director David Rebuck will issue an order opening full play to the general public on Tuesday to those licensees whose testing was successful. That will make New Jersey the third state, after Nevada and Delaware, to offer Internet gaming.

“The soft opening will be used to demonstrate to the division that all systems perform as required under
the stress of live gaming and that operational and revenue reporting controls are effective,” Rebuck said. “Staff will continually assess the progress of each platform provider before allowing them to open gaming to the general public on November 26.”

Spengler said the division has created a team of 25, at least some of whom have online or internet gaming experience, to oversee Internet gambling and is “committed to ensuring compliance with state and federal legal and regulatory requirements.”

One of those requirements is that all the sites include somewhere the state’s gambling helpline — 1-800-GAMBLER — or a link to the Council on Compulsive Gambling of New Jersey website, www.800gambler.org.

Donald Weinbaum, the council’s executive director, said he is expecting that online wagering will have a “significant impact” in every county in the state as Internet gambling is marketed and more people try it.

“For persons who may already be trying to deal with gambling problem, or who are in recovery from a gambling addiction, the risk and temptation are even greater,” Weinbaum said. “The fact that people will be able to play at any time, any place, even in the middle of the night, is definitely cause for concern. Research has long suggested that easy access is associated with increased rates of problem gambling. And, in New Jersey, on-line gambling is not limited to just poker, so we believe that these emerging problems could potentially cut across all demographic groups.”

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He added that the council is not convinced that the safeguards put in place will keep minors from being able to bet online.

The state also has expanded to Internet gaming its self-exclusion program, through which a person has been able to place himself on a list to be excluded from casinos or racetracks.

A sponsor of the bill allowing Internet gambling here, Lesniak said he expects the soft launch “will go a lot better than President Obama’s healthcare website” and state regulators will ensure that the games are fair and that only those legally allowed to play will be able to do so.

Lesniak noted that some legislators oppose gambling as a matter of principle, but said he believed there might be less opposition to his plan to make New Jersey a hub for international online gaming because it would only not be open to New Jerseyans. He said he had not discussed his proposal with Gov. Chris Christie but said he expects the governor to sign it because “there’s nothing but good things in here for the state.”

Christie’s office did not respond to a request for comment. Of the proposal, Spengler said, “The administration will review the legislative proposal and act accordingly.”

Currently in draft form, Lesniak’s bill would permit all forms of international, Internet gambling, including sports betting. Any companies overseeing the wagering would have to ensure that no players live in or are present in the United States while they are betting and that they are located in countries that permit online betting. At the moment, Internet lottery and gambling are legal in the United States only if the betting occurs within the boundaries of the state where the games are located. There have been efforts in Congress to make online gaming more widely legal.

The financial benefit from international online gambling would come from taxes — a 10 percent tax on gross revenues, as well as an investment alternative tax of 5 percent of revenues unless the company invests 2.5 percent of revenues in community and economic development projects. Additionally, licensees would pay annual fees to support their regulation and to support compulsive gambler assistance programs. And they would have to contribute to a fund that would raise, in total, $20 million a year to a fund that the New Jersey Racing Commission would use to augment purses to support the horse racing industry.

Licensees would be subject to regulation under the Casino Control Act.

While admitting he is, at times, “a little optimistic” in his predictions, Lesniak said he has a legal opinion and “off the record opinion” from the US Justice Department that the state’s licensure of international Internet gambling would not be within its jurisdiction. Ultimately, he said, the legality of what could happen should the Legislature pass and Christie sign Lesniak’s bill would be decided when the time comes, as would the feasibility of foreign countries making compacts with New Jersey to allow the international gaming to take place.

“New Jersey’s Internet gaming law will be a real boost to the state, Atlantic City, and the casino industry,” said Senator Lesniak. “International online gaming will provide even more opportunities, more jobs and more growth. We need to lay the foundation now.”

Adam Ozimek, a director of research and senior economist with Econsult Solutions, said the plan could generate between $5 billion and $8 billion a year in revenue and produce between 11,000 and 16,000 jobs.

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Lesniak said his bill would also allow international sports betting and also continued to take shots at the federal government’s ban on sports betting in all but the four states — Delaware, Oregon, Nevada and Montana — that had allowed the practice prior to the ban. Earlier this week, Christie reportedly said he would appeal to the U.S. Supreme Court a federal appeals court ruling that the federal ban is constitutional.

“This will show how unreasonable, irresponsible, and ridiculous the federal ban is,” said Lesniak, a sponsor of the sports betting law.

He said he hopes international online sports betting based in New Jersey would be allowed, but even if it is not, the other types of wagering would benefit the state.

“Sports betting is the icing on the cake,” said Lesniak. “But even if we have to remove the icing, we still have the cake. It’s worth it.”

Lesniak predicted the international online gaming bill would move sometime in the second quarter of next year and receive “quick approval from both houses.”