New Jersey Becomes Third State to Authorize Online Gaming

New Jersey Becomes Third State to Authorize Online Gaming

New JerseyIt took three tries, but New Jersey finally has authorized intrastate online gaming.

On what State Sen. Raymond Lesniak (D-Elizabeth) termed “an historic day”, today the State Legislature voted 68-5 and the State Senate voted 35-1 in favor of amendments to the Casino Control Act in order to permit online gaming in the Garden State. The amendments were signed into law by Republican Gov. Chris Christie a short time later.

“This is good news for Atlantic City that Atlantic City hasn’t heard for years,” said Sen. Lesniak moments before the final vote. “Internet gaming will attract more visitors to the casinos, create more jobs, and create up to $1.5 billion in revenue. This is truly a great day for Atlantic City and New Jersey.”

“With today’s approval of the Governor’s recommendations we are one step closer to ensuring the long-term stability of Atlantic City and gaming throughout the state,” added bill co-sponsor Sen. Jim Whelan (D-Atlantic).

Under the terms of the new legislation, all internet gaming in New Jersey must take place on computer servers located in an Atlantic City casino. By default, that limits the potential pool of internet gaming operators to the 12 existing casino operators. Regulation of the games, which potentially include all games – including poker – now offered on the floor of any Atlantic City casino, will be overseen by the Division of Gaming Enforcement.

Sens. Lesniak and Whelan have long championed internet gambling legislation in New Jersey as a possible salvation for the financial struggles of Atlantic City casinos. Atlantic City casino revenues and profits have declined markedly since 2010, when casinos opened in neighboring Maryland and Pennsylvania. Neither state has yet authorized internet gaming.

Despite Atlantic City’s struggles, passing internet gaming legislation in New Jersey has been difficult. Gov. Christie vetoed a similar law in early 2011, at the time citing concerns about the law’s state constitutionality and the proliferation of internet café betting parlors.

Lesniak and Whelan tried again in 2012, crafting a similar measure to the failed 2011 bill but ensuring that internet cafes would not be able to offer betting and that the law would be permissible under the state constitution. Christie conditionally vetoed that bill on February 7, 2013, stating that he would re-consider his veto if the legislature increased licensing fees and tax rates, addressed problem gaming more thoroughly, ensured regulator transparency, and added a 10-year sunset provision to the law.

The bill that the legislature passed and Christie signed today incorporated all of the governor’s February 7 recommendations.

The next step along the road to actual online play in New Jersey is for the Division of Gaming Enforcement to issue regulations regarding the licensing process and authorized games. After that, operators would be required to go through the licensing process itself and presumably satisfy regulators regarding the integrity and appropriate safeguards of all online games. In a conference call earlier this week, Caesars Entertainment Corporation CEO told investors he believes the first games won’t take place for 18-24 months. Senators Lesniak and Whelan, on the other hand, believe the beginning of 2014 to be a more likely target.

An unresolved side note to the passage of the legislation is the application of Rational Group, the parent company of PokerStars and Full Tilt Poker, for a Preliminary Casino Authorization to acquire the Atlantic Club casino. Rational Group’s play here is obvious; it hopes to acquire the Atlantic Club in order to be granted a potentially lucrative internet gaming license that could be used as a toehold for a broad re-entry in the U.S. market.

Rational Group filed its application in mid-January. The Division of Gaming Enforcement has until mid-April to make a recommendation to the New Jersey Casino Control Commission, which must make a final determination on the application by mid-May.

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