Update: Nothing New in New Jersey

A golden opportunity to increase revenues missed

The latest development in New Jersey with Senator ray Lesniak’s bill seeking legalization of intrastate online gambling, which received an absolute veto from the state Governor Chris Christie on March 3, is widely assessed as a missed opportunity to boost revenues, employ more people, establish new enterprises and enter the history as the first state that legalized online gambling in the US.

A number of organizations and industry observers expressed their disappointment about such a decision, but some of them, such as Caesar's Entertainment and the Poker Players Alliance, occupied a more philosophical stand, assessing that it would be better to reach a solution on a federal, rather than state-by-state level.

On March 3, only hours before the expiry of the deadline for his decision, the governor issued a press release in which he explained that the veto he put on the bill is not 'conditional' (enabling the Legislature to 'tweak' the bill to compliance within a set timeframe), but 'absolute', which means that two thirds majority Legislative vote would be needed to overturn it.

He assessed in the release that casino gaming holds extremely big importance for the New Jersey economy, since it brings billions of revenues and tens of thousands of jobs.

"Since the earliest days of my Administration, I have stressed the urgent need to address the critical issues surrounding the casino industry in order to reinvigorate this sector of our economy and ensure its long-term sustainability," Christie stated. "In partnership with the Legislature, we have achieved meaningful reforms that provide the impetus for new investment and increased tourism that will lead Atlantic City to recapturing its status as the premier resort destination in our region of the nation.”

He didn’t deny the good intentions of the Lesniak bill, but he also pointed out to some legal and constitutional issues, as well as compatibility with his administration's strategies and policies, implying that land gambling operations in Atlantic City need to be protected from other entertainment establishments throughout the state which are becoming gambling hubs via the internet and thus "create the legal fiction" that an online bet placed anywhere in the state could be regarded as an Atlantic City bet.

According to him, since the current laws forbid all forms of gambling outside of Atlantic City, any intention to spread gambling outside AC would require a referendum voting.

"The State Constitution explicitly requires casino gambling to be restricted to the territorial limits of Atlantic City," he stressed. "Senate Bill No. 490 seeks to avoid this requirement by deeming all Internet wagers as being placed in Atlantic City, even if the person placing the bet is outside the boundaries of the city. In my view, the creation of a legal fiction deeming all wagers to have 'originated' in Atlantic City cannot overcome the clear and unambiguous language of the State Constitution."

He added that “if the Legislature believes that expanding gambling outside of Atlantic City is in the best interests of the State of New Jersey, it should place the question on the ballot for the voters to decide.”

"I do not believe that Internet gambling as contemplated in S-490 is a viable option for continuing the progress that we have made so far in reversing the fortunes of the casino industry in New Jersey,” Governor Christie concluded.

It was commented by the trade group representing land casino operators, the Casino Association of New Jersey, that any legalization of internet gambling should be the subject of a referendum among New Jersey residents.

The Association President, Bob Griffin, apparently satisfied with Christie’s decision, stated: "The right way to get this bill done to avoid costly and time-consuming legal wrangling is through a referendum placed before voters on this November's ballot, and we are committed to working with the governor and our legislative leadership to make that happen.”

He added, however, that online gambling has its charms: "Currently, millions of Americans engage in online gaming with illegal offshore operators, and do so with no oversight, no regulation or no consumer protections. It makes sense for the state of New Jersey to regulate this activity, enforce strict standards to ensure games are fair and safe, and in turn be able to collect tax revenue instead of having those dollars and the jobs they support leaving New Jersey and going illegally overseas."

According to a state lobbyist hired by the pro-online gambling group iMEGA, the organization will join in if referendum is called. The organization also presented stats that according to which legalized gambling in New Jersey “could create between $210 million and $250 million in new revenues for Atlantic City casinos during its first full year of operation, and create 1,586 to 1,903 jobs and $47 million to $55 million in New Jersey tax revenue.”

In a statement issued by the bill’s author, Senator Ray Lesniak, stress is put on the need for quick action in reconsidering the bill, and getting it back on the governor's desk.

His statement reads: "We need to work as quickly as possible to bring this bill back to the Governor's desk and position Atlantic City to become the Silicon Valley of the high-tech gaming sector. While the governor expressed concern with some aspects of the bill today, he's committed to the general idea that we have to expand gaming product in order to bring our gaming industry back from the brink of fiscal insolvency.

"I'm encouraged that he's expressed an interest to work together to maintain the core idea behind Internet wagering while making sure that such operations cannot be hijacked by unscrupulous operators,” he concluded.

On the other hand, it was opined by procedural experts that in order to return the bill into the procedure, it would take redrafting the bill and submitting it to both the state Assembly and Senate, along with a request to include it in a referendum later this year.

Deputy Assembly Speaker John Burzichelli, a south Jersey Democrat on this occasion stated: "I understand this is a complicated issue that raises many legal questions," he said. "Still, the reality is that Internet gaming is coming and we need to figure out a way to make it work to benefit Atlantic City casinos," adding that he would work to perfect legislation for online gambling.

An Atlantic Country Republican and Assemblyman John Amodeo said: "Internet wagering can create construction, and permanent high-paying technological jobs that are needed in Atlantic City, but we must be certain that it does not hurt casino revenues."

Compared to the tax rate paid by land casinos on winnings, the tax paid on online betting revenues would be almost three times higher, at 23 percent.

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