Some betting on New Jersey to be first to regulate I-gaming

17 May 2010

In May 2006, the keynote speaker at the Global iGaming Summit and Expo (GIGSE), Lawrence Lessig told those at the conference that they should push for regulation of the Internet gambling industry. Five months later, the Unlawful Internet Gambling Enforcement Act (UIGEA) was attached to the Safe Ports Act by then Senate Majority Leader Bill Frist and passed both houses of Congress.

Last week, four years after Lessig's keynote address, attendees at this year's GIGSE in Montreal universally believed it was no longer a matter of if but when, and by whom, the industry would be regulated.

According to Joe Brennan, the chairman of the Interactive Media Entertainment & Gaming Association (iMEGA), the answers to those questions are the state of New Jersey and before the end of the current legislative session in 2011.

"New Jersey seems to us to be the most likely state to be successful at the intrastate level," Brennan said during a panel discussion. "Based on its status as a leading regulator of the land-based industry, New Jersey is in a position to lead and be a worldwide launching pad for the online industry."

Identical bills are currently awaiting committee hearings in both the state Senate (S490, sponsored by Raymond Lesniak) and Assembly (A2570, sponsored by John Burzichelli). According to Brennan and William Pascrell of the Princeton Public Affairs Group, the bills have received bipartisan support in both chambers. And unlike a similar proposal in California, New Jersey's efforts will not face opposition from Native American groups because the state does not have any federally recognized tribes living there.

The New Jersey bills would give gaming companies currently operating brick and mortar casinos in Atlantic City the opportunity to apply for licenses to offer online gambling services (Internet poker, slots and table games) to state residents. Online gambling revenues would be taxed 20 percent, and licensees would pay a $200,000 licensing fee the first year, followed by $100,000 to renew the license each succeeding year. The state would also collect $100,000 annually that would be allocated to programs to prevent compulsive gambling and assist compulsive gamblers. Revenues would also be subject to a five percent investment alternative tax, or a 2.5 percent investment alternative with proceeds earmarked for the New Jersey Racing Commission to benefit the horse racing industry.

While those pushing the legislation claim wide bipartisan support for the effort, many questions remain. The brick and mortar industry has offered tacit support for the measure.

"I think we're fighting a malaise," said Pascrell. "I think the brick and mortars have been asleep at the switch. Atlantic City just had its worst year ever. This is an opportunity to create jobs."

One notable exception to the support is Harrah's, which opposes the effort because, as Pascrell put it, Harrah's has "gone all-in on a federal solution."

An additional hurdle to the legislation may be the recently elected governor, Republican Chris Christie. Christie, who beat Democrat Jon Corzine in a contentious election last November, is rumored to have larger national political ambitions. And while Brennan and Pascrell attempted to downplay the effect those ambitions may have on whether he would sign a bill that reaches his desk, drawing the ire of the religious right wing of the Republican Party by offering support of any kind to gambling interests isn't a decision to be taken lightly.

Like the 2006 iteration, delegates left GiGSE last week with just as many questions as answers. But it will remain to be seen if legislative action will come as quickly this time as it did four years ago.

Related Links
Ranked Online Poker Rooms
Global iGaming Summit & Expo (GIGSE) 2010
New Jersey Online Gambling
Global iGaming Summit & Expo (GiGSE)