New Jersey Committee Passes New Version of Plan to Legalize Internet Gaming
By Bradley P. Vallerius JD
Gaming tax raised from 10% to 20%; horse racing subsidies removed; and foreign businesses barred if they participated in the US market after 2006.
Legislation that would allow Atlantic City casinos to operate internet gambling in New Jersey has received serious attention in the state’s legislature this spring. So far, two companion bills have passed favorably through committees. Now they are ready for floor action in both chambers of the legislature. The prospects of enactment seem very good.
The most recent hearing was held 10 May 2012 before the General Assembly’s Committee on Regulatory Oversight and Gaming. Prior to this hearing, Assembly Bill 2578 was nearly identical to its companion, Senate Bill 1565. In fact, the regulatory plan contained in the two bills was also nearly identical to the plan that was approved by both chambers last year.
The Regulatory Oversight and Gaming Committee has made a series of amendments, however. Some of the amendments are merely additional provisions which make the plan more complete. Others alter the plan in substantial ways.
• Tax Increase- One of the most important amendments raises the tax on gross revenue from internet gambling to 20%. Previously the plan had set the tax rate at 10%. Additionally, the investment alternative tax applicable to internet gaming revenues has been raised from 5% to 10%, and the investment alternative has been raised from 2.5% to 5%.
• No more horse racing subsidy- Another important amendment removes a provision that would have required licensed operators to collectively raise $20 million to be delivered to the New Jersey Racing Commission every year for three years. This particular provision has already been removed from the Senate’s bill, but it was part of the plan last year. Apparently a focal question of the recent hearing was whether the state’s horse racing industry deserves to compete in the market for internet gaming. As it now stands, the plan would permit only Atlantic City casinos to obtain operators’ licenses for internet gambling.
• Licensed service providers- A third important amendment specifies that Atlantic City casinos can enter into participation agreements with “casino service industry enterprises.” This term “casino service industry enterprises” is meant to cover companies that provide services related to internet gaming, including “website hosting, electronic commerce capabilities related to internet gaming, and game content providers.” A business which wishes to provide any of these functions to an Atlantic City casino must itself apply for a casino service industry enterprise license.
• Prohibited participants- In providing for the licensing of “casino service industry enterprises,” the plan sets grounds which disqualify an organization from receiving such a license. Essentially, an organization would be unable to receive a license if it or a related organization ever participated directly or indirectly in facilitating internet wagering in the United States after December 31, 2006.
Good Prospects in the Legislature
Having cleared the General Assembly’s Regulatory and Gaming Committee, A2578 now proceeds to the floor of the General Assembly. Its companion in the Senate, S1565, has also already progressed to the floor of its chamber. Both chambers must pass identical bills, but the two bills are not presently identical because of the Assembly committee’s recent amendments. This is easily adjusted though.
The new provisions of A2578 are likely to receive favor in both chambers. In fact, they probably are popular already or else they would not have been raised in the first place. Identical amendments can easily be added to S1565 on the floor before the Senate takes its vote. A2578 could undergo further amendments as well if necessary. And even if the two chambers were to enact differently worded bills, the next step would be to organize a joint committee composed of members of both chambers. The joint committee would settle the differences and then send an identical bill back to each chamber for approval.
But Governor Christie is still the Big Question
Legislation passed both chambers of the legislature last year (2011) but still failed to become law because Governor Christie refused to sign it. This year there are good reasons to expect the governor could finally be ready to sign.
For one thing, the apparent state of federal law has changed dramatically since the last bill died on Governor Christie’s desk. The federal Justice Department used to be an oppressive obstacle to the 50 states, but in December of 2011 the agency declared it would not interfere if a state wants to allow internet gambling. In response, legislatures and governors across the country are now finally becoming informed about the practical realities of internet gambling policy. Now it is much more clearly in the governor’s best interest to agree with his state’s lawmaking body if it wants to establish legitimate operators before neighboring states do.
Bradley Vallerius is a licensed attorney in the State of Illinois. He is also the proprietor of For the Bettor Good, a provider of sophisticated custom research and communications to the gaming and technology industries. If you have questions about remote gaming possibilities in the United States, For the Bettor Good can find answers and tailor them to your audience. Contact bvallerius using gmail.