Lesniak concerned by NJ I-Gaming Bill Delay
by James Rutherford
Promising to remake down-at-the-heels Atlantic City into a “vacation and convention center of the world,” New Jersey Gov. Chris Christie stood under the $3 billion Revel’ unfinished hotel tower on Tuesday and signed two historic pieces of legislation: one to overhaul the state’ 30-year-old casino regulations, another to strip the city of much of its power and effectively take the ailing gambling town under state control.
No stranger to bold solutions then, the governor has yet to touch his pen to the Internet gambling bill that has been sitting on his desk for three weeks, and the bill’ sponsor says he doesn’t like what he believes is going on behind the scenes.
“He’ very close to Harrah’,” Democratic state Sen. Raymond Lesniak said when asked whether the Republican chief executive will sign ground-breaking legislation to allow Atlantic City’ casinos to offer real-money gambling games on the Web to New Jersey residents. “I’m very concerned he will give in to their corporate interests.”
“We do not believe neighboring states would sit still,” Moody’ Investors Service suggested in a report released late last year. “New York, Pennsylvania and Maryland are likely to embark on a casino arms race, moving to legalize both sports betting and Internet gambling as a way to protect [their] operators.”
Harrah’, now Caesars Entertainment, doesn’t want the bill to become law, Lesniak and others say.
“I can tell you who’ lobbying against it: [Caesars] doesn’t want Christie to sign it,” said attorney Frank Catania, a former director of the N.J. Division of Gaming Enforcement who now heads an influential gaming consulting firm in the state. “They want a federal solution because of the World Series of Poker.”
It’ a view that holds that Las Vegas-based Caesars, the country’ largest land-based operator and owner of the WSOP, having invested heavily in online brand development outside the Unites States, believes it can exert the most market dominance this side of the Atlantic within a federal framework developed principally by the regulatory authorities in its home state of Nevada.
Caesars, which has not declared a position on the New Jersey legislation, also did not immediately respond to a request for comment.
Attorney Anthony Cabot, a partner in the Las Vegas-based firm of Lewis and Roca and a Web gambling law expert, says he has no read on any behind-the-scenes maneuvering in Trenton.
“You’ll recall the [Atlantic City] casino industry at one point was opposed to the bill,” he said. “Whether or not they’re actively lobbying on the issue I don’t know. But the industry’ position as I understood it at the time was that something should be done on the federal level first, especially as this applies to poker.”
“Poker is more of a national rather than a state issue,” Cabot explained. “Why? Games of chance are house-banked so they can be successfully implemented on an intrastate level anywhere. Even smaller states can make money. Poker requires liquidity. That’ an entirely different dynamic. That’ why it’ dominated by a couple of [Web] sites. If it is implemented in the U.S., success would depend on going national with it ‚Äî except maybe in California, which has the population to make it work.”
With the GOP in control of the 112th Congress and prospects for federal regulation a long shot at best, are operators finding more to like in an intrastate model? Lawmakers in California and Florida, the most populous state and the fourth most populous, are keen on the potential. But the fact that the Casino Association of New Jersey, which represents Lesniak’ intended beneficiaries, has not taken a public position either way, would appear to indicate that divisions persist within the ranks.
“I do know there are casinos in New Jersey lobbying the governor very strongly to sign it,” the senator said. “Because they really need it.”
Atlantic City’ gaming revenue fell more than 9 percent last year. It was the fourth consecutive year of declines. Since its 2006 peak of $5.22 billion, more than one-third of the market has gone away.
A 2010 study commissioned by Interactive Media Entertainment & Gaming Association, a Web gambling advocacy group based in Washington, D.C., estimates that legalization will generate $210 million to $250 million in GGR in its first year and kick about $40 million to the New Jersey treasury, based on a tax rate of 20 percent.
Looking to Year 2 and beyond, GGR of $500 million to $750 million at full ramp-up is not unthinkable, says Denver-based industry consultants The Innovation Group.
“If managed well, the opportunity is a revenue source for the casinos,” says TIG Chairman Steven M. Rittvo. “A 15 percent revenue jump. It’ significant.”
For this reason, iMEGA Chairman Joe Brennan Jr. believes when all is said and done that Christie will give the bill his signature.
And there is a third option: he can do nothing and the bill automatically becomes law 45 days after its passage, about three weeks from now.
“The governor is keeping his own counsel. They haven’t leaked any word one way or the other,” Brennan said. “Yes, there has been a lot of speculation that he’s going to run for president, that [Caesars] is opposed but none of it is rooted in the economic priorities which the governor himself has stated to be his priorities.”
“He’ been following the party line,” Lesniak said. “So far, he’ been on Harrah” [sic] side through this whole process. And I haven’t seen anything that indicates a change of heart, except that he hasn’t vetoed [the bill] yet, which is a good sign.”