Has New Jersey Started US E-gaming Chain Reaction?
By Jana Sedlakova
Following the conditional veto on 7 February 2013 the next key date in New Jersey’ s path to allowing online gambling is 26 February 2013. New Jersey Governor Chris Christie had been expected to give his statement on proposed online gambling laws during a 45 day review period. He had vetoed online gambling laws previously. He now had four options: to approve the legislation, to veto it, to conditionally veto the bill, or to choose to do nothing. He gave a conditional veto on Thursday 7 February which has prompted considerable reaction in the market. In his veto Chris Christie said : “I therefore recommend changes to this bill that will extend the existing prohibitions on casino-related employment for State employees and State legislators to Internet gaming licensees, and their promoters or affiliates.”

If the tax rate in the original proposal was higher and if the legislation was to be for a ten year trial period it may not have been vetoed. Thus the veto was in fact an endorsement according to some. “Now is the time for our state to move forward, again leading the way for the nation, by becoming one of the first states to permit Internet gaming. … Since the beginning of my administration, I have stressed the importance of reversing the trend of economic contraction in Atlantic City and have made the revitalization of the region’s gaming and tourism industries a key priority,.” Chris Christie said, as reported in USAToday on 7 February. 

The 31 page conditional veto contains the following suggested amendments:
“… I recommend an enhanced level of funding for compulsive gambling treatment programs and additional financial support for other beneficial purposes for which casino gaming was originally authorized. I also recommend an annual analysis of the potential problems and harms associated with these new games to be undertaken at the expense of Internet gaming licensees…. I believe that Internet gaming in New Jersey should be carefully studied and periodically revisited. I recommend that this law authorizing Internet gaming in New Jersey sunset after a period of ten years, giving future leaders the perspective and opportunity to revise and renew Internet gaming as appropriate.” 
In his press release on 7 February, Christie emphasised that this change is a demonstration of ‘an important policy decision’ for New Jersey as well as an ‘historic opportunity’ “to continue the State’s leadership as a premiere destination for tourism and entertainment. Such a significant step must be carefully considered, balancing the benefits of job creation, economic development, and the continued revitalization of Atlantic City against the risks of addiction, corruption and improper influence. It is my duty as Governor to make these determinations, always mindful of my duty to guarantee the continued welfare of our families, our neighbours, and the future generations who will call our State home… “ 

“My proposal continues the tradition in New Jersey of a fine, careful, and well-regulated implementation of gaming. With these changes, we will increase resources to treat compulsive gambling, provide sensible safeguards to ensure careful oversight and a proper annual review of the implementation of internet gaming, along with a 10-year sunset for future leaders to carefully re-evaluate internet gaming as a state policy broadly and critical transparency measures to guard against undue and improper influence and self-dealing,” he continued.
Chris Christie also advised that more was required to prevent problem gambling and thus that the legislation should be revised accordingly.
The legislation put forward for Christie’s approval is understood to allow online gambling for all gambling verticals provided by Atlantic City casinos including poker. Reportedly, the servers will need to be located in the Atlantic City casinos. 
This should also apply to all other equipment. Section 6 of the Senate, no. 1565 State of New Jersey 215th Legislature introduced on February 9, 2012 reads “All Internet wagers shall be deemed to be placed when received in Atlantic City by the licensee. Any intermediate routing of electronic data in connection with a wager shall not affect the fact that the wager is placed in Atlantic City.” Suppliers of gambling software or providers of goods relating to gambling or casinos will also be subject to a licensing requirement.
Section 27 is a new section in the legislation and establishes “annual fees for the issuance or renewal of Internet wagering permits. The issuance fee shall be based upon the cost of investigation and consideration of the license application and shall be not less than $200,000. The renewal fee shall be based upon the cost of maintaining enforcement, control and regulation of Internet wagering operations and shall be not less than $100,000… ”
The conditional veto from 7 February has also had a noticeable impact on the share prices of gaming stocks. Digital Look reported on 8 February 2013 that several stocks had posted material gains. The shares of Bwin.Party had risen by 18%, 888 by 14% whilst Playtech saw a 7% gain.
The conditional veto has effectively given the green light to legalise online gambling subject to certain conditions. It would automatically expire after ten years and it would increase the tax rate to 15%. One of the justifications for the tax rate increase is to fight problem gambling. The laws were expected to be ratified subject to the conditions set out by Christie next month. This has now been scheduled for 26 February 2013. The amended legislation will need to gain Christie’s signature. This suggests that despite Christie previously saying that any online gambling outside of Atlantic City Casinos would need to be addressed in a referendum he has now changed his mind. Christie would allow online gambling as long as it is balanced “against the risks of addiction, corruption, and improper influence.” (Source: www.nj.com 7th February 2013). 
On the first page of the 31 page conditional veto Christie says:
“… I have concluded that now is the time for our State to move forward, again leading the way for the nation, by becoming one of the first States to permit Internet gaming. I authorize this step towards modernizing Atlantic City’s entertainment attractions cautiously, with carefully constructed limitations that will ensure the highest integrity and the most robust oversight. Accordingly, pursuant to Article V, Section I, Paragraph 14 of the New Jersey Constitution, I am returning the Assembly Substitute for Assembly Bill No. 2578 with my recommendations for reconsideration.” 
The 31 page conditional veto can be found here

“This is good news and a big win for Atlantic City and for New Jersey. It will send a huge lifeline to the casinos by producing more jobs and additional revenue. It will help them recover from the gaming losses that have plagued the casinos in recent years. It could even save some casinos from closing their doors. At the same time, it will contribute to the state’s economic recovery and generate more revenue for state programs for seniors and the disabled. This is the future of gaming. It will give the Atlantic City casinos the opportunity to be the ‘Silicon Valley of internet gaming’ by positioning them to be the hub of future expansion into other states. I will work to make the recommended changes to the legislation and get it returned to the Governor for enactment.” Senator Raymond J. Lesniak (D-Union), prime sponsor of the legislation said on the 7th February.
Senator Raymond J. Lesniak prime sponsor of the legislation added on 7 February:
“Internet gaming will provide a lifeline to New Jersey casinos by producing more jobs and additional revenue. It will help casinos recover from the gaming losses that have plagued them in recent years. It could even save some casinos from closing their doors. At the same time, it will contribute to the state’s economic recovery and generate more revenue for state programs for seniors and the disabled. I will work to make the recommended changes to the legislation and get it returned to the Governor. The sooner we get Internet gaming in place, the sooner we will begin to see the economic benefits that will come with it.”
Following the progress in New Jersey, Nevada is coming under pressure to act promptly to protect its leading position in gambling. It is important for Nevada’s political leaders to maintain its gambling leadership. 
Thus, in response to the New Jersey veto, Nevada’s state Governor Brian Sandoval reacted promptly. Nevada was instructed the next day [8th February] to pass a bill within a month that would allow online gambling between Nevada and other states via the so called ‘compacts’. It is thought that Nevada could leverage its bricks and mortar casino expertise and reputation into the online world and to become a focal point for online gambling. As reported, only online poker could at present be subject of such a compact agreement between Nevada and another state, if applicable.
Brian Sandoval, Governor of Nevada said in his statement [8th February]:
“Yesterday, I met with Assemblyman William Horne regarding online gaming legislation. I am pleased that the Assemblyman has offered to carry legislation allowing for the establishment of online gaming in our state and help Nevada maintain its position as the gold standard in gaming.”
“In light of the developments in New Jersey yesterday, the need to act quickly has become even more important, a fact that both I and Assemblyman Horne agree on. This bill is critical and Assemblyman Horne and I believe that this should get done within 30 days.”
Lack of adequate gambling laws for the whole of the US market is subject to long standing criticism. The outcome of the Assembly Bill 5 putting forward the interstate compacts between Nevada and other US states is therefore being eagerly anticipated. For the industry scale is important. Interstate gaming would allow for better liquidity and bigger prizes.
If the New Jersey bill gets approved this month subject to Christie’s conditions it would be a watershed for Atlantic City casinos. 
Christie seems to have acknowledged the importance of Internet and the fact that the online revolution has already begun. By increasing the tax rate it appears that in the politicians eyed, the potential tax revenues will outweigh the negative side effects of online gambling.
This is a significant change, after two failed attempts to legalise online gambling in New Jersey, and it will open the doors for revenue growth. One can bet that software suppliers are primed and ready to jump into this market.