Five Critical Moments In The Development Of New Jersey Online Gambling

December 1, 2016
Five Critical Moments In The Development Of New Jersey Online Gambling

During its three-year history, writers have penned countless articles about the New Jersey online gambling industry. But in that time, there are five moments that really stick out as having shaped the state’s current iGaming landscape.

The mostly successful soft launch

On Nov. 21, 2013, more than a dozen online gambling websites operated by the state’s land-based casinos. They were (and are) regulated by the New Jersey Division of Gaming Enforcement.

After a five-day soft-launch period, Borgata, Caesars, Tropicana, Trump Plaza, and Trump Taj Mahal were officially approved to offer online gambling in the Garden State.

The soft launch had its fair share of issues:

  • With regulators, operators, and third-party vendors erring on the side of caution, systems incorrectly tagged numerous online players within New Jersey’s borders as being outside of the state. They also disconnected some users while playing. These early geolocation issues have all but disappeared in New Jersey.
  • The online poker and gaming community may have been counting down the moments to New Jersey’s launch, but apparently banks and credit card companies didn’t get the memo that online gambling was legal in New Jersey. Payment processing approval rates were as low as 10 percent during the early days of the industry. This situation has since been partially remedied by new credit card codes for legal online gambling and the additions of Neteller/Skrill and PayPal.
  • Not quite ready for primetime, Golden Nugget’s online casino didn’t pass muster during the soft launch and was taken offline until it could work the kinks out — which occurred three weeks later in December. As an aside, Golden Nugget has rebounded, and is now the top grossing online gaming operator in the state.

But at the end of the day, the soft launch achieved its two main goals:

  1. Demonstrate the Division of Gambling Enforcement could license, regulate, and oversee a regulated online gambling industry using an extremely accelerated timetable; New Jersey passed its online gambling bill just nine months prior to launch.
  2. Simultaneously launch more than a dozen online gaming sites through the state’s land-based casinos with assists from overseas online gambling companies and third-party vendors supplying geolocation and player verification expertise.

The failure of Ultimate Gaming

A company going under might seem like a strange choice for this list. But Ultimate Gaming’s failure in New Jersey helped prove something very important about legal online gambling markets.

When Ultimate Poker and Ultimate Casino announced they were leaving New Jersey, the immediate concern among players was the safety of their funds.

Online poker players have seen this show before, and most of the time it hasn’t ended well for them. But Ultimate was different: One of the core regulations was that all player deposits had to be kept in a segregated account. Because this decree was in place, Ultimate players were promptly paid when they made their final withdrawal request.

Furthermore, players unaware Ultimate was closing its doors who didn’t request a withdrawal were mailed a check for their entire balance, which led to a charity drive of sorts.

The bottom line: Legal, regulated online gambling protected player funds.

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DGE crackdown on black market sites and affiliates

Since the onset of legal online gambling, the DGE has been playing a game of cat and mouse with offshore online gaming sites. The presence of those sites is believed to have stunted the growth of the state’s legal online gaming websites.

The first salvo came in May 2014, when the DGE sent cease and desist letters to some online gaming affiliates. Some were advertising both legal New Jersey sites and black market offshore sites.

The DGE crackdown also extended to the gambling websites themselves. Most left the market in one capacity or another. Some left entirely (or asserted they had done so). Others refused to accept new players from New Jersey but grandfathered in existing players.

In June 2015, the DGE ramped up the pressure on fence-sitting affiliates, forcing them to choose between legal, regulated markets and continuing to promote black market sites by setting a clear, bright-line date to make their decision.

In September of this year, the DGE continued its crackdown when it came to an agreement with the Kahnawake Gaming Commission in Canada. The Kahnawake has long-acted as a quasi-regulatory body and server gateway to the US for black market sites, but that might be changing. The DGE and Kahnawake issued press releases in September stating that the Kahnawake would no longer provide access to US markets through its servers.

The DGE hasn’t been able to completely sever all access to New Jersey. But its continued haranguing of sites, affiliates and other regulatory bodies have reduced the black market’s footprint.

PokerStars approved by the DGE

For PokerStars, the road to a New Jersey license was a long, strange trip.

It began with the company’s failed attempt to purchase the Atlantic Club Casino. It was followed by the DGE suspending its licensing application after PokerStars teamed up with Resorts Casino. Later, the DGE reopened its license application after Amaya bought the company in August 2014.

But the sale didn’t pay immediate dividends for PokerStars in New Jersey. When all was said and done, it would be two years after the industry launched — and more than a year after the sale of PokerStars to Amaya — before PokerStars was approved for a transactional waiver by the DGE on Sept. 30, 2015.

PokerStars went live in New Jersey on March 16, 2016, and quickly grabbed a plurality of the online poker market share. However, after an initial increase in total market size the New Jersey, the online poker market has settled back roughly to its pre-PokerStars size.

But the addition of PokerStars fundamentally changed the landscape. The best of the best arrived in the market, which meant everyone needed to step up their games.

Golden Nugget tops $4 million

New Jersey’s online casino revenue has been growing by leaps and bounds during the past two years. But the growth was mainly due to more and more online casinos launching in the state (most notably the entry of Resorts). It did not sustained growth by the existing individual operators, where there seemed to be a hard ceiling of about $3.3 million.

This held true until June 2016, when Golden Nugget broke through the $3.3 million ceiling by posting a $3.5-million month. July saw Golden Nugget’s revenue spike again, this time to $3.7 million. Suddenly, a $4-million month for an online casino operator seemed like an achievable goal. Golden Nugget managed to hit that mark in October.

Golden Nugget’s path to $4 million was an interesting one. As noted above, the company was a bit late to the New Jersey online gambling party. It launched roughly a month after its peers. But since then, Golden Nugget has pretty much done everything right.

The company has been willing to take a number of chances, including:

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