Senator Ray Lesniak Makes Final Push To Make New Jersey An International IGaming Hub

Joss Wood December 6, 2017 541 Reads
New Jersey iGaming

On November 30, New Jersey’s long-time champion of internet gaming legislation, Senator Ray Lesniak introduced a new bill to allow the state to pool players with international online gaming operators.

Senate Bill S3536 adds a critical amendment to the existing state gaming law:

“Notwithstanding any other provision of P.L.2013, c.27 (C.5:12-95.17 et al.), wagers may be accepted thereunder from persons who are not physically present in this State if the Division of Gaming Enforcement in the Department of Law and Public Safety determines that such wagering is not inconsistent with federal law or the law of the jurisdiction, including any foreign nation, in which any such person is located, or such wagering is conducted pursuant to a reciprocal agreement to which this State is a party that is not inconsistent with federal law. The division may permit Internet gaming equipment to be located outside of the territorial boundaries of Atlantic City if the division deems it necessary to facilitate the conduct of international wagering permitted under this section.”

As Lesniak retires from the Senate at the end of this session, there is only a small window in which the bill can pass before a January 9 deadline.

Although the possibility of international player pools may catch the headlines, ending the restriction on locating game servers in Atlantic City may be the more important change.

This is Lesniak’s last chance to fulfill his vision of NJ as an international IGaming hub

Back in the earliest days when New Jersey was considering regulating internet gambling, Senator Lesniak had the vision that the state could become, “an international regulatory hub, creating tax revenues and jobs in the process.”

He introduced S980 in January 2014, which aimed to “provide interstate and foreign Internet wagering under certain circumstances.”

The critical areas of the existing internet gaming laws that prevent this from happening revolve around the requirement to maintain game servers and documentation in Atlantic City, and a requirement that players must be within the state’s borders in order to be eligible to play.

The current bill makes the point that iGaming regulation has already generated “approximately $998 million in economic output, over 3,000 jobs, $219 million in employee wages, and $124 million in tax revenues, of which $84 million derive from Internet gaming revenue alone.”

However, is it now too late for New Jersey to expand into the international market – has that boat sailed?

Is New Jersey international iGaming expansion feasible?

It might seem a little pretentious for a small US state with a population of fewer than 10 million people to want to challenge for a position in the international iGaming market. Such a view is understandable, but the other major regulatory jurisdictions serving the international market are even smaller.

The Isle of Man, Gibraltar, and Malta have all established themselves as globally relevant regulatory jurisdictions, despite being tiny in comparison to New Jersey.

Those nations which have adopted national regulations which maintain open markets for international operators – the UK, Belgium, and Denmark are good examples — are often not concerned with competing for the global player pool. They want the global operators, but not to take responsibility for the regulatory oversight of their international player base.

New Jersey Internet Gaming taxes and regulations hit the sweet spot

As a regulatory jurisdiction, New Jersey has two significant advantages. The gaming tax rate of 15 percent (plus a 2.5% contribution to the Casino Redevelopment Authority), provides an environment where the operators can make acceptable profits while the state raises the maximum in revenues.

Nevada taxes are lower, but the state only permits online poker, whereas New Jersey allows casino games and the Division of Gaming Enforcement (DGE) is open to innovation in skill-based gaming and esports. Pennsylvania will shortly join the list of states allowing internet gambling, but the taxes and license charges proposed are likely to severely limit the range of operators prepared to invest.

California and New York, which have both teetered on the edge of passing iGaming legislation, risk retaining a large black market by restricting their offer to online poker.

If New Jersey can offer international gaming operators a workable tax environment and a large game choice, it will stand out in the USA. Should the US Supreme Court overturn federal laws against sports betting and allow New Jersey to reform its own sports betting laws, the Garden State will immediately increase its attractiveness yet further.

The foreign market may not be as important as interstate compacts

Less than a month ago NJ Governor Chris Christie announced a long-awaited interstate compact with Delaware and Nevada which will soon see online poker liquidity pooled between the three states.

The stumbling block until now has always been the New Jersey restriction that game servers must be based in Atlantic City. It’s not yet clear exactly how the new agreement will work around the New Jersey game server requirement, but the solution has not been easy and has happened much later than the industry would have liked.

If Lesniak’s bill passes and the server restriction can be removed, then any future interstate compacts with New Jersey could be enacted within very few months. Pennsylvania’s new legislation permits interstate compacts, so by the end of 2018, all of the states with iGaming legislation might be joined in a consistent regulatory system.

New York and California legislative proposals both allow for interstate compacts, which raises the prospect of a “United iGaming States of America,” something which future states looking to raise their own iGaming tax revenues would probably join as the default regulatory option.

Over what could admittedly be a very long-term, Lesniak’s bill could provide the tipping point that unifies what could otherwise be a highly fragmented iGaming market in the US. The benefits for online poker liquidity are obvious, but a move towards a unified system of US gaming regulation would be a big positive for players and internet gaming operators, bypassing the problems of establishing federal law in this area.

Such a development involves stretching the horizons of political prediction a long way, but not so far that it is not a realistic future scenario.

Senator Lesniak has done a great service to New Jersey citizens in helping to establish a regulatory system that protects players and supports the state’s casino businesses and their employees. One last successful bill would provide a fitting seal to his senatorial career.