New Jersey Sports Betting Loss Hurts iGaming

June 25, 2014
New Jersey Sports Betting Loss Hurts iGaming

The U.S. Supreme Court declined to hear the New Jersey sports betting argument, a case the state lost in lower courts. The case was brought by the U.S. Department of Justice and five major sports leagues in an attempt to prevent New Jersey sports betting at Atlantic City casinos and the state’s racetracks. The sports leagues ultimately got their way.

The law at the heart of the legal dispute was the Professional and Amateur Sports Protection Act (PASPA). New Jersey had an opportunity to gain exemption under the law after it passed in 1992 but it failed to act within the one year window.

This was a huge hit to Atlantic City, a struggling resort town that was hoping to draw sports bettors to its casinos during major events. Its regional casino monopoly has been chipped away over the past decade. In 2012, Pennsylvania overtook New Jersey to become the number two casino state in the country. Sports betting might be exactly what Atlantic City needs to compete with gaming in neighboring states.

A Supreme Court ruling in favor of New Jersey would have allowed states to offer the same types of sports betting that are currently only allowed in Nevada. Delaware, Montana and Oregon also have exemptions under PASPA. A 2009 ruling against Delaware created precedent that those three states can only offer the exact types of sports betting offered in the 15 years before PASPA was enacted. For Delaware, that means only NFL parlay cards.

Regulated Sites Need Sports Betting

One of the biggest issues regulated gaming has cited for its lower than expected revenue is competition from offshore sites. Most unregulated U.S.-facing sites spread sports betting. In fact, most of these sites specialize in sports. Poker and casino games are often secondary offerings.

Sports betting is a popular pastime for poker players. Las Vegas poker rooms are often located in close proximity to sports books. The crossover between poker and sports is far more common than that of poker and house-banked casino games. Unfortunately for the industry, this type of cross-marketing will likely not be possible without congressional action.

In Nevada, where mobile and online sports betting are legal, poker and sports are spread on two different platforms. Poker is spread on the Internet, while sports betting is on an intranet. Players that log into Nevada sports betting websites are taken to a special platform and completely disconnected from other internet activity.

It is not just New Jersey that loses in all of this. Sports betting is an activity that is more profitable for gaming companies when spread online due to lower overhead. The convenience offered by mobile betting gives the activity a larger reach. This could all be used as selling points to expand iGaming across the U.S., an argument that cannot be made in this legal environment.

State Senator Raymond Lesniak has a backup plan. He plans to introduce legislation that would repeal the state’s sports betting laws. This would allow the state’s racetracks and casinos to book bets. However, calling this plan a long shot is probably an understatement (Update: It passed the state senate in a landslide). If it does pass, it could run into the same legal challenge the previous legalization attempt did.

Sports betting could be the key to marketing a full suite of gaming options to online players, just like it is in the rest of the world. It will probably take an act of Congress to make that a reality.

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