New Jersey Draws A Line Between Gray, Black Markets For Online Gambling Licenses

Steve Ruddock April 22, 2016 1703 Reads
NJ online gambling suitability licensing

The New Jersey Division of Gaming Enforcement has attempted to clarify its stance on the suitability of potential licensees that operate in gray and/or black markets with a Director’s Advisory Bulletin issued this week.

The advisory bulletin attempts to:

  • As clearly as possible, define what constitutes the different markets — which the DGE letter notes is a very complex matter and open to interpretation.
  • Explain the DGE’s policy when it comes to license applicants who operate in gray and/or black markets.

The top-line takeaways from the bulletin are:

  • Operators in gray markets can be deemed suitable.
  • Operators in black markets will be deemed unsuitable.

The bulletin comes shortly after PokerStars became the latest licensee to become active in the state.

Defining a black market

Without question, it’s much easier to classify a jurisdiction as a black market. Black markets are the opposite of a white market (where online gaming is expressly legal), and leave little wiggle room for an operator to argue online gaming is legal in the market.

In the bulletin the DGE defines black markets as:

“Black markets are defined as jurisdictions where government authorities have taken affirmative, concrete actions to actively enforce that prohibit online gambling, or have issued unequivocal official pronouncements that online gambling is not legal in the jurisdiction.”

The bulletin also notes that a licensee must also hold a license in any white markets it operates in to be considered suitable in New Jersey. Basically, if you operate in a legal market without a license, you are a black market operator.

Under this assessment, any online gaming company operating in New Jersey, Delaware, or Nevada, without a license would be deemed unsuitable.

Defining a gray market a bit trickier

On the other hand, gray markets leave a lot of wiggle room. As such, the DGE has instituted some guidelines for determining whether a market is truly gray.

The bulletin states in part:

“Clearly, when a government agency attempts to divine the intentions of another sovereign jurisdiction through a critical evaluation of local circumstances and resulting actions or inactions, any conclusion reached is fraught with the likelihood of error or misinterpretation.

“[…]

“It is in this context that the Division finds itself attempting to articulate a licensing standard that fulfills its regulatory responsibilities under the Act while also giving proper deference to the sovereignty of other jurisdictions.

“[…]

“As a result, the Division will examine whether or not the jurisdiction has a law that specifically prohibits Internet gaming, and if so, whether the jurisdiction has taken affirmative, concrete action to enforce that law.”

Gray markets are incredibly tricky, as there are different shades of gray, which is why the advisory bulletin leaves the door open for the New Jersey DGE to make a judgment call. The advisory bulletin concludes by saying the Division will look at each jurisdiction where a potential licensee operates on a case-by-case basis and make its own judgment.

Essentially, operating in gray market doesn’t immediately preclude a site from being licensed in New Jersey, but it could… depending on how the DGE views the gray market a site is operating in.

As with most of its policies, the DGE is taking a pragmatic approach to how it handles gray markets, and giving itself the ability to look at each jurisdiction independently.

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