Could NJ Become an International iGaming Hub?

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Saturday, December 16th, 2017 | Written by Stephen Smith

At the end of November, New Jersey Senator Ray Lesniak introduced a new poker bill to allow his state to share its players with online gaming operators from all around the world. Given that Lesniak will be retiring at the end of this year’s legislative session, there’s not a lot of time left to pass the bill before the deadline runs out on January 9th.

While New Jersey opening its market up to international operators is a headline grabbing piece of news, by far the most important development is the Garden State proposing that these companies’ game servers may be hosted outside of Atlantic City. Lesniak has been one of New Jersey’s biggest online gambling proponents during his tenure in office, and before he finally leaves his position as State Senator, he may yet realize his long awaited ambition of turning New Jersey into an international online gaming hub.

Last Opportunity for Lesniak

In January 2014, Lesniak first introduced bill S980 which was designed to “provide interstate and foreign Internet wagering under certain circumstances.” However, current gaming laws make this impossible because they restrict game servers to being based in Atlantic City, and require that only players within the state’s borders are allowed to play.

Nevertheless, expanding the industry to include international players paves the way for boosting a market which, according to the bill, has already produced “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, has the window of opportunity to turn NJ into an online gaming hub already gone?

International iGaming Hub Potential?

While it may sound unlikely for a small US state with less than 10 million people to make a splash on the international iGaming market, it is not such an unrealistic possibility after all when one considers that many other international market jurisdictions are even smaller. Gibraltar, the Isle of Man, and Malta, for instance, are all established regulatory jurisdictions even though their populations are tiny compared to that of New Jersey.

NJ iGaming Taxes and Regulations Attractive

New Jersey enjoys a distinct advantage as a regulatory jurisdiction, namely its 15% gaming tax rate (as well as the 2.5% contribution to the Casino Redevelopment Authority) which makes it an attractive environment for operators to generate great revenues and profits.

On the other hand, taxes in Nevada may be lower, but only online poker is allowed in the Silver State. New Jersey, however, also permits casino games, and boasts a Division of Gaming Enforcement (DGE) amenable to innovation in eSports and skill-based gambling games. Similarly, Pennsylvania is also expected to start offering internet gambling next year, but will still put off a number of operators due to its excessive tax and license charges.

Therefore, if New Jersey is able to offer a workable tax environment and a wide range of games, then it will surely stand out from the rest of the competition in the US. Moreover, if the Supreme Court overturns the federal laws prohibiting sports betting outside of a handful of states, and allows New Jersey to establish its own laws, then this will only serve to enhance its appeal further.

Importance of Interstate Compacts

New Jersey Governor Chris Christie recently announced a much-anticipated interstate compact between NJ, Delaware and Nevada that will see poker liquidity pooled between all three regulated states.

In the past, New Jersey had been held back in entering into such an agreement because of requirements that game servers be based in Atlantic City. It’s not known how this agreement will work considering the game server restriction, but if Lesniak’s bill passes and server restrictions are removed, then this and other interstate compacts could be made within a matter of months. In addition, the new legislation in Pennsylvania also permit interstate compacts, thus enabling the state to join a legalized iGaming pool by the end of 2018.

New York and California have also proposed legislation allowing for interstate compacts, which together with other states interested in raising iGaming tax revenues, could possible lead to a potential united iGaming network in the US.

In the long-term Lesniak’s bill could prove to be the tipping point that eventually unifies the US gambling market as there are obvious benefits to online poker liquidity. Needless to say, moving towards a unified gaming regulatory landscape would be great for both players and internet gaming operators alike, whilst bypassing the issue of establishing federal laws in this field.

This kind of development is not so unrealistic, either, as Senator Lesniak has been of great service to New Jersey in helping create a regulatory system to protect players and support the casino businesses and employees based in his state. Passing this one last bill would therefore make for a fitting end to his successful career as a senator.