New Jersey Online Gambling Generates $122m In 2014

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Thursday, February 12th, 2015 | Written by Charles Washington

Online gambling in New Jersey generated just one tenth of the initial optimistic revenues Governor Chris Christie had predicted preregulation, and the $122 million it did produce for the whole of 2014 translated into around $18.4 million for the state’s budget, representing the 15% tax levied on all internet gaming revenues. Nevertheless, that figure tells only a small part of the overall economic impact iGaming has had on New Jersey, especially once a multitude of other factors are considered, including licensing fees collected, jobs created, taxes on players’ winnings, and the millions of dollars spent by operators promoting their products.

$400,000 Licensing Fees

In New Jersey, each of the state’s seven online operators have to pay $400,000 a piece in order to secure a state gaming license, resulting in a combined $2.8 million being funneled to state coffers in 2014. In addition, the state requires a $250,000 license renewal fee be paid in July, and with five of the original operators still in business, the $1.25 million in extra fees, minus costs, translates into a $1.5 million to $2 million direct economic impact per year, according to an article written by Steve Ruddock in pokerupdate.com.

Job Creation

While no official statistics have been released showing just how many workers are currently employed by the Garden State’s iGaming industry, Ruddock estimates the figure to be around 300 or so, more than half of whom are highly-skilled and working in technology, Research & Development, marketing, etc. Including state and local taxes, as well as the money people spend in NJ’s economy, the economic impact of these job created is estimated to be as much as $1 million per annum.

Marketing Expenditure

New Jersey’s online operators have managed to take advantage of the opportunities afforded by the state’s regulated online gambling industry by spending millions of dollars marketing their products and differentiating them from those of their competitors. Throughout 2014, thousands of advertisements then appeared on TV, radio, internet, and in print, with much of the expenditure going towards businesses based in New Jersey, leading to a boost to the economy, as well as the creation of more jobs.

The multiyear marketing agreement signed between partypoker and the New Jersey Devils and Philadelphia 76ers in January 2014, for instance, was the first such deal made involving a major US professional sports teams and an internet gambling company, with the cost of the agreement believed to have been worth more than $10 million. Together with other such marketing initiatives undertaken throughout the year – advertising money going towards local businesses, job creation, and taxable wages spent in the state – a rough estimate of the impact marketing has had on the NJ economy in 2014 is thought to be in tens of millions range.

Taxes On Gambling Winnings

Following iGaming regulation, the state now has an accurate way in which to track online gambling results and tax them accordingly. As Steve Ruddock explains in his post:

“New Jersey online gaming sites send players W-2G tax forms on all slot winnings above $1,200, and on table game winnings above $5,000. For table games, this is actually a stricter and more exacting policy than you’ll find in a brick & mortar casino, since it’s difficult for land-based casinos to track each individual player’s wins and losses in a single session of blackjack, pai-gow and other table games, whereas this information is 100% trackable online.”

One prime example of the importance of accurate tracking is the case of Cathy Ruela, 31, who on November 6th won $1.3 million playing the “Millionaire Genie” slots on HarrahsCasino.com. Had that money been won on an unregulated site the state would most likely have never found out about her enormous jackpot, but post-legalisation Ruela’s win was subsequently reported to the IRS, leading to her having to give 34% of her winnings away as taxes. From that figure, 25% went towards the federal government, while 9% or $115,700 was collected by New Jersey.

The overall impact taxes on winnings contributed towards the NJ economy in 2014 is thought to be as much as $1 million.

Conclusion

In the first full year of online gambling in New Jersey, the nascent industry helped funnel an extra $20 million plus towards state coffers, and while that figures falls well below initial estimates given preregulation by Governor Christie, it still represents a significant boost to NJ’s budget. The exact economic impact when all other factors are taken into account is difficult to assess accurately, but with many analysts predicting the industry to double in size in the next few years, New Jersey’s online gambling industry seems to shaping up quite nicely after all.