New Jersey's intrastate play
The intrastate egaming bills introduced by NJ Senator Raymond Lesniak have clearly been drafted with a federally regulated US market in mind.
While growing state budget deficits have provided a fillip to intrastate legalisation initiatives in CaliforÂnia, Florida and New Jersey (NJ), the intrastate egaming bills recently introduced by New Jersey Senator Raymond Lesniak(pictured), the first in the US, owe as much to distinct crises afflicting that state’s racing industries and casinos.
Thus NJ’s state legislature now has two bills to consider, one proposing constitutional amendÂments to legalise sports betting, the other for AtÂlantic City’s beleaguered casinos to offer online forms of all their games, going beyond the pure poker initiatives currently being considered in California and Florida.
Perhaps more significantly for the shape of future regulation in the US, they have been draftÂed with the eventuality of a regulated interstate US egaming market clearly in mind.
Hence the clause inserted in the bills that any law arising from these will be pre-empted should any applicable federal law be passed. In short, should the Menendez or Frank federal bills make it into law, any online casino licensed by NJ would immediately be free to offer its wares interstate.
Given the barriers to interstate sports betting in the US, the bill drawing the attention of the now predominantly Europe-facing egaming industry is that proposing Atlantic City’s casinos, where revenues tumbled 13% year-on-year during 2009, offer online versions of their games. Such interÂest is justified, according to Joe Brennan, chairÂman of the Interactive Media Entertainment and Gaming Association (iMEGA) lobby group supÂporting the bills.
Brennan said: “Although not in the language of the bill now, the expectation is that in order for those casinos to get up and running, be comÂpetitive and generate tax revenues in the shortÂest time possible, is to develop partnerships with operators like Harrah’s Interactive Entertainment (HIE) has with 888/Dragonfish. This could be the way regulation moves forward in the US, so it should be nothing surprising to operators interÂested in getting a toe-hold in a potentially norÂmalised and regulated market.”
Interestingly, the bill also contains no proviÂsion to pool-poker liquidity between the casinos proposed as licensees, making it difficult for these sites to generate sufficient liquidity to become a viable alternative to offshore sites such as PokerÂStars.
Brennan said this was in part because the AtÂlantic City casinos’ plight means “this is not a poker-only issue”, and because the likes of HarÂrah’s, MGM and Boyd are too competitive to pool liquidity on a network. “When Harrah’s gets in they are not looking to share, they are looking to own and dominate poker with the WSOP brand.”
The 500,000 NJ residents already registered on offshore poker sites would also not be their target audience, said Brennan. “We will not have the avÂerage of 30,000 players online at any one time if you limit it to an intrastate system,” saying the casinos will, ahead of an interstate opening, seek to cultivate a leisure-oriented player base only comfortable on playing on state-licensed sites, as achieved by Swedish state monopoly Svenska Spel from 2006 on a similar population to NJ.
But Harrah’s has yet to throw its weight behind the NJ initiative. Brennan says this is in part beÂcause Section 207 within the Menendez federal bill Harrah’s is backing would put them on an “odd footing” in NJ. This would exempt any revÂenue generated from state and tribal government taxation, unless the operator had a physical locaÂtion for internet operations in the state, which it would have to do to participate in an NJ intrastate system. “With Harrah’s headquarters in Nevada, HIE located in Montreal Quebec, and the DragÂonfish engine situated in Gibraltar, New Jersey could potentially be cut out of all eventual US liÂquidity,” says Brennan.
However, final legislation will look very differÂent to the current bill because “every interest for this issue will get their 10 cents in”. New Republican governor Chris Christie has also yet to pubÂlicly declare his position.
Brennan hopes a final law will be signed by OcÂtober this year. The intrastate legalisation battle is now being waged on an increasing number of political and geographical fronts.
Joe Brennan of iMEGA will be appearing at EGR Live, eGaming Review‘s free-to-attend conference and exhibition in London on 14 and 15 June.
This article originally appeared in the February 2010 issue of eGaming Review.