New Jersey Moves Toward Being First State To Regulate Online Gaming, Takes Steps to Support A.C. Casino Industry

By Frank Catania & Keith Furlong - Catania Gaming Consultants

The New Jersey Assembly and Senate approved an online gaming bill on January 10, 2011.   The legislation to authorize and regulate online gaming now goes to the governor’s office for his approval.  If Governor Christie signs the legislation, New Jersey would become the first state in the nation to allow licensed casino entities to offer residents the ability to play poker and other casino style games on their computers.

In early December 2010 the N.J. Assembly Regulatory Oversight and Gaming Committee released Senate bill S-490 (combining it with the Assembly bill, A-2570), legislation allowing for intrastate online gaming within N.J.  The original legislation allowed for wagers from within N.J. and from international locations outside of the U.S.

The Assembly committee added amendments which limited wagers to within N.J. and changed tax structures to help bridge a gap for the N.J. horseracing industry to work toward being self-sufficient.  A vote on a the bill to authorize Internet wagering by New Jersey residents on poker and other casino-type games was referred to the Assembly Budget Committee because it contains a tax provision. 

Specifically, the bill provides:

       all games, including poker, which may be played at a casino, as well as variations or composites thereof, may be offered through Internet wagering;

·        all equipment used by a licensee to conduct Internet wagering, including but not limited to computers, servers, monitoring rooms, and hubs, must be located either in a restricted area on the premises of the casino hotel or in a secure facility inaccessible to the public and specifically designed for that purpose off the premises of a casino hotel but within the territorial limits of Atlantic City and all Internet wagers will be deemed to be placed when received in Atlantic City by the licensee regardless of the player’s physical location within this State or outside of the United States; any intermediate routing of electronic data in connection with a wager will not affect the fact that the wager is placed in Atlantic City;

·        Internet wagering in this State will be subject to the provisions of, and preempted and superseded by, any applicable federal law;

·        Casino Control Commission may establish a Division of Internet Wagering to which it may delegate authority for the administration of Internet wagering conducted by casino licensees; the division would be responsible for recommending regulations concerning Internet wagering for consideration and possible adoption by the commission; this would not affect the authority of the Division of Gaming Enforcement with respect to all casino gaming activities, including Internet wagering;

·        the application process for a licensed casino to obtain a permit to establish Internet wagering, with the permit valid for one year and subject to renewal.  As part of the application process, a casino licensee must submit to the commission for its approval a description of its system of internal procedures (including security procedures) and administrative and accounting controls for Internet wagering, including provisions that provide for real time monitoring of all games.  A casino licensee must also submit its gaming software and other Internet wagering equipment to the Division of Gaming Enforcement for testing to ensure compliance with technical standards for such equipment set by the commission;

·        it will be lawful for a casino licensee to provide marketing information by means of the Internet to players engaged in Internet wagering and to offer those players incentives to visit the licensee’s casino in Atlantic City;

·        required features to assist problem gamblers and potential problem gamblers;

·        penalties for violations of the provisions of the bill;

·        an annual fee for Internet wagering permit holders for the initial permit and permit renewal to cover the costs of regulation by the commission and the division, with the initial fee to be at least $200,000 and the renewal fee to be at least $100,000; and

·        an annual fee for Internet wagering permit holders of $100,000 to be allocated to programs to prevent compulsive gambling and to assist compulsive gamblers.

The New Jersey Legislature also approved legislation that creates an Atlantic City Casino District which allows for state oversight and phases out a casino financed subsidy for New Jersey Horse Racing industry.  The Casino District is an initiative by Governor Christie to help revitalize New Jersey’s traditional casino industry. The legislation was advanced after the governor’s transition team issued a report that recommended creation of the Atlantic City Tourism District as well as having the state get out of the horse racing.

Three gaming specific bills also passed the Assembly in the same voting session:

·        Creation of a “Casino Gaming Study Commission” to study the economic impact of a possible Meadowlands casino.

·        A bill to reduce the amount of regulations in the Atlantic City casino industry

·        A bill that provides incentives for continued breeding of racehorses in the state.