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Senate Committee OKs Online Gambling in New Jersey

6/3/10 - Press of Atlantic City - View Source

By Juliet Fletcher

TRENTON — State senators took the first step toward allowing Internet-based gaming in New Jersey on Thursday, releasing a bill from committee that would allow Atlantic City casinos to build online portals for poker, blackjack and other games.

Members of the Internet-gaming lobby hailed the legislation as progress toward New Jersey establishing itself as the first state to allow full Internet gaming within its state jurisdiction.

Advocates of the bill claimed online gaming could generate as much as $250 million per year for the casinos and create more than 1,500 jobs.

Under the bill, the state would allow an intra-state online gambling network relying on high-tech software to allow customers within New Jersey’s borders to access the casino-run online portals.

Atlantic City’s casinos remained silent on the issue Thursday, not publicly testifying before the committee about the bill. A Casino Association of New Jersey spokesman did not return a call seeking comment.

However, horse-racing industry supporters protested a last-minute change that blocks their venues from hosting the electronic gambling terminals.

Senators on the Senate Committee on State Government, Wagering, Tourism and Historic Preservation approved the bill by 3 votes to 1.

The bill’s sponsor, Sen. Ray Lesniak, D-Union, has argued that a recent ruling by a federal appeals court gives New Jersey a window to try an intra-state approach to developing an online-gaming business model. In 2006, U.S. banks were ordered to block their credit and debit cards from carrying payments to online gambling companies, leaving would-be players without a way to pay. But that ban begins June 1, after many delays.

Federal laws forbid interstate online gambling, but the state can control gambling within its borders. New Jersey’s proposed business model would use existing licensed premises — Atlantic City casinos — which could choose whether to pay $200,000 to apply to the state for an online operations license. Casinos could then partner with online gaming companies, and their activities would be regulated by the Casino Control Commission to prevent underage and out-of-state players.

Representatives of the Interactive Media Entertainment and Gaming Association, or iMEGA, which supports the proposal, said the bill could bring between $210 million and $250 million in annual gross gaming yield to casinos and between $47 million and $55 million in new state revenues. The state would tax the online revenue at 20 percent.

IMEGA Chairman Joe Brennan Jr. cited a study commissioned by iMEGA and conducted by a group from the University of Pennsylvania’s Wharton School of business and Fels Institute of Government, which he said showed the intra-state operation alone could “result in directly creating between 1,500 and almost 2,000 jobs.”

Still greater revenues and job-growth could be created if New Jersey succeeds in attracting Internet gaming companies to headquarter in the state.

“The state would benefit by being a ‘first mover,’” Brennan said.

The existing casino industry, combined with the space and work force available around Atlantic City to create centers of technical support and data storage to the new industry, all within reach of Wall Street investment firms, give the city a strategic advantage over other states, he said.

“New Jersey will be able to position itself as the national and potential global capital of the next gaming industry,” he went on, adding “as much as Nevada has become for the brick-and-mortar gaming industry.”

But the bill came under criticism from horse-racing advocates, as senators removed a provision to allow “gaming rooms” at racetrack venues where customers could get online to gamble via electronic hubs.

“What is the difference between something like that, and if I just take my laptop to the track and start playing?” argued Barbara DeMarco, a spokesperson for the New Jersey Thoroughbred Horsemen’s Association.

Lesniak said that provision had been struck out after objections from committee chairman Sen. Jim Whelan, D-Atlantic.

“Sen. Whelan felt that was too close to a backdoor way of allowing casino gaming at the tracks, and I agree with him,” he said.

If the bill becomes law, New Jersey could beat its nearest competition, California, where lawmakers have just introduced a similar bill on Internet gambling in their legislature. Lesniak said if the bill becomes law, online gaming portals could be active by the fall.

Gamblers would have the option to play their favorite games on computer screens, trading real-life card dealers for electronic graphics and sound effects. They would pay for gambling through personal electronic fund accounts.

Harrah’s has gone on record opposing the proposal.

“They want to protect their business interests in Gibraltar, Montreal and the U.K., and they’re proposing federal legislation that would stop New Jersey making any revenue off this,” Lesniak said following the vote.

As for other casinos’ reticence, he said, “I find it mind-boggling that the casinos haven’t spoken up in support of this idea. This is found money for them.”