News Column

NJ Law Sets Off Race for First State to Implement Internet Gambling

February 28, 2013

Hoa Nguyen and Donald Wittkowski, The Press of Atlantic City, Pleasantville, N.J.

Gov. Chris Christie's signing of the Internet gambling bill Tuesday has initiated a race over which state will be the first to have a fully functioning online wagering system.

"It went from a cold war to an all-out hot war overnight," said Joe Brennan Jr. director of the Washington, D.C.-based Interactive Media Entertainment & Gaming Association who lobbied for New Jersey's law. "You're going to see Nevada and Delaware falling all over themselves to take a bet before New Jersey."

New Jersey, which was the third state behind Nevada and Delaware to authorize Internet gambling, is requiring the gaming enforcement division to deliver regulations and develop a system that would go into effect as early as three months from now and no later than nine months.

That means casinos, which must go through a licensing process, could begin operating Internet wagering systems in Atlantic City as early as late May and no later than late November, according to the new law. That expedited timeframe makes New Jersey one of the most watched in the casino industry when it comes to Internet gambling.

"The gaming industry in the United States believes the future here is in New Jersey -- there's no doubt about it," Division of Gaming Enforcement Director David Rebuck said. "We are under a lot of pressure to do this correctly."

Officials have begun looking at Internet gambling regulations in other jurisdictions and pulling from them to develop a draft of New Jersey's own set, he said.

"We are deep into our review of the regulation," Rebuck said. "We are debating a number of issues on what we want our product to look like so when it's offered for public review, we have done a thorough review."

Nevada, which is one of the states New Jersey is looking toward for model regulations, has licensed a few companies to offer Internet poker and only last week revised laws to remove a final legislative obstacle standing in the way of its implementation. But the software and other systems of licensed operators remain in the testing stage and there is no deadline for completion, said A.G. Burnett, chairman of the Nevada Gaming Control Board.

Meanwhile, officials in Delaware, which made it legal for its lottery system to offer Internet gambling last year, said in documents they want to begin offering the program to the public no later than Sept. 30.

Burnett said he could not speak to New Jersey's process but that Nevada spent a year or longer conducting its investigations of companies interested in providing the Internet gambling technology to casinos.

"Anywhere from eight to 10 months is ... average," Burnett said.

At the same time, the state has licensed some operators much quicker but due to various delays in paperwork and other reasons, the software remains in the testing stage.

Brennan said he believed some of the delay is attributable to companies being wary of moving too fast in Nevada because there aren't enough people in the state interested in gambling at home. New Jersey is different because it is more densely populated and there is more money to be made, Brennan said.

But given the latest escalation by lawmakers of both states to enact laws, Nevada is likely to quicken its pace ahead of New Jersey, he said.

"It's likely Nevada will get a couple of their operators up and running if only to show they are going to be market leaders," Brennan said.

The stakes are high for states because many believe the fertile ground of gambling on the Internet may be the largest market into which Atlantic City can tap given that many Northeast states now offer casino gambling.

"Internet gaming is the biggest issue on the national gaming platform today," Rebuck said. "I would say that I would be very surprised if any property in Atlantic City chose not to look at the business model for Internet gambling in New Jersey."

While the law says online wagering must roll out before the end of the year, Gary Loveman, chairman and chief executive officer of Caesars Entertainment, owner of the Bally's, Caesars, Harrah's Resort and Showboat casinos in Atlantic City, told analysts during a conference call Monday he believes it will take between 18 months and two years.

Analysts Andrew Zarnett, of Deutsche Bank, and John Kempf, all of RBC Capital Markets, are also projecting 18 months to two years. Zarnett warned the entire process could be slowed down even more if there is a constitutional challenge to the law.

Some observers argued the state constitution should have been amended to allow for Internet gambling. However, a state constitutional scholar told lawmakers prior to the legislation's passage that because Internet wagers would be taken by a server machine based in an Atlantic City casino, that conforms with existing constitutional provisions limiting gambling to only the city.

Chad Beynon, an analyst for Macquarie Capital, estimates Internet gambling will not begin until mid or late 2014. He noted that amount of time will be needed for casinos to set up the "online felt technology."



Source: (c)2013 The Press of Atlantic City (Pleasantville, N.J.) Distributed by MCT Information Services


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