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Hartley Henderson
New Jersey Legislature Approves Online Gambling Bill

By Hartley Henderson - Exclusive to OSGA
Jan 14, 2011, 14:01

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A bill to legalize online gambling in New Jersey easily passed the state legislature on Tuesday and now will be put on the desk of Governor Christie to sign into law. The bill which has been in the works for 18 months will allow New Jersey casinos to offer online gambling with proceeds going to the casinos, the racetracks and of course the State.  William J. Pascrell III, a partner at the Princeton Public Affairs Group (PPAG) was instrumental in getting the ball rolling on the bill and was emphatic as to the benefits that online gambling will have for the state.

"The bill is good for the State, it’s good for jobs and it’s good for revenue," Pascrell said. Pascrell added that online gambling is expected to create over 1,500 jobs in New Jersey and over $300 million per year in revenue.

The bill passed the Senate by a vote of 35-2 with 3 abstaining and the Assembly by a vote of 63-11 with 6 absent. There was support for the bill from both Republicans and Democrats so there is an overwhelming mandate for Governor Christie to sign it into law. Asked if he thought Christie may be wary of signing the bill, Pascrell was adamant that the Governor is in full support and will cede to the wishes of the people.

The only real opposition to the bill was from Harrah’s, but Pascrell claimed that they had their chance and missed out.

“Harrah’s wanted a federal law passed and they failed. They tried to convince us that it would be passed in the summer and it wasn’t, they tried to convince us it would pass before the midterm elections and it wasn’t. And they tried to convince us it would pass in the lame duck session but Harry Reid failed. Harrah’s has been selfishly opposing our bill and Governor Christie sees through it.”

Pascrell had no hard feelings for Harrah’s since they were looking out for their own interests as a company based in Nevada but he also acknowledged that with a Republican majority in the House, it is very unlikely that a federal bill could be passed prior to the 2012 elections. Moreover, Barney Frank’s bill HR2267 has been hanging around for quite a while now and has really never garnered much support outside of the few initial co-sponsors. The gambling community may be hyping HR2267 as a sure thing, but the truth is that it is a far way off from being adopted.  As well, with New Jersey currently challenging the legality of PASPA, the clause that bans sports betting in HR2267 could prove troublesome to the state later should HR2267 pass and New Jersey win their challenge of PASPA. Consequently, Pascrell believes New Jersey must move forward to protect its own interests and this bill does just that. As for Harrah’s, since they run casinos in Atlantic City, the New Jersey bill will prove to be a benefit to them as well.

The New Jersey bill also provides an opportunity for offshore companies to get a foothold in the U.S. The bill as written requires a New Jersey land based operation to be in charge of the online product, but offshore companies such as Cryptologic, Betfair or Party Gaming will be allowed to get involved in the gaming so long as they partner with a brick and mortar casino. And since Pascrell believes it’s unlikely that Trump or Boyd Gaming are ready to set up online sites, nor have the capital to do so, it would be in their best interests to partner with companies that already have the software developed and perfected. It’s uncertain if New Jersey will have a clause similar to California barring companies that were catering to the U.S. after the passage of the UIGEA, but Pascrell believes it is unlikely.

“New Jersey’s regulatory framework for probate has not been promulgated yet.  Rules and regs will be written and published soon after the legislation becomes law.  There is absolutely no prohibition for off shore sites to get licensed.  If they pass probate, they will get licensed.”

The rules and regulations will have stipulations that mandate the use of verification software to ensure all people who bet online are located in New Jersey and are at least 21 years of age, plus there will be rules relating to problem gambling.

As mentioned previously, this bill is not linked to New Jersey’s attempt to overturn PASPA, but the 2 bills are inter-related because sports betting will almost certainly become a part of the new online gambling framework if the state is successful in their challenge. Earlier this year New Jersey’s legislature voted over 60% to challenge PASPA which will in turn result in a November ballot question asking if residents support sports betting. And if the majority do vote in favour (both PPAG and iMEGA are preparing to convince the public of its benefits) then New Jersey will move forward with their challenge that it violates numerous chapters of the Constitution. Pascrell isn’t concerned that it violates the UIGEA or the Wire Act because the betting would be confined to the State and intrastate betting is excluded under both laws.

Senator Raymond Lesniak, who has been the point person for the state on the issue, was very pleased with the vote.

"This precedent setting legislation will give a shot in the arm to our ailing casino industry, producing in excess of $300 mil in after tax revenues and will create over 1,500 high paying jobs in an area, Atlantic City, which has lost thousands.  I thank Joe Brennan Jr. and Bill Pascrell, III for fighting alongside me all the way to the finish line."

Joe Brennan Jr., the President of iMEGA added:

“We were certain NJ was going to embrace this bill. The focus was on creating a good home for the industry in the US, one that had the infrastructure, workforce and gaming regulators that combine to make the best ecosystem for i-gaming firms. The AC casinos provide an excellent foundation and potential partners. The state will see this become an engine for job creation and investment. It's a win-win."

The passage of the bill in New Jersey will prove to be a victory, not only for New Jersey but for all states. Gambling has always been a state issue but for some reason the Federal government decided to stick their nose in where it doesn’t belong; first with PASPA and then with the UIGEA. The passage of the UIGEA, which of course was only possible by attaching it to the unrelated Safe Port bill, attempted to block online gambling and handcuff the states and the New Jersey bill is an important first step in giving states back their 10th amendment rights. One must remember that New Jersey had examined online gambling as an option prior to 2006 and the UIGEA was a slap in the face since it was passed without consulting New Jersey or other states first. California, Rhode Island and Missouri have passed measures to examine online gambling as a revenue source and no doubt other states struggling for revenue are waiting in the wings to see how the New Jersey initiative pans out.

Americans enjoy gambling online and the UIGEA has done little to curtail the activity. But instead of the money staying within the state, the betting is done offshore.  It’s only right, therefore, that the states should be able to benefit from an activity that their citizens perform every day. New Jersey must be commended for having the fortitude to do what was best for the state and its residents.

Read insights from Hartley Henderson every week here at OSGA!

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