Posted 3/4/11 : Jobs and tax revenues could have flowed from internet gambling legalization
New Jersey Governor Chris Christie's absolute veto of Senator Ray Lesniak's bill seeking to legalise intrastate online gambling Thursday may have denied the state not only the tax revenues, jobs and new enterprises that accrue to a first mover, but the historic recognition of initiating the tipping point for strictly regulated internet gambling in US states.
The disappointment in the industry as news of Christie's negative conclusions emerged was almost palpable, with online media alive with comment and opinions on the way forward. In the wider gambling industry the disappointment was more qualified, with both Caesar's Entertainment and the Poker Players Alliance reiterating their view that a federal, rather than state-by-state, solution was preferable.
In New Jersey, March 3rd was a day of delayed press conferences and releases, hope, uncertainty, and finally disappointment and even anger.
With only hours to go to the deadline for his decision after over 45 days of consideration, the governor postponed a press conference scheduled for 11am, following up with an afternoon press release clarifying that his veto was not a ‘conditional' ruling, which would have enabled the Legislature to ‘tweak' the bill to compliance within a set timeframe, but the more stringent ‘absolute' veto, which requires a two thirds majority Legislative vote to overturn.
In his statement, Governor Christie noted that casino gaming is a vital component of the New Jersey economy and one of its most important industries, generating billions in revenues and providing tens of thousands of jobs.
"Since the earliest days of my Administration, I have stressed the urgent need to address the critical issues surrounding the casino industry in order to reinvigorate this sector of our economy and ensure its long-term sustainability," the governor wrote. "In partnership with the Legislature, we have achieved meaningful reforms that provide the impetus for new investment and increased tourism that will lead Atlantic City to recapturing its status as the premier resort destination in our region of the nation.”
He went on to acknowledge the good intentions of the Lesniak bill, but raised concerns regarding legal and constitutional issues, along with compatibility with his administration's strategies and policies.
He also implied the need to protect the land gambling business of Atlantic City, pointing out the dangers of other entertainment establishments throughout the state becoming gambling hubs via the internet in what he referred to as "creating the legal fiction" that an online bet placed anywhere in the state could be regarded as an Atlantic City bet.
The governor observed that existing legalization did not allow gambling, on the Internet or otherwise, outside of Atlantic City, and that the state constitution required that any expansion of gambling in New Jersey beyond Atlantic City would necessitate a referendum vote by New Jersey residents before acceptance.
"The State Constitution explicitly requires casino gambling to be restricted to the territorial limits of Atlantic City," Christie wrote. "Senate Bill No. 490 seeks to avoid this requirement by deeming all Internet wagers as being placed in Atlantic City, even if the person placing the bet is outside the boundaries of the city. In my view, the creation of a legal fiction deeming all wagers to have ‘originated' in Atlantic City cannot overcome the clear and unambiguous language of the State Constitution."
“If the Legislature believes that expanding gambling outside of Atlantic City is in the best interests of the State of New Jersey, it should place the question on the ballot for the voters to decide,” the governor observed.
The legislature already has approved another referendum for the November ballot asking voters whether they want to amend New Jersey's constitution by legalising sports betting in the state. Even if voters say yes to that question, a federal ban on sports betting in all but four states would have to be repealed or overturned.
"I do not believe that Internet gambling as contemplated in S-490 is a viable option for continuing the progress that we have made so far in reversing the fortunes of the casino industry in New Jersey,” Governor Christie concluded.
One organisation apparently satisfied with the governor's decision was the trade group representing land casino operators, the Casino Association of New Jersey, which opined that any legalization of internet gambling should be the subject of a referendum among New Jersey residents.
There are conflicting research studies indicating both support and a lack thereof for the concept of internet gambling in the state.
"The right way to get this bill done to avoid costly and time-consuming legal wrangling is through a referendum placed before voters on this November's ballot, and we are committed to working with the governor and our legislative leadership to make that happen," Bob Griffin, the association president, said in a statement.
Griffin did, however, recognise the attraction of internet gambling, noting: "Currently, millions of Americans engage in online gaming with illegal offshore operators, and do so with no oversight, no regulation or no consumer protections.
“It makes sense for the state of New Jersey to regulate this activity, enforce strict standards to ensure games are fair and safe, and in turn be able to collect tax revenue instead of having those dollars and the jobs they support leaving New Jersey and going illegally overseas."
A state lobbyist hired by the pro-online gambling group iMEGA told local media that if a referendum was decided, the organisation would participate.
iMEGA has produced statistics predicting that legalised gambling in New Jersey could create between $210 million and $250 million in new revenues for Atlantic City casinos during its first full year of operation, and create 1,586 to 1,903 jobs and $47 million to $55 million in New Jersey tax revenue.
The author and prime mover of the legalization proposal, Senator Ray Lesniak, issued a statement emphasising the need for quick action in reconsidering the bill, which enjoyed overwhelming support at all levels in its passage through the Legislature, and getting it back on the governor's desk.
"We need to work as quickly as possible to bring this bill back to the Governor's desk and position Atlantic City to become the Silicon Valley of the high-tech gaming sector," he wrote. "While the governor expressed concern with some aspects of the bill today, he's committed to the general idea that we have to expand gaming product in order to bring our gaming industry back from the brink of fiscal insolvency.
"I'm encouraged that he's expressed an interest to work together to maintain the core idea behind Internet wagering while making sure that such operations cannot be hijacked by unscrupulous operators.”
However, procedural experts opined to reporters that a referendum will entail redrafting the bill and submitting it to both the state Assembly and Senate with a specific request that it be included in a referendum later this year.
Deputy Assembly Speaker John Burzichelli, a south Jersey Democrat, told Associated Press that he would work to perfect legalization for online gambling.
"I understand this is a complicated issue that raises many legal questions," he said. "Still, the reality is that Internet gaming is coming and we need to figure out a way to make it work to benefit Atlantic City casinos."
New Jersey would have taxed Internet betting revenue at 23 percent, nearly three times the rate the land casinos pay on winnings.
Assemblyman John Amodeo, an Atlantic County Republican, said: "Internet wagering can create construction, and permanent high-paying technological jobs that are needed in Atlantic City, but we must be certain that it does not hurt casino revenues."