Online Poker Report

Christie Conditionally Vetoes Online Gambling Bill

This article may be outdated. Get the latest news on New Jersey here.

New Jersey Gov. Chris Christie has signed a conditional veto of the bill that would bring online gambling to the state.

Official word first via Press of Atlantic City. Gov Christie took to Twitter for the announcement:

 

Read the full statement from Christie here.

This development is generally good news for people who want to see more regulated online gambling in the United States, but several questions still remain.

Christie vetoed – isn’t that bad for online poker?

Christie signed a conditional veto, not a pure veto. Going into today, a conditional veto was seen as the second-best outcome for proponents of regulated online poker in the U.S..

What is a conditional veto? What happens next?

With a conditional veto, Christie (in very simple terms) says “I like some of the bill, but I would like some changes.” Christie now sends the bill back to the legislature with his changes and the Assembly & Senate vote again on the revised version. The bill then returns to Christie’s desk.

For reference, here’s the bill as it currently stands, and here’s a copy of the changes required by the conditional veto.

How long will that take?

While early reports indicated a March 18th return to the Governor’s desk, New Jersey lawmakers are now predicting an even faster timetable. Via Press of Atlantic City:

The Senate is not scheduled to meet until March but because lawmakers want to move on the Internet gambling bill, they are pressing for the earlier Feb. 26 vote when they will be gathering already to hear the governor speak, Sen. Raymond Lesniak, D-Union, said.

Christie has a 45 day window to sign the bill once it lands back on his desk.

Why February 26th? Why not just right away?

Legislative process.

Could Christie refuse to sign the bill when it gets back to him?

As far as I can tell, technically yes – he could refuse to sign. But it seems highly, highly unlikely given Christie’s public statement on the issue, the language of his conditional veto and the substantial political backlash he’d risk for little apparent gain.

How does this impact PokerStars’ purchase of the Atlantic Club Casino?

Today’s news seems entirely positive for PokerStars. While they still have to pass muster with state gaming regulators, nothing about Christie’s proposed changes to the bill appears to interfere with Stars’ planned purchase of the ACC.

PokerFuse has a reaction to the news from PokerStars:

In a statement issued to pokerfuse, the online poker industry leader stated it was “hopeful” that the state would “… work quickly to finalize the legislation in accordance with the important revisions and additions to this bill set out in the Governor’s statement.”

How long before I can play regulated online poker in New Jersey?

Today is a big win for proponents of regulated online gambling in the United States, but it remains only one step on a lengthy and complicated path. Nevada has seen proposed launch dates for real-money online poker come and go since passing their online poker bill into law back in June of 2011.

But unlike New Jersey, Nevada never thought of online gambling as a way to stop the ship from sinking. The economic pressures facing New Jersey in general – and Atlantic City in particular – along with the potential momentum a PokerStars-owned casino could generate both suggest that New Jersey will adopt a brisker pace for rolling out online gambling than Nevada has to date.

In terms of a hard timeline: at least a month to get the bill back to Christie and then multiple months – a year does not seem out of the question – for the development, proposal and adoption of regulations by DGE. I believe the bill itself mandates a 3 month waiting period before the DGE can even begin to issue licenses. Licensing, however, will likely proceed on a parallel track – it’s the regulation process that could potentially run up the clock.

But at least one lobbyist believes otherwise. Via NJBiz.com:

Top advocates of the plan already are looking toward the next steps in New Jersey. Bill Pascrell III, a lobbyist with Princeton Public Affairs Group, said the state could also be ready to take bets online as soon as September, noting that gaming regulators have been working on guidelines long before Thursday’s decision.

There’s also the chance that poker could take somewhat of a backseat to games like blackjack that are lower-hanging fruit for regulators, not to mention higher-margin for casinos.

Anyhow, bottom line: 2013 seems highly unlikely for poker. 2014 seems reasonable given NJ’s unique situation.

I heard that Christie’s changes might make it tougher to offer online poker. True / False?

I’m going with “technically true.” This was first mentioned on TwoPlusTwo and then succinctly articulated by Brad Polizzano over at Taxdood.com:

The language proposed in the original bill says the Division of Gaming Enforcement may approve for internet gaming any games only already authorized to be played at New Jersey casinos. Since poker is authorized for play in NJ casinos, then the division may approve it for internet gaming.

The Governor’s proposed language takes a different approach. Instead, he wants the Division of Gaming Enforcement to decide pursuant to promulgated regulations the games that are suitable for internet gaming.

Some – including Polizzano – have speculated that the DGE might take employ a more cautious approach to multi-player games like poker (as opposed to player vs house games like roulette) due to unique issues like collusion. The argument they make is very reasonable.

I think poker will be a central part of the online gambling New Jersey offers – especially if PokerStars receives their now-widely-anticipated approval from NJ regulators – but there’s no denying that Christie’s changes do erect a roadblock that didn’t exist before.

What did the markets think of Christie’s decision?

Wild with joy would be an understatement, I think. Double-digit gains for Party, Caesars, Boyd and 888.

What impact will this have on regulation in other states?

Christie’s decision has already sparked a dramatic response from Nevada. Gov Sandoval reacted by characterizing the footrace between Nevada and New Jersey as a “critical” one, and called for a fast-tracking of the most recent revisions to Nevada’s online gaming laws, saying “In light of the developments in New Jersey yesterday, the need to act quickly has become even more important.”

My general sense, shared by most (but not all), is that Christie’s decision will effectively accelerate the pace of regulation, an acceleration that – with the right conditions – could cascade across a majority of states.

Nolan Dalla wrote a good piece that sums up some likely trajectories for a post-New Jersey-regulation online gambling industry in the United States.

What does Christie want changed?

Here’s a copy of the conditional veto.

Short answer

Early analysis suggests the changes are comparatively minor. The primary changes identified so far:

  • Taxes at 15%, not 10%
  • License fees roughly double
  • NJ Division of Gaming Enforcement takes the reigns of online gambling
  • Online gambling regulation “sunsets” (expires) after 10 years (though nothing prohibits the legislature from renewing)
  • More funding for problem gambling initiatives, including an annual report wrt the impact of online gambling on problem gambling.

General reactions from Twitter:

 

 

Longer answer

Digging into the requested revisions reveals some potentially interesting tidbits. I also suggest the summary over at DuaneMorris.com and the writeup from Brad Polizzano at Taxdood.com.

Excerpts identifying a few of the more significant revisions (in order of their appearance), followed by my (quick and dirty) translations:

Page 4, Line 40: Insert “2. Section 5 of P.L.1977, c.110 (C.5:12-5) is amended to read as follows:

As far as I can tell, the additional language this change adds – “”Authorized game” or “Authorized gambling game” shall also include any game that the division may determine by regulation to be suitable for use for wagering through the Internet.” – gives additional flexibility to state regulators in terms of approving new games / variants.

Page 5, Section 6, Lines 46-47: Delete in their entirety Page 6, Section 6, Lines 1-2: Delete in their entirety

This revision removes language that prohibited casinos from counting “cash equivalent value of any merchandise or thing of value included in a jackpot or payout” against revenue for the purposes of determining gross (read: taxable) revenue.

Page 6, Line 14:Insert new sections 7 through 11 as follows:

Adds “games played upon and wagered through the Internet” to the purview of the Division of Gaming Enforcement. Requires an annual report “on the impact of Internet gaming on problem gamblers and gambling addiction in New Jersey.”

Also requires periodic (and public) reporting by licensees regarding “The identity and nature of services provided by any person or firm receiving payment in any form whatsoever for professional services in connection with the authorization or conduct of games conducted via the Internet.”

Licencees will have to submit quarterly reports to DGE that detail basically anyone they make a payment to in connection with offering online gambling.

Page 7, Section 8, Lines 22-44: Delete in their entirety

The deleted language relieved certain service providers from needing a casino service industry license.

Page 14, Section 9, Line 34: After “Atlantic City”
insert “,provided no Internet gaming shall occur unless a wager is accepted by a casino within the territorial limits of Atlantic City, New Jersey”

Seems to just tighten equipment location requirements / close up a potential loophole.

Page 21, Section 13, Line 33: Delete “10%” and insert “15%”

Tax rate goes up.

Page 32, Section 33, Line 47: Delete “an interstate compact” and insert “a reciprocal agreement”

Not entirely clear on the impetus for / meaning of this, but it alters a critical section of the bill that paves the way for shared player pools between states. Some thoughts from various sources:

 

 

 

 

Page 41, Section 40, Lines 32-47: Delete in their entirety and insert

Essentially updates regulations to prohibit state employees, officers and the like from participating in the industry.

Page 42, Section 41, Line 13: After “this bill).” Insert …

Law expires 10 years after passage.

Who initially broke / confirmed this news?

I first heard from Chris Porter of Golden Gaming on Twitter:

 

… and then confirmation from another person with an inside track to negotiations in New Jersey:

 

And then by DiamondFlush:

 

… and the PPA:

 

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Chris Grove
- Chris is the publisher of OnlinePokerReport.com. Grove also serves as a consultant to various stakeholders in the regulated market for online gambling in the United States.