Happy sixth anniversary, NJ online gambling!

Six Lessons From Six Successful Years Of Online Gambling In New Jersey

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Just over six years ago, New Jersey made history. Last Thursday, Nov. 21, marked the sixth anniversary of the synchronized launch of legal online gambling in New Jersey.

The Garden State was the first to legalize real-money online casino gaming in 2013, though it was beaten to the punch in poker. The first legal hands of online poker in the country were dealt in Nevada earlier the same year.

The success of NJ online gambling has since spurred other states to follow suit. Pennsylvania is the most notable name on that shortlist, having gone live just this year. Plenty of others are at various stages along the path, however.

To commemorate the sixth anniversary of legal online gambling, here are six lessons other states can learn from New Jersey.

#1: The technology is reliable

One of the biggest fears raised around online gambling concerns the reliability of the technology. It’s a natural worry, given the amount of money potentially changing hands.

It’s also largely unjustified in 2019.

Online gambling technology has progressed a lot since the unharnessed days of the early 2000s, before the UIGEA and Black Friday. Even prior to launch in New Jersey, one could see evidence of progress in Europe’s regulated markets.

One concern unique to the US has to do with geolocation. It’s of paramount importance that players can only place bets from within state lines, and the solutions provided by companies like GeoComply are remarkably robust.

In six years, there have been just two fines by the New Jersey Division of Gaming Enforcement (NJDGE) for sites allowing out-of-state customers to play. In both cases, the gamblers were technologically savvy and intentionally attempting to circumvent the geolocation.

The two detected attempts represent exceptions that prove the rule: the technology is working as intended.

#2: Revenue is significant, and growing

If there was ever any doubt that Americans have an appetite for online gambling, New Jersey’s results have put that to rest.

Soon after launch, NJ online casinos and poker sites were generating over $10 million in combined revenue per month. That had doubled by mid-2017 — and nearly tripled by the end of 2018.

This year has been especially explosive, with combined casino and poker revenues cracking $40 million in August and $45 million in October. Last month, Golden Nugget became the first casino in the state to see its online revenue exceed that of its land-based operation.

That doesn’t even include revenue from NJ online sportsbooks, which debuted last year. Revenue for those operators more than tripled in the first year, rising to rival online casinos in October.

It’s not just the operators profiting, either.

Across all verticals, online gambling should soon generate over $10 million in monthly tax revenue for the state of New Jersey. That’s surely something other states considering online gambling legislation should be keeping an eye on.

#3: Online gambling hasn’t killed casinos

One of the most common objections to online gambling comes from the land-based casino industry.

Some executives routinely put forward the notion that legal online gambling will pull players away from their brick-and-mortar tables, costing the state jobs and tax dollars.

There was never much substantive justification for this claim, and the results in New Jersey show it.

Land-based casino revenue has increased every year from 2015 to 2018, albeit at a slower rate than online. This year, too, is on pace for an 8% increase in casino revenue.

Online casinos don’t even appear to be slowing growth. Casino revenue has grown in the low single-digit percentages annually nationwide — most of that in states without legal online gambling. If anything, NJ casinos are outpacing the national average.

#4: Players prefer a well-regulated environment

It’s conventional wisdom that people who want to gamble will find a way to do so, legal or not. Given a legal option, however, players do tend to prefer that.

In 2017, for example, the only legal way to bet on sports in the US was in person in Nevada. That year, an estimated 97% of bets made on the Super Bowl by US bettors were placed illegally.

The UK, which conversely has a liberal approach to gambling — both online and off — estimates that 95% of its citizens’ gambling activity is carried out legally.

In a recent study of Australian online gamblers, researchers asked what disadvantages they found in online versus land-based gambling. Of those who did their online gambling legally, 24% said they didn’t see any disadvantage (compared to just 15% of those gambling on illegal sites).

Meanwhile, 22% of illegal gamblers said they were less confident about game fairness when playing online than live. Only 8% of those betting legally expressed the same concern.

We don’t have access to revenue numbers for illegal casinos, of course, since they don’t pay taxes. In terms of online poker traffic, however, legal states — which represent around 7.5% of the country’s population — account for about a quarter of all cash gameplay in the US.

It’s becoming more and more apparent that the best way to stamp out illegal gambling is to provide a legal alternative. Indeed, some offshore sites illegally serving US customers have now stopped serving New Jersey residents altogether.

#5: Online gambling fosters innovation

One of the advantages of online gambling is that it allows operators to experiment with types of games that would be impractical or impossible in a physical environment.

In online poker, for instance, two of the greatest successes of the online era have been fast-fold cash games and lottery-style sit-and-goes (LSNGs). Of these, only LSNGs are currently available in New Jersey. Fast-fold poker was tried and failed there, as it simply requires a larger amount of traffic to work.

PokerStars says that it plans to launch its Zoom format on its new online poker site in Pennsylvania, where traffic is heavier, soon.

Also, live dealer products are currently provided in the US by Evolution Gaming. Some of these take traditional casino games and add augmented reality (AR) features to create an experience beyond what would be possible in a live environment. AR gambling isn’t yet available in the US market, but it’s probably on the way.

Sports betting technology has benefited from going online, too. In-play betting, early payouts and electronic funding are some of the innovations online play makes tenable.

#6: The political climate is right

Hostility toward online gambling at the federal level has been one of the biggest challenges for the US market. Although antagonism remains the stance of the Department of Justice (DOJ), it seems to be losing support.

In part, that’s due to a trend towards libertarianism on the right and liberalism on the left. More importantly, though, the highest levels of the judicial system seem inclined to rule in favor of the devolution of powers to states.

New Jersey led the charge on sports betting, and its efforts eventually resulted in the US Supreme Court striking down the federal ban known as PASPA. That ruling opened the door for states to begin making their own decisions, and nearly 20 of them have since legalized some form of sports betting — either retail or online.

The DOJ next tried issuing an opinion on the Wire Act, working to expand its 1961 forbiddance on interstate sports betting to other forms of gambling. Here too, however, the courts ruled against the DOJ.

In that case, it was New Hampshire fighting the battle rather than New Jersey. Both examples, however, should serve to reassure states that the judiciary will likely take their side if the DOJ attempts to interfere with regulated gambling.

Who will follow New Jersey’s lead?

The success of online gambling in New Jersey is undeniable. Yet it’s still one of only three states where all three online verticals are available: casino, sports and poker. The others are Delaware and, most recently, Pennsylvania.

West Virginia also passed online casino legislation in 2019, but the first sites won’t launch until next year at the very earliest. Numerous other states are considering it, though, and some quite large ones — Illinois, Michigan and Massachusetts.

Hopefully, this six-year anniversary will serve as an occasion for state lawmakers across the US to reflect on its successes and what legal online gambling could mean for their states.

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- Alex is a journalist from Dartmouth, Nova Scotia, Canada. Now site runner for Online Poker Report, he has been writing about poker and the online gambling industry in various capacities since 2014.
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