6 Predictions For New Jersey’s Regulated Online Poker Market

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With only one full week of operation, the story of regulated online poker and gambling in New Jersey is far from written.

The market will continue to evolve, likely in ways that will surprise observers. But, even at this early stage of the game, some trends are apparent.

Based on those trends and the larger context surrounding NJ’s foray into iGaming, here are six predictions for the short-term future of New Jersey’s regulated online poker and casino industry.

1. Geolocation will improve before deposits

New Jersey’s regulated online gambling market is facing two core challenges right now: correctly identifying the location of players and accepting deposits from those players.

Both will get better with time. But geolocation will likely experience greater improvement in the near-term.

That’s because the relatively poor performance of geolocation technology is partially by design. Regulators and operators are both terrified of a scenario where an out-of-state player circumvents the legal requirement for players to be located within New Jersey’s borders.

As a result, they’re acting out of an abundance of caution, calibrating systems to err heavily on the side of keeping players out. For example, PartyPoker is reportedly blocking all players who register with an out-of-state address, regardless of where they’re logging in from.

That caution will subside as the system in place gain the trust of regulators and operators, and with it false positives that are keeping players legitimately located in New Jersey from accessing regulated sites.

But deposit failures are largely out of the control of sites and state officials, driven instead by commercial forces that will be slower to react.

2. New Jersey will outperform Nevada

This has already happened in absolute terms, but here I’m speaking in per capita terms.

It won’t be too long before New Jersey has more poker traffic relative to population than Nevada. NJ is roughly three times the size of NV, and is already boasting about two times the poker traffic.

New Jersey’s advantages over Nevada are numerous and definitive:

  • NJ offers casino games and poker, while NV offers only poker.
  • NJ has a larger in-state population of gamblers and access to a much larger population straddling the state borders.
  • And NJ has over a dozen unique brands online, while NV is still wholly comprised of just two sites.

I’d imagine Nevada’s lead won’t last the year.

3. A significant number of people will travel to NJ to play online

We recently conducted a survey of people located in Pennsylvania and asked them the question:

If a state close to you offered legal, regulated online gambling, would you travel to that state to gamble online?

Roughly 20% of respondents answered “yes” or “possibly” to the question.

The amount of population situated near the borders of New Jersey is such that even a small participation rate would result in a substantial influx of out-of-state players. PA alone has over three million residents under an hour from the New Jersey border, to say nothing of New York.

This traffic will come. The only question is how welcoming New Jersey’s online poker rooms and casinos will be.

4. Revenue for first fiscal year will not come close to official predictions

New Jersey Gov. Chris Christie is still clinging to his initial revenue predictions for online gambling.

I wrote at length a few months ago as to why those predictions were, to put it kindly, loony tunes.

Everything I wrote then is still true today. The likely tax windfall for New Jersey in the first fiscal year (which ends in June of 2014) from online gambling is much closer to $30mm than the $180mm figure Christie plunked into his budget.

5. NJ online poker will have clear winners and losers

This fact seems already apparent after only a week of data. WSOP.com and PartyPoker are clearly outpacing rival rooms Ultimate Poker and 888’s All-American Poker Network.

Traffic numbers from PokerScout.com on December 4th, 2013, show WSOP and PartyPoker with a combined peak traffic of 320 players, while the combined traffic of UP and AAPN sits around 50 players.

The situation in New Jersey is obviously fluid. And there are still several rooms on the sidelines that could change the dynamic in New Jersey – especially PokerStars’ pending partnership with Resorts.

But, as the rest of the world has learned from PokerStars, having the lead in an online poker market tends to beget a larger lead. More players equals more games, larger prize pools and the ability to launch wide-reaching, big-ticket promotions.

6. No interstate compacts for NJ in 2014

With online poker now live in New Jersey, Nevada and Delaware, the attention of many players has already turned to how those states might pool players to increase liquidity.

There are obvious advantages to interstate compacts. And the operator overlap – 888 is active in all three markets, while companies like Caesars and Ultimate are active in both Nevada and New Jersey – will definitely provide support and momentum for compacts.

But the fact of the matter is that compacts are a complex affair. As David Rebuck, head of the New Jersey Division of Gaming Enforcement, put it in a recent interview with OPR: “It’s not as easy as just flipping the switch and saying you’re going to have an agreement […] you’re going to have to sit down with the executives from each of those states and come to a negotiated agreement on how to embark.”

And while compacts are a priority for players – and, to a lesser degree, for operators – regulators have a long list of other issues demanding their attention, a point echoed by Nevada’s A.G. Burnett. Whether it’s geo-location, software testing, fraud detection or problem gambling protections, there are literally dozens of aspects of regulated online gambling that regulators are going to want on firmer ground before they’re willing to spend time and resources exploring interstate compacts.

- 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.
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