What Happens to Online Gambling in NJ if RAWA Passes?

Posted on February 5, 2015 - Last Updated on May 16, 2015

On Wednesday Representative Jason Chaffetz (R-UT) reintroduced the Restoration of America’s Wire Act into the U.S. House of Representatives. Senator Lindsey Graham (R-SC) said he will introduce a similar bill in the U.S. Senate this year as well.

Chaffetz and Graham first introduced RAWA into Congress in March of 2014, which many people believe was done at the behest of Sheldon Adelson, who is widely believed to be the driving force behind RAWA.

The 2015 version of RAWA is identical to the 2014 version, which means if passed most forms of online gambling would become illegal in the United States, including the currently legal online gambling offerings in New Jersey, which is why the Garden State has more skin in this game than virtually any other state.

Impact on New Jersey

Theoretically, if RAWA is passed, everything New Jersey has done in the online gambling sphere would have to be rolled back. Considering the amount of time and energy the state has invested in the industry, along with the amount of money the operators have invested, this is an outcome New Jersey simply cannot afford.

Even though the revenue generated by New Jersey’s online operators in 2014 was underwhelming, $122 million is still a significant chunk of money, particularly for some of the struggling properties on the Atlantic City Boardwalk.

Of the four online operators, online gaming represented  5.5% of their total gross revenue Рa not insignificant amount. For some it would be worse than others. Here are the numbers broken down by operator as reported by the New Jersey Division of Gaming Enforcement.

Casino 2014 Total Revenue 2014 Online Revenue % of take
Bally’s/Harrah’s/Caesar’s $920.7 Million $32.8 Million 3.5%
Borgata $643 Million $44.3 Million 6.9%
Tropicana $274.6 Million $22.6 Million 8.2%
Golden Nugget $171.9 Million $10.8 Million 6.3%

 

But this is only part of the puzzle, as taking away online gambling would hurt these casinos in two ways. Not only would they lose the online revenue, but these companies have invested a lot of money into their online products (money that could have been spent elsewhere), and this is an investment that RAWA would simply snatch away from them, further hurting what are already struggling businesses.

If RAWA passes it will be challenged

If RAWA were to become law New Jersey’s online gambling industry wouldn’t close down overnight.

The state would certainly file suit and challenge the new law, in much the same way a number of states challenged the Affordable Care Act.

New Jersey wouldn’t be alone in this fight either. Nevada and Delaware also have legal online gambling, and states such as California and Pennsylvania are seriously exploring online gaming expansion. Rawa would force these states to roll back their iGaming laws and/or prevent them from enacting online expansion laws.

Additionally, depending on the final language of the bill, RAWA may also come under fire from several other states that have expanded into online lottery sales. As currently written RAWA only exempts “in-person, computer generated retail lottery sales.”

Presently, Minnesota, Michigan, Illinois, and Georgia offer online lottery sales, and a number of other interests have expressed interest in online lottery. Without an exemption for online lottery RAWA will face quite a bit of opposition.

However, there are several possible solutions to this problem for RAWA advocates:

  1. Exempting online lottery sales from the prohibition.
  2. Grandfathering in certain states in much the same way the 1992 Professional and Amateur Sports Protection Act (PASPA), which prohibited states from legalizing sports betting, did for Nevada and several other states.
  3. Adding a poker carveout to placate states such as Nevada and California.

These changes would not make RAWA amenable to pro-online gambling crowd, but they could help diffuse some of the blowback Congress would receive if they were to pass such a law. RAWA would still be challenged in court, and even if these challenges were to fail it’s likely state’s would continue to challenge the law in much the same way New Jersey is currently challenging PASPA.

Final thought

RAWA is unlikely to pass, but even if the bill does manage to make it through Congress and avoid the veto pen of President Obama it would still have to hold up in court, and considering the bill’s trampling of state’s rights, and gambling laws historically occurring at the state level, there is a better than decent chance that a court finds the law unconstitutional.

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Steve Ruddock

Steve covers nearly every angle of online poker in his job as a full-time freelance poker writer. His primary focus is the developing legal and legislative picture for regulated US online poker and gambling.

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