A Garden State debate has been reignited. The Showboat Casino‘s request to subdivide its property, and its more recent approval, has revived discussions on whether New Jersey should limit the number of Atlantic City casinos.
The subdivision request is how Showboat owner Bart Blatstein intends to work around deed restrictions that transferred with the sale of the property that prevents casino operations.
Assemblyman Ralph Caputo is a vocal opponent to the idea of adding another AC casino. He told the Associated Press, “That’s just a bad idea.”
Is it a bad idea, though?
The restriction has plenty of support, but consider these drawbacks to limiting AC’s casinos:
- Doing so would hurt the market.
- Consumers would be inconvenienced.
- Less-than-deserving companies would potentially be rewarded.
Jim Johnson, who is part of Gov. Phil Murphy’s team to evaluate the state’s management of Atlantic City, is also a proponent of capping casino licenses. He recently expressed “a very serious concern” for the strength of the Atlantic City casino industry.
When looking at casino growth in the region, Johnson told the Press of Atlantic City, “The trend lines suggest things are going to be down.”
“The Atlantic City casino industry is vulnerable to challenges from within, and competition from outside the state. The data is really stark.”
Atlantic City casinos already have the regulations it needs
The American economic system is based on a free market. And the market determines its products, prices, and services…not the government.
The Division of Gaming Enforcement (DGE) and the Casino Control Commission are responsible for licensing and regulating gambling activities to ensure compliance with the state’s laws.
Historically, the Atlantic City casino industry has been a relatively open market. It’s regulated, but that doesn’t mean it isn’t a free market.
Some government regulation is needed, especially when it comes to gambling. However, it doesn’t need the type of management that stifles growth. The industry instead needs the kind of regulations it already has; laws that keep people safe and allow for competition.
Free markets work partially through supply and demand. This determines the price of goods and services and how many companies produce them.
The bottom line: When customers want something, they will pay for it. If there aren’t enough companies to supply it, the price will goes up.
When the price increases, profits are high and fewer people can afford it. Eventually, more companies enter the market to bring the price down to a more affordable level.
When many companies are competing for customers, they offer lower prices and specials. The competition, in return, is good for customers.
But there are other benefits to a free market aside from affordability.
Benefits of a free and open NJ casino market
Regulations restricting companies from entering the market can lead to a black market.
We’ve seen this with sports betting pre-PASPA, and in states that have yet to legalize sports betting. We have also seen it with an online poker following 2011’s Black Friday indictment.
The problem with a black market is the lack of regulation. Illegal gambling sites may not offer the same quality, guarantees, or recourse to gamblers if something goes wrong.
On the other hand, if too many companies enter the market, then prices become too low and some companies could go out of business.
It is the threat of casinos closing their doors that are of great concern for state officials.
In a free market, the market comes to equilibrium with the right number of companies for the right number of customers.
Legislating that number limits growth, innovation, competition, and consolidation.
What about AC casino industry saturation?
The fear of placing no limits on Atlantic City casinos is that too much competition will force the closure of casinos that can’t keep up.
During the first two quarters of 2019, Atlantic City casinos- excluding Hard Rock or Ocean Resort- reported declines. However, when internet gaming is factored in, overall gaming revenue increased.
As reported on Casino.org, Hard Rock president Joe Lupo alluded to the reality that “top-line revenue” isn’t translating to the bottom line.
Is it the DGE’s job to help casinos make a profit? A more competitive market will force casinos to evaluate their business practices.
Diversity and more competition will behoove casinos to employ best business practices, work harder to attract new customers, and keep legal casino gambling affordable.
All of that will result in more customers on the Boardwalk.
Forced limits likely won’t have a long-lasting, positive impact. Companies can find ways around imposed limitations, hence Showboat’s request to divide.
When a government dictates a business’ parameters, you have a state-run economy.
Is that what AC really wants? The World’s Playground has been trying to get out from under state control since 2016.
The AC casino industry will naturally limit itself
Regulation for the sake of preventing casino closures benefits the casino, not the consumer. The consumer has made it clear that the casino is not meeting its needs. If it were, the casino would be doing better.
How does a casino stand out in a crowded field? Through innovation and differentiating itself from the rest. Unfortunately, for the most part, the casino industry likes to play it safe.
Golden Nugget is a prime example of what happens when a casino takes risks. It might not be the biggest brick-and-mortar casino, but its dominating online casino performance is directly related to differentiating itself and taking a gamble.
The market needs more of that.
Let the customers regulate the AC casino industry and force casinos to innovate and take risks. Not only will the consumer benefit, but so will the casinos and the state.