Latest NJ Online Casinos Extension Became A Textbook Lesson In Gross Politics

Written By David Danzis on July 14, 2023
new jersey state house trenton

Editor’s note: The following article represents the views of the author

New Jersey politics is full of behind-the-scenes nonsense that makes even the most seasoned observers occasionally shake their heads in disgust. The old adage about not wanting to know how the sausage gets made applies to much of what happens in Trenton.

But is there a saying about the inverse of the aforementioned pork metaphor? Something to describe a scenario where the “how” and “why” is more appetizing than an objectively unsatisfactory result?

Well, if there is, it would be used to (partially) explain the story behind New Jersey lawmakers settling on a five-year continuation of legal NJ online casinos instead of the originally proposed, noncontroversial 10-year extension. We added “partially” as a modifier because, truthfully speaking, a good deal of Trenton’s decisions do not make sense, or cents, for the people of NJ.

Somehow NJ online casinos don’t get 10-year extension

Such is the case with the state’s internet gaming law, which has been in effect since 2013 and was due to expire in November of this year. New Jersey was the first state to legalize online casino gambling and has reaped the benefits for nearly a decade, collecting $928.5 million in taxes on more than $6.28 billion in NJ online gambling revenue.

A 10-year extension of this thriving and growing industry cleared multiple legislative committees in 2023 without so much as a single word of opposition or counterpoint. Then, for unknown reasons, an Assembly budget committee cut the timeline from 10 years to two. Business leaders and politicians in South Jersey spoke up, and the budget legislators relented.

A few days later, without any logical explanation, lawmakers in both the Assembly and Senate hastily passed a five-year extension for legal online gambling. Gov. Phil Murphy signed it into law on June 30.

Finding out why proves a difficult task

PlayNJ has been trying to get answers about why the online casino legislation was changed since before the Independence Day holiday break. Full disclosure — getting to the bottom of this story has proven to be one of the more difficult assignments I’ve ever had.

Atlantic City casinos were silent. Political insiders were tight-lipped. Even lobbyists, who are usually quick to make a phone call or two to move a juicy story along, were oddly quiet.

In the past few days, the slow drip of information has started and we have spoken to several well-placed sources about what happened and why. Getting people to go on the record has been a fruitless endeavor. No one wants their name attached to this “sausage.”

PlayNJ made an editorial decision to protect the identities of those sources in order to relay as much information as possible. If and when people want to go on record to talk about this (and we can pretty much assure you that will happen at some point), we will keep our readers up to date.

Extension tied to power dynamics throughout state

Here’s what it boils down to — the mundane legislative action of extending NJ’s online gambling law is loosely, yet intrinsically, connected to the 2025 governor’s race, Atlantic City casino taxes and the state’s ongoing oversight of the seaside resort.

In short, the truncated extension of NJ’s internet gaming law, and the process of getting there, was meant to send a message to certain groups of people in South Jersey about the state’s power dynamics.

We’re going to do our best to keep this concise, but it requires a bit of context.

Consolidation of power bad news for AC casinos

The once-formidable South Jersey Democratic machine, led by former Senate President Steve Sweeney and his childhood friend/political powerbroker George Norcross, had been losing influence since Murphy’s election in 2017. Atlantic City and its casinos counted Sweeney among their allies, even if he sometimes strayed from acting in their best interests. Sweeney’s surprise Election Day defeat in 2021 opened the door for other coalitions of Democrats to seize power in the single-party state.

Currently, Middlesex County is the political power center of NJ, with both the Senate president and Assembly speaker representing districts that include parts of the Central Jersey hub. North Jersey Democrats, scattered throughout Hudson, Essex, Union and Passaic counties, are less influential in the grand scheme of things but still hold considerably more sway in Trenton than anyone south of I-195.

Since most politicians from North and Central Jersey couldn’t find Atlantic City without a GPS, the consolidation of power in the top two-thirds of the state is bad news for AC and its nine gambling parlors. Atlantic City casinos, online gambling and NJ sports betting are nothing more than line-item revenue streams to them.

Effect of PILOT program and transfer of political power

The state takeover of Atlantic City and the casino PILOT (payment in lieu of taxes) program are prime examples of the unique situation in South Jersey. If I were a gambling man (and I am), I’d be willing to bet my annual salary that the majority of the state’s 120 lawmakers could not explain the genesis of either legislative action, how they impact the city and its residents, why Atlantic County took the state to court over the PILOT or when (or if) the state takeover will end.

Arguments can be (and often are) made in favor and against both the PILOT and the takeover. Both exist for a reason, which is to address complex problems in Atlantic City. Neither is very popular (for a multitude of reasons that differ among various groups), but both have serious long-term and immediate ramifications on the future of Atlantic City and her casinos.

So, what does any of that have to do with online casinos? Well, the PILOT and the state takeover both have expiration dates. That also means they are subject to being extended at the whims of the powers that be in Trenton.

Lawmakers using NJ online casinos as political leverage

Whoever is the new governor in 2026 will shape how those two scenarios play out. The new power coalition in Trenton is aware of this dynamic and is using online gambling as leverage.

Because NJ was an early adopter of online casinos, the state’s tax rate (15%) on revenue reflects a time when no one could foresee online gambling’s explosive growth over the next decade, which was accelerated by pandemic-related stay-at-home orders in 2020.

Now, those Central and North Jersey politicians are seeing record-breaking numbers coming from not only NJ online casinos but other states as well. Other states, such as Pennsylvania and Michigan, whose tax rates on online gambling revenue are significantly higher than NJ’s.

Well, the only thing more mythical in the Garden State than the Jersey Devil is an elected official who doesn’t like spending other people’s money.

Could NJ online casinos see increase in tax rate?

Are you starting to see where this is going?

PlayNJ has confirmed with multiple sources that there is a desire amongst a handful of powerful Central and North Jersey Democrats to increase the tax rate on online gambling in order to squeeze as much out of the Golden Goose as they can. They know South Jersey officials, regardless of political party, will oppose a rate hike because it harms Atlantic City’s casinos and their internet gambling partners.

The coalition of current Trenton powerbrokers flexed their muscles on the NJ online casinos extension. It was a bluff with the sole intention of sending a message. It was a show of force to demonstrate that they could (and will) go forward with or without the support of South Jersey.

Well, this is where deals and sausage are made.

South Jersey legislators voted in favor of the five-year online gambling extension. They didn’t really have a choice. Some years are better than no years, and none of them wanted to vote against an extension of online gambling, even if the proposal fell woefully short.

Atlantic City can provide level of support politicians need

Seemingly out of nowhere, a handful of shore towns received $100 million for boardwalk repairs in the recently passed state budget.

Coincidence? Perhaps.

It may also wind up being a coincidence if the next governor of NJ extends the state takeover of Atlantic City — which benefits the AC casinos due to decades of incompetence and corruption by local elected officials — but helps negotiate an alternative to the deeply problematic and potentially unconstitutional PILOT.

That next governor will need political support from somewhere in South Jersey, even if it’s superficial and transactional. Atlantic City and, to a lesser extent, Atlantic County, could provide that level of support.

Should that happen, the major players involved can claim “wins.”

Central/North Jersey Dems get what they want — more tax revenue and a foothold in South Jersey. Atlantic City casinos get something of value, namely stability in their host municipality and a favorable property tax structure. And Atlantic County, which is basically ignored in Trenton because of its Republican leanings, would benefit from a more predictable revenue stream coming out of Atlantic City and a louder voice in the halls of the State Capitol building.

In other words, the online gambling extension deal was a masterclass in political sausage-making, and we’re honestly a bit sick to our stomachs from it.

Photo by Seth Wenig / AP Photo
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David Danzis

David Danzis is the lead writer for PlayNJ. He is a New Jersey native and honors graduate of Rutgers University. As a newspaper reporter for the New Jersey Herald and Press of Atlantic City, David earned statewide awards for his coverage of politics, government, education, sports, and business. Today, he is PlayNJ’s Atlantic City “insider” and gaming industry expert on casinos, sports betting, and online gambling. David lives in Atlantic County, NJ with his wife and two children.

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