November 26 marks the official 10-year anniversary of legal online casinos in New Jersey. It is a seminal moment in the fascinating odyssey of gambling in the Garden State, signifying a decade of continuous growth and momentum for a once-shunned segment of the casino universe.
To date, online gambling in NJ has generated more than $7 billion in lifetime revenue, while the state of NJ has collected over $1 billion in taxes from those proceeds. And those numbers don’t even account for online sports betting, which has only been legal since 2018 but would add another $3 billion in revenue and $400 million in taxes to the totals.
But, the quantifiable success of NJ online casinos may overshadow the industry’s intangible impacts.
Former state Sen. Ray Lesniak — the face of 21st-century gambling expansion in New Jersey and the legislative champion of the state’s online casino law — summed it up nicely in 2013:
“New Jersey’s Internet gaming law will be a real boost to the state, Atlantic City and the casino industry.”
New Jersey leads by example, creating the blueprint
Lesniak’s predictions were on point, if not a bit understated.
New Jersey’s legalization set the table for other states, such as West Virginia, Pennsylvania and Michigan, to embrace online casinos.
Ed Andrewes, CEO of Resorts Digital Gaming, said New Jersey is widely regarded as the original pioneer of online gambling in the US. Other states consider NJ and its two regulatory agencies — the Division of Gaming Enforcement and the Casino Control Commission — the industry benchmark.
“The DGE is well-respected throughout the country, and they’ve produced a blueprint for the way to do things,” Andrewes said. “It’s always hard to say, but I’m not sure (Pennsylvania) and Michigan would have followed suit if New Jersey hadn’t blazed the trail.”
During the summer, Shawn Fluharty, a West Virginia Delegate and president of the National Council of Legislators from Gaming States, told PlayNJ that the Garden State is “looked at as a leader.” When Fluharty’s fellow state lawmakers were considering legal sports gambling and, eventually, online gambling, NJ was the example.
“We looked at (NJ) and thought, ‘Okay, let’s emulate what they’re doing,” he said. “They’re doing it the right way, and they didn’t stop.'”
What Jersey regulates, the world takes
The commitment by NJ gambling regulators to “doing it the right way” is one of the primary reasons online casino proponents cherry-picked the state to be the litmus test for the US.
Bill Pascrell III, a New Jersey native and industry lobbyist at Princeton Public Affairs Group, said his one-time client, Interactive Media Entertainment and Gaming Association (iMEGA) intentionally chose to push for legal, regulated internet gaming in NJ because of its high standards and barrier for entry.
“They chose New Jersey because New Jersey has had and continues to have the toughest regulatory regime in the world. In the world,” Pascrell repeated for emphasis.
“They thought if they could get it there — like the old New York line ‘If you can make it here, you can make it anywhere.’ (NJ’s approval) would immediately legitimize the industry and create broader attention than to do it in another state.”
The approach was objectively successful.
Andrewes, whose professional résumé includes previous roles working for international gaming operators, said NJ is an industry model, both domestically and abroad.
“New Jersey has proven that with proper controls in place and proper responsible gambling policies, online gaming can be safely rolled out and safely regulated. And it is much better regulated than not regulated,” he said.
When the Godfather says to do it right, that’s how it gets done
One man has been spearheading the state’s regulatory regime throughout the entire lifespan of legal online gaming in New Jersey: David Rebuck. The longtime director of the DGE has occasionally been called the “Godfather” of online gambling in the US and his agency is not-to-subtly referred to as the “platinum standard” of regulatory bodies.
In an exclusive interview with PlayNJ, Rebuck detailed how the NJDGE had just nine months in 2013 to draft online regulations “basically from scratch.” An attorney by trade, Rebuck and the DGE were mindful of how even the slightest misstep could run afoul of federal laws, such as the Wire Act or national banking regulations.
Combined with the pressure of upholding the state’s reputation as a no-nonsense jurisdiction — a standing earned via the effective corruption-free oversight of Atlantic City casinos — and the eyes of the gambling world watching, NJ had one chance to get things right.
“I just had Jersey guys and gals who stepped up and worked on this with an unbelievable commitment to get this done the right way and build upon the success that the state had had in retail casinos,” Rebuck said. “We knew that if we didn’t do this the right way, then we’d be the laughingstock of the nation.”
To a man, Rebuck deflects any and all credit anytime the situation arises. He constantly shifts the focus, likening his role to an orchestra conductor.
“The technical expertise that drove the ultimate decisions wasn’t coming from (me). It was coming from a whole host of staff that worked for me, who really embraced this and wanted to prove that we could be a leader in this area,” he said.
“There’s a standard we have to meet, and there’s an expectation and there’s a commitment. That makes it really easy for a director to have that type of buy-in and to work in that type of environment.”
Speaking of Atlantic City casinos…
Just as Sen. Lesniak predicted in 2013, Atlantic City has been a benefactor of online gaming.
When internet gambling was first presented to NJ officials, it was offered up as a way to offset AC’s economic losses in the wake of nearby gambling competition and the Great Recession. Atlantic City was a $5.2 billion gambling market in 2006. Annual gambling revenue fell for the next nine years before hitting its lowest point at $2.5 billion in 2015.
Of course, the irony is that one of the primary arguments against legalizing iGaming is that it will take business away, or cannibalize, existing retail casinos.
Pascrell vividly recalls his then land-based casino clients buying into that line of thinking. Some of those clients, he said, bailed on him due to his work on behalf of online operators. Even when revenue sharing and tethering (requiring internet operators to partner with physical properties) were presented to AC casino operators as an olive branch of sorts, online gambling was viewed as a threat.
Today, Pascrell remains an outspoken critic of iGaming cannibalization arguments.
“Long story short – they were all wrong. Vehemently, grossly wrong. There is no proof of any cannibalization,” he said. “Online gaming is a compliment to offline, to brick-and-mortar gaming.”
COVID-19 was rocket fuel for growth of NJ online casinos
In 2020, online gaming proved its worth to the Atlantic City casino industry (and the state’s tax collections) when Gov. Phil Murphy ordered the indefinite closure of all nine casinos in March of that year because of the novel coronavirus. The revenue-sharing arrangements with online casino operators kept the industry afloat.
Online gambling revenue surged more than 101% year-over-year from 2019 to 2020, generating over $970 million. The following year, online gambling revenue topped $1.36 billion, finally reaching the projected figure cited by former Gov. Chris Christie more than a decade earlier.
“The biggest surprise was how the market kept on growing after COVID-19,” Andrewes says.
Not only were retail casinos closed, but there were no sports either, which brought the digital sports gambler to online casinos.
“The sports-first brands (such as FanDuel and DraftKings) really saw the value of online casino and really started to promote and cross-sell,” Andrewes added.
In 2022, online casinos in NJ — led by the “sports-first” brands — reported more than $1.66 billion in revenue. The industry is on pace to shatter that number in 2023.
Loyalty goes both way when it comes to NJ online casinos
Mark Giannantonio, president and CEO of Resorts Casino Hotel and president of the Casino Association of NJ, said online gambling has “absolutely” benefited operators in AC. While Resorts Digital is a separate entity from Resorts Casino Hotel, the two operate in conjunction with one another, including revenue sharing.
“Our team has done a really good job, not only attracting customers but delivering a product that we really are proud of. It has really helped to establish our brand – Resorts — online, which was really important. We wanted to give our brick-and-mortar customers an experience that they would be happy with,” Giannantonio said. “It’s been a great business for us.”
Andrewes, the digital gaming executive, said the synergy between his operation and the land-based casino in AC is essential to their respective successes.
“We want all of our online customers to go to the property and have a good experience on the property. And vice versa,” he said. “It’s a really good way of producing loyalty from that customer and for them to be loyal to the Resorts brand.”
The real winner is always the state of NJ
The loyalty of online gamblers in NJ has borne fruit for more than just casino operators in the Garden State. Trenton tax collectors have been busier than ever since the launch of online gambling in 2013.
Recall that NJ online gambling revenue is taxed at 15%, almost double what in-person revenue from AC casinos is taxed. After a few underwhelming years, online taxes really started to take off in 2019 when iGaming added more than $75 million to state coffers.
Between 2020 and 2022, online gambling generated more than $376 million in taxes.
Similar to AC gambling taxes, online casino taxes are directed to the Casino Revenue Fund, which provides essential services to the elderly and disabled throughout New Jersey.
“(Online gaming) does help us from a primary overall business perspective,” Giannantonio, president of the AC casinos’ lobbying group, said. “But the real benefactor, to me, is the state of New Jersey…The state should pat itself on the back.”
You got a friend in Jersey
Indeed, it is the state tax revenue that has many in the gambling industry believing it is only a matter of time before more states implement legal online casinos.
Fluharty and Pascrell, both advocates of additional gambling expansion, say that while the tax money is a good talking point, the real lesson is here, in NJ, where evidence proves that a regulated industry is the best way to protect customers (i.e., residents, voters, and taxpayers) and advance social equity.
“You cannot treat (gambling expansion) as a cookie-cutter approach. Every state is different. It’s got a different culture. It’s got different priorities, and it really needs more serious attention,” Pascrell said. “But it starts with educating the public about the difference between regulated and unregulated sites.”
Fluharty, the WV lawmaker at the helm of an organization whose primary purpose is to offer guidance and resources for responsible gaming expansions around the country, said NJ remains the standard.
“New Jersey is looked at as a leader, and it’s looked at as a leader because of people like David Rebuck, who have been there from day one. And not only do they know what they’re doing, they are willing to pick up the phone and help others as well,” he said.
That is the true impact — the legacy – of online gambling in New Jersey.