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Can New Jersey Become the Online Gambling Capital of the World?

By Joshua Brustein
November 22, 2013
Businessweek

Just days before New Jersey’s experiment with online gambling goes live, the lawmaker responsible for pushing the issue in the first place is setting his sights on global gamblers.

State Senator Raymond Lesniak plans to introduce a bill that would let international companies set up shop in New Jersey and then offer online gambling to people located outside the U.S. The idea is to play on America’s reputation for financial security: Legal gambling operations headquartered in New Jersey would presumably appear less likely to make off with customers’ money or crumble under shifting regulations.

Lest he might fail to establish that he plans to make New Jersey’s laws as friendly to gambling companies as possible, Lesniak told reporters via a conference call on Thursday: “I didn’t come up with this proposal. Some of the gaming companies did because they want to come here.”

New Jersey’s interest in online gambling was never just about allowing its 9 million residents to play digital poker against one another. Once the infrastructure is set up, New Jersey believes it can serve as a beachhead for a much wider market. Between the local and international licenses available under the online gambling law, New Jersey will create 16,000 to 22,000 jobs, according to a study done for Lesniak by Econsult Solutions.

Lesniak’s bill would also allow international companies with a physical presence in the state to take bets on sports from people in other countries—even though gambling is currently illegal in New Jersey itself. The lawmaker expects the bill to be passed next spring. Some unsettled issues remain, though.

For one thing, it’s not clear that foreign companies will find New Jersey as attractive as Lesniak imagines, given questions about taxation and memories of recent American hostility to online gambling. Nor is it a foregone conclusion that other countries will smile on U.S.-based companies taking bets from their residents. Regulators from New Jersey would have to reach agreements with regulators in gamblers’ home countries. And legal gambling industries are already established in many major markets. Some within the industry believe that providing infrastructure to other American states as they liberalize online gambling laws is a better area of focus for New Jersey.

Lesniak may be getting a bit ahead of himself, given that no one is certain how well New Jersey’s online gambling experiment will play out. As we’ve seen recently, the success of ambitious, government-supported Internet ventures is hardly guaranteed.

The state legislative, meanwhile, is still scuffling over what types of gambling should be legal in New Jersey. Lesniak’s inclusion of sports gambling seems to be almost wholly intended as a thumb of the nose toward the federal government and the major sports leagues that are suing New Jersey over its attempt to legalize sports betting. And the Washington Post reported over the weekend that Sheldon Adelson, chairman and chief executive officer of Las Vegas Sands (LVS), who makes his money running brick-and-mortar casinos, is planning a major push to get the federal government to outlaw online gambling next year.

Adelson has not followed rival physical casino businesses into the online market, so it seems he has the most to lose from the rise of Internet gaming. He insists that his objection is purely moral. In a strange interview with Bloomberg TV over the summer, he tried to explain the distinction between upstanding, in-person gambling and the “cancer” that is the online version. Adelson’s argument is worth listening to in its entirety, but basically he puts forth a scenario in which people will be drunk and naked, lying in bed with computers, unable to resist the peer pressure to play online poker. “No land-based casinos, whether it’s us or Harrah’s or now Caesars (CZR), would allow somebody who’s out of control with themselves to sit and gamble,” he says.

In the conference call, Lesniak expressed annoyance with Adelson and scoffed at another line of argument the billionaire has made: the suggestion that online gambling would have a particularly pernicious impact on poor people. “If he was really concerned about those folks,” Lesniak said, “he’d go after the lottery.”

Brustein is a writer for Businessweek.com in New York

http://www.businessweek.com/articles/2013-11-22/can-new-jersey-become-the-online-gambling-capital-of-the-world