New Jersey’s Online Gambling Industry Disappoints

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Posted: April 2, 2014

Updated: October 4, 2017

The state’s financial benefits from its recently legalized internet casino industry are much lower than expected.

Four months have passed since the legalization of online casinos in the US state of New Jersey and officials are starting to ask themselves if it paid off.

When lawmakers decided to change American gambling laws and start handing out licenses to operators willing to take their business online, they were armed with estimates and statistics to back their decision. Now even though monthly financial reports show growth, the real figures don’t even come close to what officials initially promised and – more importantly – included in the annual state budget.

The fresh online casino industry didn’t even come close to generating the anticipated tax revenue, which is why officials had to make a downward adjustment to the local budget.

All eyes on the local administration

The whole issue would have probably slipped everyone’s mind if officials hadn’t raised their hopes in the first place.

This is the third straight year when Governor Chris Christie’s administration overestimates the tax revenues which make up the state’s budget. The initial revenue forecast has already been reduced by $215 million and officials estimate a further reduction of $217 million.

All tax revenue from the New Jersey online gambling industry and Atlantic City’s land-based casinos go to the Casino Revenue Fund. The income estimated by the administration turned out to be way too high, so the initial figure was cut by $126 million. The amount represents half of the state’s revised budget projection.

“Clearly, the results so far have not met our expectations,” State Treasurer Andrew Sidamon-Eristoff said. But even so, he told the Senate Budget Committee that he remains optimistic about New Jersey’s gambling revenues over the mid- and long-term.

Not enough

New Jersey’s first online casino went live at the end of November. By the end of February, a total of 248,000 accounts had been created on online gambling sites available in the state. The local gambling commission reported a 25% increase in the number of accounts, compared to the previous month.

According to budget officer David Rosen, the industry has brought the state $4.2 million in tax revenue since then. Also, profits have been rising every month, so it all started out with $1.1 million in December, jumping to $1.4 million in January and eventually reaching $1.5 million in February.

The New Jersey official claims he expect the rising trend to continue and reach the $12 million milestone sometime during this year, then go up to $48 million in 2015. Even these projections are much lower than the $160 million estimated last June.

Meanwhile, the state treasurer avoided to make a comparison between the amounts generated by online and land-based casinos.

No bright future for NJ

A poll conducted in February showed that people living in the state of New Jersey aren’t really that interested in online casinos. In fact, 41% of the people questioned said they would have preferred to access to legal marijuana, rather than internet gambling.

The budget proposed for the fiscal years beginning July 1 totaled $34.4 billion. According to Rosen’s Office, this initial projection was overestimated by $509 million. The budget officer added that the process of economic recovery was much slower in New Jersey than in neighboring states.

Things aren’t looking better either, especially with Fitch Ratings recently lowering the state’s credit outlook from “stable” to “negative”.

Online gambling in the US: Yes or No?

So far, it looks like American states have little to gain from allowing internet gambling sites. Even so, several other states – including California and New York – are taking legal steps to introduce local gamblers to legal online poker services.

But not everyone wants to see online gambling grow in the USA. Utah representative Jason Chaffetz and South Carolina Senator Lindsey Graham have joined forces to ban all virtual casino games in the country. Many suspect that the two politicians are in fact carrying out Sheldon Adelson’s plan to stop internet gambling.

It remains to be seen whether Adelson and his crew win this battle or not. Even if the income generated by online casinos isn’t very impressive, it’s still better than nothing. Besides, having a regulated market protects American consumers and this is what legislators should keep in mind, before refusing US gamblers’ the possibility to play via the Internet.

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