[toc]The legalization of online gambling and sports betting in New Jersey – and now potentially, in any U.S. state – recently granted by the U.S. Supreme Court can trace its parallel pathways to a decade-old philosophical argument that, at least at first, didn’t even necessarily involve gambling.
Let’s look back at how New Jersey came to be the epicenter of the expansion of legalized gambling in the U.S. in that time frame – a distinction that has been fueled by New Jersey’s five years of online gaming success.
The origins of iMEGA
New Jersey’s past experience is having a direct impact on plans later this week [June 7] to bring sports betting within the Garden State’s borders to your smartphone, beyond just brick-and-mortar racetracks and casinos – a feature that ultimately was not (though many have forgotten this) in the original 2012 New Jersey sports betting law that turns out to have been perfectly legal.
With prior experience working at America Online (AOL), Joe Brennan Jr. [who is not related to the author] and some others involved with internet companies noticed by 2006-07 that state legislatures had begun sponsoring bills designed to limit online activity.
“Everything online was supposed to be so insidious and dark,” Brennan told NJ Online Gambling. “Some of us thought the whole panic was ridiculous.”
Brennan said he even recalled a Michigan legislator who sought to impose extensive background checks on the burgeoning field of online dating services. To Brennan and some others, dating could just as easily be dangerous in “the real world.”
So with a theme of “digital civil liberties” – allowing the same rights to private citizens online as off – an idea began percolating to form a non-profit group.
“The first issue was actually going to be the online dating thing,” said Brennan.
Of course, some of those who wanted greater freedom on the internet were gamblers and offshore betting sites – and it wasn’t long before this faction strode to the forefront. The non-profit iMEGA, or The Interactive Media Entertainment & Gaming Association, was born at the start of 2008 – and became the target of sometimes withering, and never-ending, claims that foreign interests were trying to interfere with U.S. policy via iMEGA.
Brennan counters that “Gaming” in the iMEGA title initially included new internet concepts like “Second Life” – an online virtual world that had launched in 2003. Still, unlike some of iMEGA’s founding fathers, he didn’t object to the veer towards online gambling.
Sen. Lesniak takes notice
A little before Brennan and allies formed iMEGA, New Jersey state Senator Ray Lesniak – now something of a sports betting folk hero nationally – had been troubled by the 2007 arrest of his friend, former Assemblyman Rudy Garcia, in a massive illegal sports betting sting. For Lesniak, who grew up on the docks of the Port of Elizabeth, the idea that what he recognized as widespread sports betting could lead to an arrest seemed absurd.
That helped bring Lesniak – then one of the most powerful lawmakers in Trenton – into what became the two-pronged gambling legalization expansion fray, in what proved to be a fortuitous partnership for sports betting supporters as well as online poker players.
By spring 2008, a judge had granted iMEGA standing to sue in federal court.
The target was another offbeat acronym: UIGEA, or the Unlawful Internet Gambling Enforcement Act of 2006. U.S. District Court judge Mary L. Cooper rejected iMEGA’s arguments, including one that the act is too vague and another that it would be “too difficult to determine the jurisdiction from which an individual gambler initiates a bet over the Internet, and consequently, whether the bet is unlawful.”
But in losing at the U.S. Third Circuit Court of Appeals as well in 2009, both courts noted that UIGEA was not relevant to the wishes of states to authorize online gaming within state borders.
“It bears repeating that [UIGEA] itself does not make any gambling activity illegal,” Third Circuit Judge Dolores Sloviter wrote, adding that the issue is whether the state from which the bet initiates would find such a bet runs afoul of state law.
That didn’t help the offshore companies win the case. But Brennan, Lesniak, and others saw a bright side.
“If people didn’t understand it already, this showed that UIGEA was not a full ban on online gambling,” Brennan said.
Bill Pascrell III, a lobbyist for gaming entities for more than a decade, agreed.
“iMEGA was an important precursor for sports betting – it was all a domino effect,” Pascrell said.
iMEGA vs. PASPA
Having been defeated in the online gambling efforts in 2009, iMEGA next joined forces with Lesniak and the state’s horsemen – but not the Atlantic City casinos – in pivoting to a challenge to yet another acronym, PASPA, also known as the Professional and Amateur Sports Protection Act of 1992 that was passed by Congress. The effort this time was a lawsuit to try to void PASPA and bring Las Vegas-style sports betting to New Jersey.
Brennan and Lesniak note that New Jersey Governor Jon Corzine had joined the sports betting suit in March of 2009 – but the issue grew more complicated when Chris Christie took over in Jan. 2010.
Several people most familiar with the politics of the parallel betting tracks today give credit to Christie for the eventual legalization of online gaming and sports betting – while adding as well that in 2010-11, he vetoed a key piece of online gaming legislation while also backing off an informal promise to back sports betting.
According to three sources familiar with the talks, Christie – while privately supporting sports betting – told advocates that they must wait until the May 2010 selection of the 2014 Super Bowl. The Meadowlands’ MetLife Stadium landed the game as the first cold-weather Super Bowl, adding another line to Christie’s potential Presidential resume.
State sports betting advocates also faced a politically daunting foe in this era – the Casino Association of New Jersey. The group’s president, Joseph Corbo of Borgata Casino, wrote a letter to state Assembly gaming committee chairman John Burzichelli in June 2010 opposing a state Constitutional referendum on sports betting. The Atlantic City casino operators then opposed online casino gaming as well on the grounds that it would cannibalize brick-and-mortar revenues, but in this letter Corbo’s focus was on deferring to the federal government “because the internet is inherently inter-state activity.”
Brennan pounced on Corbo’s assertion in a subsequent letter to Burzichelli days later, noting that the 2006 UIGEA federal law’s “unlawful internet gambling” has exemptions – the first of which is if the bet is “made exclusively within a single state.” Brennan added that the American Gaming Association just months earlier had expressed a willingness to see state-run internet gambling move forward.
“We realize that these issues are complex and that New Jersey is, at the moment, ahead of the curve nationally in dealing with the questions of sports betting and Internet gambling,” Brennan wrote in 2010.
The second lawsuit was thrown out in March 2011 because it was found that Lesniak and the other advocates lacked legal standing to pursue the case. But months earlier, Lesniak, Pascrell, iMEGA, and the horsemen – the latter of whom is now suing the sports leagues for $150 million for lost revenue from the long delay in sports betting legalization – had achieved a key first step in the parallel sports betting legalization path.
The people say “Yes” to sports betting in New Jersey
In Dec. 2010, the state Legislature voted to place the sports betting referendum on the ballot the following year. Lesniak notes that while a New Jersey Governor has no direct say in state referendums, the Democratic majority at that time needed a handful of Republican lawmakers to provide the 60 percent majority required. Christie – then nearing the height of his political powers – did not object.
The Nov. 2011 statewide referendum on legalizing sports betting at racetracks and Atlantic City’s casinos passed with 64 percent of the vote – in spite of the fact that the state law clearly thumbed its nose at Congress’s Professional and Amateur Sports Protection Act of 1992.
Lesniak said that Christie publicly endorsed the ballot question in the weeks before the election. Within two months, Christie had signed a sports betting bill into law.
But a first version of the bill also had included intrastate online sports betting – a concept that was not specified in the referendum and which did not appeal to Christie. Brennan recalls a lawmaker pulling him into a room in the Trenton statehouse in Dec. 2011 and telling him, “We’re pulling the online part out of the sports betting bill.”
“I caved,” Lesniak conceded at the time. He and others who wanted the online portion adopted concluded that the important issue was getting the sports betting law passed – thus luring the NFL and other major sports organizations into a federal court battle. The online sports betting battle could be saved for later.
That effort got a major boost in May 2012 when Christie – heretofore not as publicly vocal on this topic – proclaimed on the eve of Memorial Day weekend on the Atlantic City Boardwalk that “We intend to go forward and allow sports betting to happen. If someone wants to stop us, then let them try to stop us.”
A bemused Brennan said he remembers a fellow sports betting backer calling him that day while he was en route to his son’s youth hockey game, explaining that Christie “had used cowboy language.”
A six year war for sports betting
The leagues took the bait three months later and filed suit, and the court battle lasted six years. Along the way, the state and the horsemen lost a pair of 2-1 decisions at the Third Circuit Court of Appeals – with the judge who wrote the majority opinion in the first ruling winding up as the dissenting vote on New Jersey’s side.
The other two judges in the second case were Maryanne Trump Barry – older sister of President Trump, a former Atlantic City casino owner – and Marjorie Rendell – wife of former Pennsylvania Gov. Ed Rendell, who was instrumental in bringing casinos to his state in 2006, contributing to the devastation of the Atlantic City casino industry that, in another irony, helped get the New Jersey sports betting ball rolling as a way to help.
Last month [May 14], the U.S. Supreme Court voided PASPA – setting the stage for widespread sports betting in the U.S.
iGaming’s smooth run paves way for online sports betting success
How has the gambling landscape changed over those years? There was no legal online gaming in New Jersey when the leagues sued New Jersey over sports betting in 2012.
Yet by 2013, Nevada had legalized online poker while New Jersey and Delaware legalized widespread online casino gaming – all with no objection from the federal government.
Also importantly, state online gambling advocates now have a 5-year-old counterpunch to many understandable potential concerns of lawmakers who are only casually acquainted with the online sports betting topic.
Will children be able to make sports bets online? There has been no scandal on that front with online casino gaming.
What if someone figures out a way to make a bet with a New Jersey site outside of the state – potentially triggering federal intervention? Again, geolocation has proven remarkably effective – and the technology continues to get more sophisticated.
Will sports betting legalization create a massive new segment of compulsive gamblers? That has not yet been formally claimed regarding online casino gaming in the state.
“I hadn’t even thought of that – at how much easier it will be now to bring in online sports betting, because we already have online casino gaming,” said Lesniak, now retired from the Senate.
Assemblyman John Burzichelli, a key figure in the gambling expansion efforts in New Jersey, is gratified by growing monthly revenue figures for online gaming.
“By all measures, it has been a success – and the lack of scandals speaks well for the industry,” Burzichelli.
A shifting stance on online betting
In fact, the landscape has changed so much in the last seven years that previous arguments have long been retired. One of the early goals for many sports betting advocates was to bring new blood to the state’s ailing casino and racetrack industries – perhaps providing the key to keeping doors open in each sector.
But between the near-miss of online sports betting in 2012 and the culture’s ever-growing dependence on smart phones, the state Senate and Assembly bills posted since the Court ruled each have online sports betting components – with no outcry from some of the same Legislators who once were laser-focused on brick-and-mortar traffic.
Even Meadowlands Racetrack operator Jeff Gural and Monmouth Park counterpart Dennis Drazin have not objected to the switch – counting on significant additional revenue from online bets for them and their gaming partners.
Then there are the Atlantic City casino operators. Their resolute opposition to online casino gaming slowly faded away after research showed that the overlap of customers between brick-and-mortar players was less extensive than feared. The casinos also – by getting information from online gamblers who signed up at their site – therefore gain a useful database to market opportunities to visit their Atlantic City properties. (The same will be true of online sports betting.)
As for the Casino Association of New Jersey, the group issued a statement after the May 14 Supreme Court ruling that the sports betting legalization “will provide an economic boost for Atlantic City, Atlantic County and the entire state of New Jersey, generating meaningful tax revenue while supporting local jobs and businesses.”
Burzichelli noted another long-forgotten fact: PASPA granted one state – New Jersey, which in 1992 was the only state aside from Nevada with legal casinos – one year to vote to allow sports betting at those casinos (but not the racetracks). But a Republican-controlled Assembly, a projected tight Governor’s race in 1993, and a sentiment that a sports betting referendum might boost Democratic turnout left the sports betting issue as political collateral damage.
“The Legislature did not serve the people well by not even allowing that measure to come to a vote,” Burzichelli said. “If it had, maybe this whole case never would have happened, and no other state might be able to offer sports betting today.”
Finally, whither iMEGA?
Brennan – now the CEO of SportAd, a daily fantasy sports startup – jokes that it died a very quiet death at the end of 2013.
“It was too battle-scarred by that time, and I was worn out and wanted to try something different.”
So who was iMEGA, really?
In a June 2010 letter to Burzichelli, Casino Association of New Jersey President Joseph Corbo claimed that iMEGA “represents offshore internet gambling sites which are not permitted to accept wagers from patrons located in New Jersey or elsewhere in the United States.”
Even the Third Circuit, in its dismissal of iMEGA’s first lawsuit in 2009, included in a footnote that iMEGA “notes that some of its members operate gambling websites from outside the United States.”
Pascrell says that offshore interests indeed were involved – but not in the way people think.
“They were predominantly were ex-American citizens who moved overseas so they could gamble,” Pascrell said. “Some left wives and children behind. I guess they can come back now.”
Brennan conceded that the “digital civil rights” goals yielded to one main interest – gambling – quicker than expected.
“We’d be pitching other ideas, but we’d be told, ‘Well, you’re the online gambling guys,'” Brennan said. “We kind of got defined down to that – and at that point, you embrace who you are. But people jumped to the wrong conclusions – our most support came from guys who had been in online gaming and then got out. People talked about Bodog or Calvin Ayre – we never got any of those guys.”
Those who won either or both long battles – and Pascrell includes state Sen. President Stephen Sweeney, Assembly Speaker Sheila Oliver, and the late Sen. Jim Whelan among them, while Brennan touts the unsung role of former state Senator and Christie ally Joseph Kyrillos – are, not surprisingly, looking back with satisfaction.
“The guys who backed iMEGA were right – PASPA is un-American,” Pascrell said. “I’m glad I did something about such a seminal issue.”
Said Brennan: “It’s fun having gotten on at the beginning of a bandwagon. I guess I was right twice.”