New Jersey Seen As Gold Standard For iGaming, Per Economic Impact Report

A new report from iDEA finds massive iGaming growth in NJ "without cannibalizing the revenue generated by B&M casinos in Atlantic City."

New Jersey has been the U.S. leader in its offering of legal, regulated online gambling — from poker and casino games in 2013 to sports betting in 2018 — and that has led to job creation and to new tax revenues.

But how much of each? iDEA, an association of the online gaming industry that advocates for further education of all relevant parties in the sector, commissioned a report on those topics called “The Economic Impact of New Jersey Online Gambling” that was released on Tuesday.

The “headline” numbers are the estimated 6,552 jobs created from iGaming, $401 million in wages, and $259.3 million of local and state tax revenue collected in that span.

But there are plenty of other figures worth digesting for state legislators — who presumably also would want to study what negative impact, if any, comes from the increased availability of such gambling.

For instance, New Jersey net iGaming revenue (subtracting all promotional gaming credits from gross gaming revenue) has ballooned from $122 mm in 2014 to $136 mm in 2015, and then in the following years to $138 mm, $233 mm, and $280 mm. The 2019 projected figure is $420 mm, for a 50% year-to-year leap.

With brick-and-mortar revenues far more stagnant, iGaming revenue has climbed from 5% to 13% of the total casino pie in the last five years, with a boost to 18% projected in 2019.

According to the report’s authors, “This revenue growth for iGaming has occurred without cannibalizing the revenue generated by brick and mortar casinos in Atlantic City. In fact, industry analysts generally agree that iGaming has been complementary rather than cannibalistic to land-based casino business.

“After a decade-long downturn in Atlantic City gaming revenue following the Great Recession and a significant increase in regional competition, the land-based casino market stabilized in 2017 and both land-based casino and iGaming revenues have experienced growth in 2017 and 2018. These phenomena provide strong evidence that multi-channel engagement is attracting new customers to the casino, increasing brand loyalty, and growing the overall player database — rather than substituting online for brick-and-mortar visitation.”

A taxing situation

With increased revenues, of course, come added tax dollars — with a projected doubling (and then some) from $35 mm in 2016 to $79 mm in 2019. The headline figures in the report factor in a multiplier effect from indirect economic benefits that occur from more employment and more spending.

The report praises the state Division of Gaming Enforcement’s regulatory efforts, a common refrain in the industry.

“To date,” the report says, “there has been no measurable evidence of increases in gambling harm, underage gambling, fraud, or money laundering as a result of the legalization of iGaming. New Jersey’s iGaming industry has successfully addressed the valid concerns voiced by opponents and skeptics of legal iGaming and proven that geo-fenced interactive wagering can be successfully operated and safely regulated in an intrastate environment.”

This report is a sequel to a 2016 version, also commissioned by iDEA and produced by Meister Economic Consulting and Victor-Strategies.

iGaming? Go east, young man

The map on page 3 of the report is intriguing, showing not only which states have iGaming but also which ones have active iGaming bills.

Nevada, New Jersey, Delaware, West Virginia, and Pennsylvania have such gambling, but what the map underscores is the geographic divide of the next wave.

The eight “active online gaming bills” states — including Michigan, which may be just days from the finish line as far as final government approval — all are east of the Mississippi River, mostly echoing the early days of U.S. casino legalization a couple of decades ago.

If Ohio joined the list, there would be state-border connections of such states from Massachusetts to Michigan down to Tennessee (which doesn’t quite border South Carolina, the southernmost candidate).

New Jersey’s success, meanwhile, is well-known in the industry. The report found that on Jan. 7, 2017, DGE listed a total of five iGaming licensees, 42 iGaming “ancillary companies” (business enterprises that provide goods or services ancillary to gaming activity), and a total of 524 iGaming-related vendors on its website.

As of Sept. 12, 2019, the NJDGE lists a total of seven licensees, 39 iGaming ancillary companies, and 695 iGaming related vendor registrants.

The report also analyzes why the New Jersey market is growing exponentially:

“Multiple factors appear to be contributing to the most recent growth in iGaming revenues. These factors include the evolving acceptance of iGaming among New Jersey residents who choose to gamble, the continuing improvement of product offerings and operating platforms, and the maturation of marketing and operations technologies, as well as the increasing acceptance of credit card payment transactions by the large issuing banks.

“One particularly interesting factor is the apparent complementary effect of sports wagering. Since September 2018, the onset of football season and the advent of double-digit sports betting revenue, iGaming revenue exceeded all previous monthly GGR totals, reaching $39.5 million in September 2019.

“Qualitative evidence appears to confirm that younger sports bettors, including many daily fantasy sports consumers, are now discovering online casino games.”

That may be the most important takeaway of all for legislators who are learning that sports betting may produce as little as 1% of taxes on the gaudy monthly “handle.” The margins for online casino gaming are considerably higher.

Live dealers, underage gambling

There is one nugget here (so to speak) that even some Atlantic City regulars might not have noticed:

“One new operational development has been the implementation of ‘live dealer’ table games online. This product, featuring ‘dealer-tainers’ administering live table games in a studio environment, is extremely popular in Europe and internationally and has proven equally attractive in the New Jersey market.

“Golden Nugget has very effectively positioned their live dealer studio in the entrance corridor to the physical casino in Atlantic City, allowing patrons to view the dealers through smoked glass and adding further credibility to Internet table games.”

Finally, understandable legislative concerns about the possibility of underage gamblers is addressed in the report as well.

“The key differentiation between registering for New Jersey iGaming and signing up on a black market or internationally regulated sites is the requirement for a player’s physical address and social security number.

“Compared to international jurisdictions, New Jersey’s state-regulated registration process is more intrusive from a customer perspective, requiring various validations, such as a physical address, age verification, and social security number. These more stringent KYC [Know Your Customer] requirements may discourage an uncertain number of qualified potential customers from signing up, but they undoubtedly discourage underage players and make it extremely difficult for cheaters to establish fraudulent accounts or for cyber criminals to launder their proceeds through a New Jersey authorized iGaming site.”

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