The 10-year partnership otherwise will expire in November

NJ Lawmakers Consider Extending Online Casino Act

Original iCasino legislation sunsets in November without action in Trenton
new jersey capitol

It will be 10 years ago this November that New Jersey became the first state to offer online casino gaming in a competitive marketplace, with foreign companies with previous expertise in the industry forming partnerships with the nine Atlantic City casinos.

That means that the original 10-year act authorized by the New Jersey Legislature expires in just eight months, unless state elected officials extend it. The Assembly Tourism, Gaming, and The Arts Committee met in Trenton Monday for the purpose of commencing discussion of the issue.

The landscape has changed quite a bit in online casino gaming, which in its first full year of operations in 2014 produced a modest $122.8 million in revenue. By 2021, that figure had jumped to a record $1.37 billion in revenue — partly boosted, no doubt, by consumer reluctance to visit casinos in the COVID-19 era.

But that rise in revenue has coincided with qualms among both Atlantic City casinos and the online gaming operators.

For the casinos, the problem was that the state Division of Gaming Enforcement had been lumping online casino revenue together with brick-and-mortar casino revenue to calculate the “payment-in-lieu-of-taxes,” or PILOTs, that the casinos pay to the city and the state. The online casino companies, which run those operations, get to keep a majority of that revenue.

Legal uncertainty surrounds PILOT tweak

Casino operators in December prevailed in getting lawmakers to pass a bill — quickly signed into state law by Gov. Phil Murphy — that removes both online casino revenue and sports betting from the PILOT calculation.

Atlantic County officials then filed a lawsuit over what they said would be tens of millions of lost revenue to the county in a reworking they never wanted to a 2016 agreement. A state judge recently sided with the county in the case, which has additional proceedings this month.

Industry insiders, meanwhile, have said that the overseas online casino operators have begun to question why they have to pay a significant share of their revenue to casino companies seemingly in perpetuity. The 2013 law requires any online company to partner with a casino to offer its gambling.

Whether a new arrangement ultimately occurs, there is little doubt that the casinos benefited from a share of online casino gaming revenue when visitation to the island city was down in the worst of the COVID-19 era.

“Who knew it would be so valuable?” Assemblyman Ralph Caputo mused to NJ Online Gambling after Monday’s hearing. “[Online casino revenue] really kept the lights on down there.”

That barrage of online casino ads

Still, Caputo — who recently sponsored a bill to extend the 2013 provisions by another 10 years — said that his committee wants to review the impact of online casino gaming on the state’s overall culture.

“Through these conversations, we have to have an analysis of whatever social impact there might be,” Caputo said. “We know how productive it is in terms of revenue.”

“The marketing sometimes is just over the top,” Caputo added to NJ Online Gambling. “It’s crazy — too much. We have to take a look at it, and maybe regulate it. It’s like [advertising] never stops.”

Caputo said he does appreciate that various companies are “fighting for their share of revenue, and the margins can be slim.”

Smoking ban enters the discussion

Caputo’s bill simply would extend the partnership law covering casinos and online casino operators, but a spokesman for a group called Americans For Nonsmokers’ Rights decided to testify.

It didn’t take more than a handful of seconds for Caputo to interject that “a smoking ban has nothing to do with this bill.” But the spokesman pressed on, in an effort to link casinos gaining an extension of online casino deals with efforts to end the state exemption that allows casinos to sidestep the statewide indoor smoking ban.

“The casinos can’t have it both ways,” he said.

The separate casino smoking ban bill will be taken up in “the early spring” by the state Senate Health Committee, according to committee Chairman Sen. Joe Vitale in remarks last month.

“They try to cloud the argument with job loss or financial ruin, but none of that will happen,” Vitale said of the Casino Association of New Jersey’s longstanding insistence that smoking should be allowed on gaming floors.

Photo: Shutterstock


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