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The 7 bills designed to breathe life into AC’s casino industry

Last week the NJ Senate approved 7 bills to improve the casino and racing industry in NJ which are now moving to the Assembly for consideration.  Bill (1) S-490 seeks to legalize internet gaming for existing casino operators.  The second bill, S-1866, would allow for 2 additional “boutique” casino hotels.  Bills (3-7) S- 829, 1866, 1980, 2229, 2290, and 2394 seek to help the horse racing industry by allowing exchange based wagering, implementing a use it or lose it policy of OTW licenses, combining wager pools reducing volatility of payouts, lower minimum number of racing dates, and dedicate more funds to improve and promote horse racing.  

 


Thoughts on the 7 bills:

With the help of politically connected industry experts, we’ve come up with some thoughts on the proposed legislation. The takeaway is that if these bills get signed or passed, there will still be a lot of issues that need to be resolved before anything can be implemented – especially as it pertains to Bill S-490.

  • Bill S-490 conflicts with the NJ constitution which states that gambling is only allowed in Atlantic City or through the lottery. A section of this bill would allow for state wide gambling as long as the servers sit in AC. This issue could require a referendum to resolve.
  • Bill S-490’s international player provisions complicate the bill, beyond just the expected Department of Justice (DOJ) issues.  According to sources, New Jersey Senator Raymond Lezniak (D) has said that those could be negotiated away and are “throw away issues”, but it’s interesting that the Senate passed with it in. 
    • Apparently the international player provision would be a way to beef up state-ringed liquidity. However, we question why international players would bother going to NJ for their internet betting needs.
    • Individual operator sites are also likely to face fierce competition from Full Tilt Poker and Poker Stars which still operate illegally in the US market and basically own it.
  • The international provision in S-490 and just the Bill itself may force the DOJ to take a position on intrastate gaming.  There have been discussions in Illinois and New York as it relates to intrastate gaming for some time, yet the DOJ has not taken a position.  The DOJ position as it relates to the Internet in other areas such as child porn, makes this a very complicated situation.  In the past the DOJ has taken the position that anything that relates to the Internet is considered interstate.   Allowing this to happen in NJ would acknowledge that use of the Internet can be intrastate.
  • The international provision in S-490 can also raise WTO issues
  • Apparently S-829 (account based wagering) initially included a provision to include international players which was later excluded given the DOJ complications
  • It’s puzzling that while the Governor has all but written off the horse racing industry, S-490 proposes to use 15% of the tax proceeds from I-gaming to fund purses
  • It’s still unclear whether the Governor will sign this package of bills; although given the GOP support, it’s likely that he will at least consider it
  • Harrah’s, AC’s largest operator, is opposed to the proposed bills as it believes passage of these bills will complicate their Federal play for internet gaming legalization, which still appears to be a viable option

 

Proposal Summary:

Bill #1:  S-490

Sponsored by Sen. Raymond J. Lesniak; approved by a 29-5 vote

  • Proposes to authorize Atlantic City's 11 casinos to operate intrastate and international Internet wagering
  • All games, including poker, that are played at a casino, as well as variations or composites, may be offered through Internet wagering
  • Internet-based games would be available to New Jersey residents and international bettors, but would be prohibited for bettors across state lines, to conform to federal interstate Internet gambling prohibitions.

Bill #2:  S-1866

Sponsored by Whelan; approved 32-0

  • State Casino Control Commission to create a pilot program to offer two new classifications for casino licensure in addition to the traditional 500-plus room capacity, minimum 60,000 square foot casinos that the commission currently licenses:
    • 1 Small-scale casino project:  no more than 24,000 feet of casino space and at least 200 hotel rooms
    • 1 Staged casino facility project:  begin with no more than 34,000 square feet of casino space and at least 200 hotel rooms initially, increasing to 500 rooms within 5 years and would be required to build up to the 500-room requirement within five years of licensure

Bill #3:  S-829

Sponsored by Sen. Richard J. Codey; approved 34-1

  • Authorize the state Racing Commission to issue a license to the state Sports and Exposition Authority to establish an exchange wagering system in New Jersey
  • Allows New Jersey residents who are at least 18 years of age to open an account; bettors would be able to set up exchange wagering accounts; and two or more bettors would be able to place directly opposing wagers on the outcome of a horse race or races
  • Bets could be paired against opposing wagers in New Jersey or any other state that has a legal exchange wagering system. Exchange wagering could also be set up so that bettors can place their bets in person at the racetrack, by direct telephone call, or by communication through some other electronic medium, including over the Internet.

Bill #4:  S-1980

Sponsored by Sen. Paul A. Sarlo; approved 32-1

  • Changes to the state's "Off-Track and Account Wagering Act," to ensure that off-track wagering (OTW) facilities are being built in New Jersey.  Under the bill, the 15 current permit holders would have to show progress by Jan. 1, 2012, or those permits would revert to the horsemen organizations, and if the horsemen organizations cannot show progress, the permits would go to the open market to allow any private investor to bid on the development rights for those facilities.

Bill #5: S-2229

Sponsored by Codey; approved 34-0

  • Allow racetracks to combine all wagers placed on the results of one or more runnings or harness horse races into a single pari-mutuel pool.  By creating larger pari-mutuel pools, racetracks can handle a greater variety of wagers and reduce the adverse effect of large pay-outs to the racetrack's bottom line.

Bill #6:  S-2390

Sponsored by Sarlo and Whelan; approved 34-0

  • Lower the minimum requirement for the number of standardbred horse racing dates scheduled at the Meadowlands Racetrack and Freehold Raceway to 100 dates per season at each track; ensuring larger purses and more prestigious races at the racetrack each year

Bill #7:  S-2394

Sponsored by Sarlo;  approved 31-3

  • Dedicate an amount equal to the sales and use taxes associated with horse racing, breeding, training, raising or boarding to programs designed to improve and promote thoroughbred and standardbred horse breeding in New Jersey.

Require the director of the state Division of Taxation to annually deposit an amount equal to the sales and use tax revenue collected in association with horse racing and breeding into a new fund within the state Department of Law and Public Safety - the "New Jersey Standardbred and Thoroughbred Racehorse Incentive Fund" - which will be maintained by the state Racing Commission.