Surviving bans on smoking and sports-betting ads in Atlantic City

March 26, 2023 1:52 PM

Surviving bans on smoking and sports-betting ads in Atlantic City

Photo: Shutterstock
  • Ken Adams, CDC Gaming Reports
March 26, 2023 1:52 PM
  • Ken Adams, CDC Gaming Reports

The casinos in Atlantic City are faced with two of the largest challenges in years.

First, legislation is being considered that would eliminate the partial exemption from a ban on indoor smoking that casinos now enjoy; the subject has been under discussion since 2006, when smoking was banned and casinos were granted a partial exception; smoking is permitted in 25 percent of the casino floor. Banning smoking completely would have an impact, though how much of one is being debated. The casinos believe eliminating smoking would reduce their revenues by as much as 20 percent.

The second piece of legislation would ban sports-betting advertising. The subject has become a national lightning rod due to the huge volume of advertising that has accompanied the spread of legal sports wagering. Two states have initiated some form of restrictions and several others are considering following suit.

New Jersey can be credited with the spread of legal sports betting in the United States. Legislation that legalized betting on sports in New Jersey led to the Supreme Court decision in 2018 making sports betting subject to state jurisdiction, rather than federal.

In New Jersey, sports betting has become very important as a source of revenue; in 2022, $11 billion was bet in the Garden State, resulting in $726 million in gross gaming revenue. Most of those wagers were made remotely from phones, tablets and computers, not in casinos. Those bettors are very vulnerable to advertising during an event and most of the advertising in New Jersey is targeted at those remote-betting sports fans. That is true not just in New Jersey, but also in New York, Pennsylvania, Illinois, Ohio, Indiana, and other states that permit remote wagering. It is the major source of sports wagering in the country.

Eliminating the advertising on sports betting would certainly impact the revenue. Again, the extent is debatable. The proposition has yet to be tested in any jurisdiction. For years, advertisers in Nevada could not mention gambling, so they used a euphemism, “Nevada-style entertainment.” That law had no noticeable impact on gaming revenues. But that was a brick-and-mortar world. The cyber world is different.

Those two proposed laws would not end gambling in New Jersey or close all the casinos in Atlantic City. The majority of the city’s casinos are part of corporations with casinos in other jurisdictions. Hard Rock, Caesars, and Golden Nugget have diverse sources of revenue. The Atlantic City casinos are also somewhat protected by online gaming and sports. Online gambling generated $1.6 billion in revenue in 2022. Combined with sports betting, that nearly equals casino revenue ($2.7 billion). Clearly, sports and igaming help to keep the casinos viable.

Casinos in Atlantic City have been on a long slow downhill slide since 2007, the first year of slot machines in Pennsylvania. Since that fateful year, Atlantic City has endured the Great Recession, Hurricane Sandy, and casinos in Maryland, Massachusetts, and New York. The pressure of those events led to five casinos being shuttered between 2014 and 2016. New Jersey passed an online gambling law in 2013, but that alone was not enough to stem the tide. Governor Chris Christie did what he could, but that too was not enough.

When Christie took office in January 2010, things were not good on the Boardwalk. In 2005, Pennsylvania authorized casinos with slot machines. By 2007, the slot machines in Pennsylvania generated a billion dollars in gross gaming revenue a year. Almost immediately, the casinos in Atlantic City went into free fall. On assuming the governorship, Christie set out to help Atlantic City. His first order of business was restarting the stalled Revel project. Christie hoped a new megaresort would bring back the glory days of the 1980s and 1990s. The plan for Revel was extremely imaginative, an out-of-the-box concept. Rather than bus-riding slot players, only the highest of rollers would grace its carpets and it would be totally non-smoking. It would also be very expensive to build, $2 billion.

Halfway through construction of the original project, the primary lender, Morgan Stanley, had had enough. A year later, Governor Christie came to the rescue, brokering new financing and getting the project back on track. It was scaled down, but it did get built. Revel opened April 2, 2012. Sadly, for Revel, Atlantic City, and Chris Christie, conditions had changed since the first drawings and the casino was a miserable failure.

Another event in 2012 made life even more difficult on the Boardwalk. That October, Hurricane Sandy roared through town, closing the casinos. It also gave Christie his finest moment. He visited Atlantic City, waded through water up to his knees, and promised to help Atlantic City come back greater than before. At that moment, Christie probably could have been elected president of the United States. He certainly demonstrated leadership, and his promises were not as empty as is typical in politics.

Among other things, Christie set out to make it easier for New Jersey’s casinos to compete against those in Pennsylvania and other states. He asked to have gaming regulation streamlined and to eliminate many of the unnecessary restrictions on operations and imagination. It worked in a way; Hard Rock bought the failed Taj Mahal. When the Hard Rock opened in June 2018, it was a new product, one meant to appeal to consumers in the 21st century, not the 20th as the Taj had been. Even Revel managed to make it through several bankruptcies and changes in ownership to reemerge as Ocean City Resort in June 2018.

Christie also championed sports betting. 

Casinos in Atlantic City still earn only 53 percent of the revenue generated in 2006. But in 2023, the casinos have two new cards in their deck. Together with sports and igaming, gaming revenue in 2022 was equal to 2006. Smoking and advertising bans would hurt, but probably not as much as the three casinos projected for the New York City region. Additional competition in New York is the greatest threat to Atlantic City. That is the hardest lesson. The days of exclusivity for Atlantic City are gone and competition from other jurisdictions is fierce.