New Jersey and Pennsylvania are establishing themselves as the foundation for the growth of online casino gaming and sports wagering throughout the country.
New Jersey not only challenged the federal law that had prohibited states from regulating sports betting but also requires that computer servers be located within the state for any Internet gaming offered in New Jersey, Delaware or Nevada. Those are the only states currently offering Internet gaming.
Pennsylvania, the fourth state to approve Internet gaming, intends to have online casino and sports wagering up and running within a few months. When Pennsylvania launches its version of iGaming, which includes slots, table games and poker, the number of Americans able to gamble legally online will double. An important but unsung element of the state’s wide-ranging gaming expansion law is that regulators may allow operators to use servers based in other states.
That could save money for operators, increase tax revenues, and set an example for other states considering iGaming, regulators and operators say.
“We appreciate Pennsylvania taking the practical approach,” said Eric Frank, deputy compliance officer and director of legal affairs for The Stars Group, the world’s largest Internet gaming company. “Us and others have invested a significant amount of infrastructure in New Jersey. Hopefully, future states will follow suit.”
Yaniv Sherman, senior vice president of 888 Holdings, which operates online gaming sites around the world, echoed that sentiment.
“Online’s biggest advantage, and the reason it’s a growth engine for most companies, is its ability to have a gearing effect,” he said. “The same infrastructure and same overhead generates more revenues. This creates a real opportunity to drive growth and profits for the states and for the operators.”
The two spoke during a panel discussion on “iGaming Battleground: Who’s Next, What’s Next?” at the 22nd annual East Coast Gaming Congress at Harrah’s Atlantic City. Also on the panel were Susan Hensel, director of licensing for the Pennsylvania Gaming Control Board; David Rebuck, director of the New Jersey Division of Gaming Enforcement; and Quinton Singleton, vice president of corporate strategy and government affairs for SG Digital, the sports betting and iGaming arm of Scientific Games.
Lynne Levin Kaufman, a partner and gaming law specialist at Cooper Levenson law firm, moderated.
Rebuck explained the history behind his decision to require online gaming servers in New Jersey. Nevada, which allows only online poker, and Delaware already had a poker liquidity agreement, asked New Jersey to join the multi-state gaming pact this year. After internal debates, the state agreed to join the compact provided all the servers would be in the Garden State. He argued that all three states would benefit by proving they could work together to share not only in the gaming itself but also in regulations and standard practices.
“If we can do this as three small states, and have other states join on, we’ll have our confederation of states working together,” he said. “Now we have some real opportunities beyond just the games we were talking about at the time.”
Singleton applauded the flexibility that Pennsylvania’s online gaming law provides, calling it an example of balancing regulatory concerns and efficient operation.
Pennsylvania’s gaming expansion law extended far beyond Internet gaming. It allowed for up to 10 mini-casinos, video gaming terminals at specified truck stops, online gambling in airports, Daily Fantasy Sports wagering, and sports betting if the federal ban were overturned.
Hensel noted that it also allows the state to join compacts such as the one involving New Jersey, Nevada and Delaware. For now, the focus is getting online gaming to operate within the state. Discussions about interstate agreements will come later, she said.
Sports betting in Pennsylvania could be available by the start of the NFL season. Hensel predicted that some forms of sports wagering will be available online, but that will roll out as a fourth type of Internet offering in addition to slots, table games and poker.
Hensel said Pennsylvania’s existing casinos have until July 16 to apply for a $10 million online gaming certificate allowing them to offer online slots, table games and poker. After that, the casinos have 30 days to apply for a certificate in one, two or all three gaming categories. Each certificate costs $4 million. The state also is accepting applications from online manufacturers, suppliers and providers.
The law authorized 39 online certificates, 13 in each game category. If any remain available after the mid-August deadline, the state will allow outside companies to seek one.
The first legal sports bets in Atlantic City were placed during the East Coast Gaming Congress. Rebuck said the groundwork for the bets was laid shortly after the U.S. Supreme Court heard New Jersey’s arguments last December to regulate sports betting.
Atlantic City’s two new casinos already were scheduled to open in June, and a favorable Supreme Court ruling on the case would mean getting sports books going at roughly the same time, creating a “tsunami wave of work coming at us.” In January, his office advised casinos to get their sports book plans ready, identify their online and on-site partners, and hire lobbyists to represent their interests as the Legislature drafted a sports-betting law.
He hoped to have online sports betting operations running by the end of July.
“Those just starting to look at having an online product, are woefully behind the 8-ball,” he said. “I see some properties being tremendously successful. Some will struggle a bit. By the end of the year, we’ll have a very robust system going.”
He noted that New Jersey can learn from Nevada, which has had online sports betting since 2010.
He said online gaming, particularly sports betting, is in its “infancy stage” in the United States.
Kaufman praised Rebuck for his behind-the-scenes efforts in fighting the federal ban on sports betting, and those attending the discussion gave him a standing ovation.
Rebuck said he wanted to combat a “false rumor” that New Jersey citizens paid more than $8.5 million legal fees on the case.
“Casinos and racetracks paid all the costs of the fight,” he said, adding that state officials sought their help before filing suit.
Operators expect big profits from a legal U.S. sports betting market. Rebuck pointed to The Stars Group’s $4.7 billion acquisition of Sky Betting & Gaming in April.
“They didn’t buy Skybet just because New Jersey might have online gambling or because Pennsylvania may have online gambling,” Rebuck said. “They bought it because this country is really into this area full speed ahead, in a frenzy that is unprecedented in the gaming world.”
