NJ Online Gambling: Will Other States Follow?
On November 26, 2013, New Jersey became the third state in the U.S. to launch legalized state-run online gambling. Even though the other two states–Nevada and Delaware–had a head start in launching their iGaming platforms, New Jersey has been far and away the leading revenue producer of the three. Over the past 3 ½ years, other states, encouraged by the great success of NJ online gambling, have also been trying to get the necessary legislation passed. But so far, there has been little progress. New Jersey, Nevada, and Delaware are still the only three states where state-run online gambling exists.
Why Other States Are Hesitating to Launch Online Gambling
A panel at the May 24-25 East Coast Gaming Congress discussed the likely reasons why it is taking longer than anticipated for other states to come aboard. One obstacle is the very high tax rate that would be imposed on casino operators. Other reasons why the efforts to introduce online gambling in other states are dragging on so long are hesitation on the part of state legislators based on perceived problems getting the program to run smoothly.
According to Robert Moncrief, Deputy Director, Technical Services, NJ Division of Gaming Enforcement (DGE), all of the following have been mentioned by opponents to online gambling as areas of concern.
- Geolocation errors
- Possible increased opportunity for fraud and money laundering
- Possible increased compulsive gambling
As to whether these concerns are valid, we need look no further than the existing NJ online gambling sites. In fact, three top executives of existing NJ online casinos were on the panel: Steve Nathan (Borgata), Luisa Woods (Tropicana), and Mattias Stetz (Rush Street Interactive). All of the speakers agreed that geolocation errors were no longer a problem and that highly effective safeguards were in place to address the other two concerns as well.
While the NJ online casinos did encounter some gelocation problems in the early going, they were quickly corrected. It was also pointed out that this is the type of human error problem that can occur in any business.
Furthermore, according to a Rutgers University research study of the NJ online gambling sites in their first year of operation, there was no evidence that online gambling was conducive to increased incidence of fraud and money laundering. This finding is not surprising since the NJ online casinos use the same protective measures as banks. The Rutgers study also found no evidence of increased problem gambling attributable to the availability of the online gambling option. On the contrary, according to Moncrief, there are more controls in place to curb irresponsible gambling than on the casino floor since every online transaction is tied to the player’s account. There is no anonymity.
Early vs. Late Entry into Online Gambling
Borgata, Tropicana, Caesars, and Harrah’s Online Casinos all had their online gambling platforms up and running since day 1, November 26, 2013. Other sites did not enter the iGaming market until later. Other companies are now weighing the pros and cons of opening a new site in New Jersey, or perhaps another state if and when that option also becomes available. Would such a move pay off because they can draw on the experience of the existing sites about what to expect, as well as learn from their predecessor’s mistakes? Or would opening another NJ online casino be a big risk because of the uncertainty of being able to compete effectively against all the existing sites that already have a well established customer base?
Steve Nathan, Vice President of Online Gaming at the Borgata Hotel Casino & Spa said that Borgata Online Casino’s early launch was very advantageous in capturing a large customer base from the outset. On the other hand, having only nine months between the time the DGE approved the site and opening day wasn’t sufficient time to iron out all of the bugs ahead of time.
Another panel member, Mattias Stetz, CEO of Rush Street Interactive, spoke about his experience as the operator of PlaySugarHouse.com, which has only been open since September, 2016. Besides entering the NJ market long after most of the other sites, another disadvantage his online casino had to overcome is that the land-based casino is in the Philadelphia area rather than Atlantic City. For some online players that would mean a longer commute to the land-based casino, while for the Pennsylvania residents visiting the casino in their state, the online casino could only be accessed if they traveled to New Jersey. The casino is now trying to provide more benefits for online customers in order to increase traffic to the site.
Nicholas Menas, Executive Vice President of Corporate Development and Government Relations at Amaya Gaming, who was also on the panel, does not believe that entering the iGaming market late is necessarily a disadvantage. He said that Resorts is a good example of a latecomer which has fared very well.
Hard Rock International, which plans to open a new land-based casino in Atlantic City in the summer of 2018, is also planning to open an online casino. While confident that both endeavors will be highly successful, Senior Vice President of Online Gaming, Kresimir Spajic, who was on the panel as well, acknowledged the need to attract new customers by actively promoting the Hard Rock Brand as a leader in entertainment as well as casino gambling. He also regards the successful existing sites as an open book that could be very beneficial to Hard Rock.
Engaging the Customer
Luisa Woods, Executive Director of Online and Internet Marketing at the Tropicana Atlantic City, said that 10% of the casino’s revenue is coming from the Internet. The Tropicana online games introduce many new people to casino gambling for whom, for one reason or another, traveling to the land-based casino is difficult or inconvenient. Others who haven’t played in quite a while return to gambling because they are attracted to the online games. There are also many people who like to play both online and in the Atlantic City casino and who, since they started playing online, are increasing their visits to the property as well. Over 10% of Tropicana online casino players generate traffic to the land-based casino.
Woods believes that there is a “tremendous opportunity” for continued growth of online gambling and that engaging the customer is the key. Thus, Tropicana staff members are reaching out to both existing and prospective customers. Online players are also able to access rewards on the property as well as online. In addition to being able to use their comp points from online play towards rooms, meals, and other casino amenities, online sweepstakes are held periodically where the prize is a stay at the Tropicana in Atlantic City.
Marketing to Millennials
According to Moncrief, many people in New Jersey, surprisingly, still don’t know that online gambling is legal in that state. So it is important to get the word out and particularly to millennials, who are seen as the key to the success of the casinos of tomorrow. The DGE has asked manufacturers to step up their efforts to get innovative online games ready as quickly as possible to drive new traffic to the sites.
Which State Will Be Next?
This question is hard to answer. But according to the experts, Pennsylvania, New York, and Michigan all look promising.