New Jersey Governor Chris Christie, who vetoed Internet gambling in 2011, said he would be willing to allow a 10-year trial period of online betting to see if it helps Atlantic City casinos stem six years of declining revenue.
The governor, a first-term Republican seeking re-election, conditionally vetoed a bill today that would allow wagers to be placed online for games conducted in Atlantic City casinos. He sent the measure back to lawmakers with recommended changes, including the time limit, an increase in the tax on Internet bets and more money for compulsive-gambling programs.
Senator Raymond Lesniak, an Elizabeth Democrat who sponsored the bill, said he expects the changes to be approved by the Assembly this month and by the Senate in March, and the first online bets to be taken by September. Internet gambling is New Jersey’s best chance of fending off competition from nearby states that have opened new casinos, Lesniak said
“The conditions are minor changes,” Lesniak said in an interview today. “This is going to be wildly successful, and it’s going to bring in millions of dollars of additional revenues for the casinos and the state.”
Shares of Caesars Entertainment Corp (CZR:US), the largest operator in Atlantic City with four casinos, rose 17.3 percent to $9.96 as of 3:36 p.m. in New York. Boyd Gaming Corp (BYD:US)., which manages the Borgata, the top grossing Atlantic City casino, rose 3.3 percent to $7.14.
New Jersey lost its spot to Pennsylvania last year as the second-largest gambling market in the U.S. after Nevada. Revenue for Atlantic City casinos slumped 8 percent in 2012 to $3.05 billion, as Pennsylvania casino revenue increased 4.4 percent to $3.16 billion.
Only Nevada and Delaware allow Internet betting. California, Hawaii and Mississippi lawmakers also are seeking to authorize online gambling, according to the Denver-based National Conference of State Legislatures.
Christie’s recommended changes include increasing the proposed tax on Internet gambling to 15 percent, from 10 percent in the original bill, and an annual analysis of the potential harms of the new format.
“Our state cannot carelessly create a new generation of addicted gamers, sitting in their homes, using laptops or iPads, gambling their salaries and their futures,” Christie, 50, said in a statement.
The bill allows people within the state to place bets on any game presently played in casinos, although poker is expected to be two-thirds of the revenue, Lesniak said. Bets would be taken by casino operators licensed in the state through hardware located in Atlantic City.
“The opportunity is for us to become the Silicon Valley of Internet gaming,” Lesniak said.
Online gambling could climb to $1.5 billion of revenue in New Jersey annually over the next five years, according to a Jan. 24 report by Wells Fargo (WFC:US) Securities analyst Dennis Farrell, who called it “one of the last chances the governor has to provide a lifeline to Atlantic City casinos.”
The market could generate $171 million in earnings before interest, taxes, depreciation and amortization within three years, including $34 million for the Borgata, which is co-owned by MGM Resorts International (MGM:US), Union Gaming Group analyst Bill Lerner wrote in a research note today.
New Jersey approved casino gambling in 1976 and limited it to Atlantic City to help revitalize the once-bustling beach resort. The first casino, Resorts International, opened in 1978. Gambling revenue rose every year until 2007, when the recession began and casinos opened in nearby states, including Pennsylvania and New York.
Christie’s administration created a state-run tourism district in the city in February 2011 to oversee policing and cleanup. He also extended $261 million in tax credits to jump- start development of Revel Entertainment Group LLC’s project, the first new casino in nine years. It opened in 2012.
New Jersey’s online-gaming market could be a model or a partner for other states, said Assemblyman John Burzichelli, a Paulsboro Democrat. “We can create an environment that has checks and balances,” he said in a telephone interview.
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