New Jersey Governor Chris Christie signed legislation authorizing online gambling in the state, setting off a national horse race over a business forecast to reach $13.4 billion in five years.
The governor, a first-term Republican seeking re-election, signed the bill yesterday. Christie said the measure will help New Jersey’s struggling casino industry and projected an 85 percent increase in his state’s casino tax revenue from online gaming and an economic recovery.
“This was a critical decision, and one that I did not make lightly,” Christie said in a statement. “I am confident that we are offering a responsible yet exciting option that will make Atlantic City more competitive while also bringing financial benefits to New Jersey as a whole.”
New Jersey is the most-populous state to legalize online gambling, following Nevada and Delaware. Other states, including the largest, California, may be prodded to pass Internet betting bills in the absence of federal legislation, according to Simon Holliday, director of the U.K.-based research firm H2 Gambling Capital. Nevada and New Jersey, with their long-standing casino industries, are competing to take a leadership role in the evolving business.
“The fact that Nevada had moved down this road made it more likely Governor Christie would be tipped over the edge,” said Holliday, who provided the five-year forecast. “Both of them have a vision of getting out there first, becoming some kind of hub for interstate pooling of liquidity.”
Casino companies in Atlantic City rose. Boyd Gaming Corp. (BYD:US), co-owner of the Borgata Hotel Casino & Spa with MGM Resorts International (MGM:US), gained 3.9 percent to $6.75 at 2:10 p.m. in New York. MGM Resorts added 2.8 percent and Caesars Entertainment Corp. (CZR:US), the city’s largest operator, advanced 3 percent.
London-traded online gambling companies with ties to New Jersey’s casinos also rose. Bwin.Party (BPTY), in a partnership agreement with Boyd and MGM Resorts, added 8.9 percent to 150 pence at the close of trading. 888 Holdings Plc (888), in an accord with Caesars, climbed 4.3 percent to 156.75 pence. Zynga Inc. (ZNGA:US), the biggest maker of online social games, jumped 5.1 percent.
On Feb. 7, Christie conditionally vetoed the bill, which allows New Jersey residents to bet online in games run by the state’s casinos. Lawmakers returned it to him yesterday with recommended changes, including a time limit, a tax-rate increase, and more money for compulsive-gambling programs.
Online gambling in the state could be a $1.5 billion annual business in five years, Dennis Farrell, a casino analyst at Wells Fargo Securities, said in a Jan. 24 investor note.
“All New Jersey license holders will benefit, but properties with strong brands and gaming facilities will likely see the most upside,” Farrell said.
Borgata’s owners, Boyd Gaming and MGM Resorts, and Caesars are best positioned to capture online business in New Jersey, Farrell said. Borgata is the top-grossing single property in Atlantic City, according to Bloomberg Industries data, while Caesars operates four casinos.
New Jersey is looking to fend off competition as nearby states open casinos and others pursue online gaming. Senator Raymond Lesniak, an Elizabeth Democrat who sponsored New Jersey’s bill, has said Internet gambling offers the best chance to do so. Last week Nevada Governor Brian Sandoval signed a measure legalizing such gaming in his state and opening the door for agreements with other states.
Casinos licensed in New Jersey must get a permit to offer online betting, according to Lisa Spengler, spokeswoman for the state’s Division of Gaming Enforcement. Third parties that want to offer services through the state’s casinos must obtain licenses, she said. Regulators will announce an official start date, which will be in 90 to 270 days.
Caesars expects to offer online poker in Nevada this year and in New Jersey in about 18 months, Chairman and Chief Executive Gary Loveman said on a conference call yesterday.
The governor projects fiscal 2014 casino-tax revenue of $435.8 million, up from a revised fiscal 2013 expectation of $235.4 million, according to a budget summary. The 2013 number was lowered from an earlier prediction of $284 million after casino revenue failed to meet his forecasts.
Christie’s recommended changes included raising the state’s share of bets to 15 percent from 10 percent and establishing a 10-year time limit, after which the Legislature would have to reauthorize the bill. The first online bets should be taken by September, Lesniak has said.
New Jersey casino revenue fell 8 percent to $3 billion in 2012, the sixth straight decline, according to the Division of Gaming Enforcement. Nevada’s revenue rose 1.5 percent to $10.9 billion last year, according to Bloomberg Industries data.
Lesniak said the legislation will save one or two Atlantic City casinos that might have faced closing, preserving as many as 4,000 jobs. Michael Doherty, the Republican senator who cast the sole vote against the legislation, said the state should follow the example of New York by increasing the tax rate on casinos and allowing them closer to the population centers.
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