New Jersey Introduces In-State Internet Gambling Legislation

Jan. 15, 2010 - A newly proposed law would allow Internet gambling by New Jersey residents, to be offered on Web sites through the state’s casinos in Atlantic City. The bill was introduced in the New Jersey senate by Sen. Raymond J. Lesniak (D-Union), who also introduced a separate bill which calls for New Jersey residents to vote on a constitutional amendment that would permit state-regulated sports wagering in Atlantic City casinos, and by state residents via an intra-state Internet gambling system.

New Jersey currently offers wagering on horse racing to state residents through the 4NJbets.com Web site. The state would expand the law to permit Internet versions of games currently allowed in Atlantic City casinos, such as Poker, Blackjack and Baccarat. The intra-state Internet gambling system would be regulated by the New Jersey Casino Control Commission, which would establish a Division of Internet Wagering to oversee operations and licensing.

“We’re happy that New Jersey has taken this issue into their own hands,” said iMEGA chairman Joe Brennan Jr. “New Jersey is recognized as having the toughest gaming regulators in the US, but as a leading gaming state with a long track record of doing things the right way, Internet gambling will have a great home here and the opportunity to begin normalizing the industry.”

Though iMEGA supports efforts in Washington DC, especially by Rep. Barney Frank (D) in the US House and Sen. Robert Menendez (D) in the US Senate, to create a Federal path to regulation, the association worked with New Jersey legislators on the new bill to ensure continued progress toward regulated Internet gambling in the US.

“The efforts to resolve the Internet gambling issue have stalled in Washington DC,” Brennan said. “If states assert their right to regulate gambling and take a serious look at permitting Internet gambling within their borders, one side effect may be a breaking of the deadlock in the US Congress.”

Links
NJ Senate S3167 - Intra-State Internet Gambling Bill
Bio: NJ Senator Raymond J. Lesniak

Huh? Since when have the federal "efforts to resolve the Internet gambling issue" stalled? Didn't we just get a delay to the implemenation of the UIGEA regulations, and a start on the markup hearings for the Barney Frank bill?

Also, I'm not sure why iMEGA thinks this NJ bill is a good thing, since it will make all internet gambling sites illegal for NJ except for sites run by licensed Atlantic City casinos with their gaming servers located in Atlantic City.

I am less concerned about who owns the sites and where the servers are located than I am that these legal requirements will also mean that the poker offered by the AC casinos (and who they hire to create and run the sites for them) will be limited to only NJ players.

NJ is a good sized state and that may well make such a system effective. But while I hardly consider it a deal killer, if I lived in NJ I would sorely miss being able to play ring games and especially tournaments against players from other jurisdictions and countries.

But other than that concern, I agree with the general premise that we should push for openly legal online poker wherever we can, and to whatever extent we can get. Every step forward gets us closer to the real goal.

Skallagrim

Oh boy...what''s going to happen to NJ residents who have poker accounts on sites that are regulated off-shore. That just makes illegal for those sites to allow NJ residents to play on those sites except for the ones within NJ. Isn't it weird how the Barney Frank and the PPA try to push for federal legalized online gambling but yet those rights are reserved to the states? I can see why pushing to those online casinos and cardrooms to be federally legalized because they allow US players to play. Also the UIGEA doesn't really clarify to the players what is legal and what is not legal. Maybe NJ took this idea from Florida and California respectively...>_>

Wait, what am I missing? Unless I'm reading the wrong thing, I don't see this anywhere. Can someone show me where it says that me (NJ resident) playing on pokerstars will become illegal if this passes?

Edit: nm, found this thread: http://forumserver.twoplustwo.com/57...-490-a-685979/

Why do you think the right to regulate interstate gaming is reserved for the states? Nothing in the Constitution defines gaming as a state issue. OOTH, the Commerce Clause gives Congress the right to regulate interstate and foreign commerce.

All -- the PPA is very intrigued by the NJ proposal. We have not taken a formal position and we appreciate the dialogue on this forum. To further the discussion and help us better understand the bill I am meeting with iMEGA this week. Hope to have more of a perspective after this meeting.

Thanks,

John Pappas

IMO, the PPA should oppose NJ proposal on the grounds that it is too protectionist and violates the Commerce Clause of the US Constitution.

PPA needs to support this legislation. Closest thing in the works to legally licensed and regulated poker. This will be a huge victory for poker players in US.

I think the PPA opposing this proposal would be foolish. Legislation like this, even at state level, is still a means to push back on the current federal situation. This may be somewhat protectionst and frankly that's fine by me. I appreciate that some lobbying groups might have ties to such sites, but I have no loyalty to Stars, FTP, or really any offshore site at all.

In this case, it would be regulated by a state agency I know to be very critical and demanding, and if my games are going to be taxed I'd much rather see revenue staying in state as much as is possible. Sure there is a big trade off with regard to the player pool but we could finally get some badly-needed accountability for operators, because I think we're all tired of the UBs/APs/Pitbulls/Pokerspots having none.

This also doesn't rule out other states following suit and perhaps becoming part of a larger network (such as with lotteries) in the future. This might be a good out for those states who object to this sort of thing anyway... if some Bible Belt state doesn't want online gambling or the revenue it could help provide, so be it.

There are millions, if not billions, of dollars collected in taxes from gambling in the US, but how much of that does the federal government get? I believe very little. They now have a chance to cut themselves in with a licensing and regulation bill. However, if the individual states do it for themselves with intrastate initiatives, then once again the feds will be left out in the cold.

I think these kind of initiatives give one more reason to Congress to act.

To Joe Brennan Chairman @ imega.org

Mr. Chairman, if you could respond to this when you get a chance from your busy schedule...I'm an MBA student looking to finish and go to law school and I admire your work for not just poker players but also for creating the dialogue between the entire online gaming industry and government while fighting for every American's right for freedom on the internet...

With that said, Mr. Chairman, could you answer why no has challenged the supreme court to redefine the Wire Act in the context of online gambling and not telephone or electronic gambling...Clearly the Wire Act predates the internet and lawmakers could not have created such a rule with the foresight of the internet so many decades ago. If the Wire Act is explained and understood to not include internet gambling (especially gambling games of skill that do not include sports gambling), then the DOJ cannot threaten gaming sites and American citizens with the notion that internet gambling is illegal. I understand that it may not be high on the supreme courts list, but with so much money at stake and clearly an outdated law that fails miserably to be both understood and explainable to even the common man, there is a fundamental lag between the Wire Act, internet gambling of today, and what is deemed legal or illegal.

-Michael of NJ

I'm in the middle of traveling to the UK this weekend, but once I get settled in London, I'd be happy to address this.

Joe@iMEGA

Do you have a strong argument why the states should give up control of gambling regulation, along with half of the tax proceeds they could otherwise receive?

^^^ Because they don't/can't control it on the internet?

I don't think Congress will cut the states out of getting some revenue. I am talking about the feds cutting themselves in. Federal law does trump state law.

My point is if Congress thinks online gaming is inevitable anyways, then they will have extra motivation to pass something soon or else, once again, be cut out.

In the "Skill Games" bill in the US Senate (alternately called the "Poker Bill" and the "Harrah's Bill"), it specifically exempts the revenue from state and tribal taxes (Sec. 207 - S. 1597: link to text)

SEC. 207. EXEMPTION FROM STATE AND INDIAN TRIBAL GOVERNMENT TAXATION.

(a) Exemption From Tax on Internet Games of Skill- A State or political subdivision thereof, and an Indian tribe or political subdivision thereof, shall impose no tax on--
(1) deposits or bets or wagers placed with a licensee that is subject to the fees under section 4491 of the Internal Revenue Code of 1986; or
(2) income of a licensee relating to such deposits or bets or wagers, unless such licensee maintains a permanent physical presence in such State or within the area of the jurisdiction of such Indian tribe.

Joe@iMEGA

Mr. Chairman:

When I logged on this morning to see that you made a post I was anticipating a response to my original question. Nevertheless, I hope you had a reasonable pleasant stay in London. Mr. Chairman, what do you expect will come about in the California Assembly committee that is to take place February 8th- 9th? It is my opinion that if the tribes are concerned about their casinos, then a move to legalize online gaming will only be with a licensed poker platform. This is a slight, but important concession because internet gaming in the state of California will not encroach on the other games offered by the California held Indian-casinos. It seems that the Morongo group may have finally got on the same page due to this important concession. What is your take on this and also any news on NJ and Sen. Lesniak's bill for online gambling regulation? Just yesterday, the Delaware governor signed the bill to allow table games in the 3 Delaware casinos. These table games may be up even before games in Pennsylvania as with only 3 casinos in Delaware, there is less coordination that is needed compared to Pennsylvania and also less red tape. NJ lawmakers and Atlantic City better take notice because come June this summer, mark my words, Atlantic City will be a ghost town and they'll be begging people to visit. I optimistically await your response.

Michael of NJ

Why no one has challenged the supreme court to redefine the Wire Act in the context of online gambling and not telephone or electronic gambling...

Any challenge would not proceed directly to SCOTUS. It would have to start at District Court level, wind it's way through, and hope that SCOTUS would pick it up. Thus far, no one has come forward to make that kind of investment over time, preferring instead to lobby the US Congress for affirmative legislation.

One case, In re MasterCard, made it to the US 5th Circuit Court of Appeals, where the panel ruled that the Wire Act applied only to sports betting, but that decision is only the precedent for states within the 5th Circuit (Texas, Louisiana and Mississippi). Louisiana has state laws against Internet gambling.

Mr. Chairman, what do you expect will come about in the California Assembly committee that is to take place February 8th- 9th?

It's simply a hearing. Currently, there is no legislative sponsor, but perhaps after the hearing, one will emerge in Sacramento. There still seems to be discord amongst the tribal gaming interests on the issue, and how that is resolved, more than any other factor, will determine whether the Internet poker issue will succeed in CA.

What is your take on this and also any news on NJ and Sen. Lesniak's bill for online gambling regulation?

The bill in NJ will go to hearings in the NJ senate gaming and budget committees. In the meantime, legislation will need to be introduced into the NJ assembly. There is bi-partisan support for the measures, and interest in the new administration.

There was news that a transition committee, largely influenced by a Harrah's executive, issued a report recommending that (paraphrasing) 'NJ not waste money legalizing Internet gambling..." ahead of a Federal law, but given that it's no secret that Harrah's prefers a Fed solution that exempts operators from paying state taxes, NJ will likely reject that report's recommendation.

Joe@iMEGA

Mr. Chairman,

Thank you for your candid response. It offered a great deal of insight to both myself and I'm sure others who look forward to your posts. Interesting that you mentioned Harrah's because they are well positioned to provide an online gaming platform. As you already know, Harrah's relationship with 888's Business to Business Arm Dragonfish has already launched online gaming in Europe with CaeasarsCasino.com which Harrah's owns in addition to the WSOP. It is ironic that with the status of online gaming being up in the air, Harrah's has stepped outside of U.S. borders conducting business with the same online gaming platform that is incorrectly considered illegal by many in the U.S. How a reputable company like Harrah's is forced offshore to conduct its business activities while not being able to take advantage of the economic landscape in its own backyard is an absolute joke and a disgrace. As a NJ resident, I will be looking forward to the proceedings in the state and hopefully the bill will make to the state assembly in the not too distant future.

Michael of NJ

I would be surprised also if the senior Senator from Nevada will support exempting online gaming from Nevada taxes. ..... not to mention any Senator from any other state with a sizable brick & mortar gaming industry.

I'd think cutting out States is a sure bill-killer. .... very tough to explain back home.

Chairman Brennan gives some revealing quotes in an article by pokernews.com regarding The Impact of New Jersey's Potential Legislation on Existing Online Poker. Firstly, Chairman Brennan reveals that the bill by Sen. Lesiak to legalize intrastate online gambling in New Jersey through NJ land-based casinos will not preclude NJ residents from playing at current offshore sites such as Full Tilt and PokerStars. While the bill does have a $100K fine for violators who offer online gaming without the consent of the NJ Gaming Control Commission, the fine is and can only be enforced on violators which the state of NJ has jurisdiction over. And of course, the state of NJ has no jurisdiction over offshore sites thus rendering them powerless to sites such as PokerStars and Full Tilt. Now tie in the Kentucky case of which IMEGA represents defendants such as Full Tilt and PokerStars and you can understand how the online landscape is beginning to take shape. If IMEGA gets a favorable ruling in Kentucky, the ruling will set the precedent that states cannot restrict or block the domain names of online gaming sites. IMO, this would really be the only advantage the state of NJ can have over offshore sites (restrict their player access within state thereby forcing residents who gamble online to only play licensed intrastate sites). These sites are already skilled enough and partnered with so many 3rd party payment providers that they have all but circumvented the UIGEA law. If you are a PokerStars or Full Tilt player, why would you leave your offshore site to play on an intrastate site with probably a smaller player pool which equals less profit making opportunities for the player. Chairman Brennan goes on to say that "it is an incentive for casinos to cut a deal with existing operators" basically so as to not have to expend a great amount of capital on overhead. This means that with a bill in play, B2B relationships could be absolutely vital to compete in the online intrastate market. For a proactive company like Harrahs, they already have a stout B2B relationship with 888's B2B arm Dragonfish as Harrahs is already raking in online gaming revenues from its caesars website that operates in Europe. Harrahs along with 888 holdings (which Pacific Poker belongs to) are already well-primed and positioned to enter the market with little manuevering necessary compared to other NJ casinos. No disrespect to the PPA, but IMEGA has been fighting this fight for years since they challenged the UIGEA at the Circuit Court of Appeals getting a very subtle but favorable ruling. IMEGA is right on the ball as they seem to be all the time. States are just waiting to see who will blink first. Once online gambling is passed within a state, the proverbial genie will be out of the bottle and other states will rush in. I agree with Chairman Brennan that it is essentially this process, and not the legislative process on Capitol Hill, that will force the federal govt to step in, legalize and regulate online gambling. States right now are just looking for a proven model. But their are other models possible aside from what NJ is doing. NJ is just trying to tie intrastate gambling to the AC casinos because they are currently struggling and will continue to struggle once table games open up in PA and Delaware. The UIGEA allows the state to determine whether gambling is legal or illegal. There is nothing in the UIGEA that precludes a private company or even a publicly traded company like Party Poker from setting up intrastate gambling in any state so long as online gambling is in fact deemed legal by that state (though the Wire Act could still surface as a scare tactic). Again this was an extremely telling article and I believe valid info that realistically and legitimately puts us closer to some form of licensed online gaming.


Keeping a close watch,
Michael of NJ

"If you are a PokerStars or Full Tilt player, why would you leave your offshore site to play on an intrastate site "

1. Comfort knowing that funds cannot be seized or frozen (Paypal fiasco)
2. Easy methods and QUICK (if not instant) cashouts and deposits with no fees!
3. Comfort of knowing that site is accountable (much less likely UB type scandels)
4. Licensed and regulated in the states
5. Licensed and regulated in the states
6. Licensed and regulated in the states (This is pretty important)
7. Fish to shark ratio much higher knowing that this will appeal to rec players because it eliminates most thoughts and suspicions of rigged offshore sites (I think it is generally agreed that a large player pool don't feel like they are getting a fair deal). More profitable as a result.
8. Potential to expand to other states
9. Tax revenue will stay onshores and help govt programs.

Take a look a Sweden Spel as an example. It is a huge success. Sweden's population 9+mil. NJ 8.6+mil.

Here is the link to the article:
http://www.pokernews.com/news/2010/0...sting-7871.htm

Partnering with an offshore site in a B2B relationship does not automatically mean a combined international player base. A lot will depend on the wording of the legislation and the subsequent regulations, as well as whether or not the DOJ brings the Wire Act into play.

For online casino gaming, which is a far bigger profit center, I think, for the casino corporations than poker, this issue doesn't come into play. The offshore gaming software developers like Dragonfish and Playtech can just come in and set up the in-state casinos with their software, branded, on local servers.

It's only peer-to-peer poker which has a questionable outcome, since the servers for playing on a combined international player base will continue to be located where they are now - offshore. Will sites like PS and FTP be allowed to partner with the in-state casinos to bring to market a branded version of their poker clients but operating out of their current server location, or will they only be allowed to provide a branded version of their poker software for in-state server operations limited to in-state players? That is the big question in regards to intrastate online poker which has yet to be answered, not who will and who won't be offering poker in the state.

[QUOTE=PokerXanadu;16550990]Here is the link to the article:
http://www.pokernews.com/news/2010/0...sting-7871.htm


Partnering with an offshore site in a B2B relationship does not automatically mean a combined international player base. A lot will depend on the wording of the legislation and the subsequent regulations, as well as whether or not the DOJ brings the Wire Act into play.

I appreciate your respond and also for posting the link. Somehow it didn't work on my end. Let me first begin by saying that no where in my comment did I mention anything about a combined international player base. It would be premature to assume that a B2B relationship automatically links an int'l player base. If you could find where I alluded to anything like that I would be impressed. The only player base I referred to was an intrastate player base. We do however agree on the possible complexity that the Wire Act can bring. I think that is fair to mention.

For online casino gaming, which is a far bigger profit center, I think, for the casino corporations than poker, this issue doesn't come into play. The offshore gaming software developers like Dragonfish and Playtech can just come in and set up the in-state casinos with their software, branded, on local servers.

Of course Dragonfish and Playtech can just come in and set up in-state casinos. I gave the same example with a public company such as PartyPoker doing precisely the same. Anyone can set up an online casino provided that it is legal in the state and that the company abides by any of the state's regulations. You can do it, I can do it. Anyone can do it provided we are within the laws of the state. What you write here was already addressed.

I think for the most part we agree on the same points with a slight difference in semantics. All in all, I thought the pokernews article was quite telling.

Michael of NJ