The uncertainty of the impact of intrastate online gaming in New Jersey apparently was too much for Governor Chris Christie, who last week vetoed the bill conditionally. The bill was the first to pass any state legislature in the U.S. that would have legalized the online wagering. 

In addition to legal and constitutional concerns, Christie reportedly rejected the argument that because the servers would have been based in Atlantic City at the casinos there, the gambling actually takes place in the only city in New Jersey were gambling is legal.

“In my view, the creation of a legal fiction deeming all wagers to have ‘originated’ in Atlantic City cannot overcome the clear and unambiguous language of the state constitution,” he said in a veto message.

Therefore, according to Christie, a referendum put before the voters of New Jersey is necessary. A recent poll indicated that 67 percent oppose the introduction of online gaming in the state, while a majority favor sports betting in Atlantic City.

“If the legislature believes that expanding gambling outside of Atlantic City is in the best interests of the state of New Jersey, it should place the question on the ballot for the voters to decide,” the governor said.

Christie was also worried that the bill would have spurred the establishment of “cyber cafés” that would have attracted gamblers without access to computers or those who wanted more high-tech features. Since these cyber cafés would have directly competed with Atlantic City casinos that were designed to be aided by the bill, Christie could not see how the measure would have accomplished that goal. He also didn’t want gaming center popping up in communities that didn’t want them.

Another concern voiced by Christie was a portion of the online gaming tax revenues that would have been dedicated to horse racing in the state. He has consistently rejected any kind of subsidy for that industry, even one paid for by the casinos in Atlantic City.

Senator Raymond Lesniak, the sponsor of the online gaming bill, said he would not try to override Christie’s veto, which passed overwhelmingly in both houses of the legislature. “The votes just aren’t there,” he said.

But Lesniak wasn’t giving up, and said Christie is willing to consider a revised bill.

“While the governor expressed concern with some aspects of the bill today, he's committed to the general idea that we have to expand gaming product in order to bring our gaming industry back from the brink of fiscal insolvency,” said Lesniak in a written statement. “I'm encouraged that he's expressed an interest to work together to maintain the core idea behind internet wagering while making sure that such operations cannot be hijacked by unscrupulous operators.”

Since the bill was vetoed conditionally, legislators can address the concerns of the governor with specific passages in the bills, rewrite the bill, pass it with a simple majority and return it to the governor’s desk.

Because other states are considering online gaming—and the activity continues illegally in every state—supporters expressed hope that New Jersey could still be the first.

“We need to be in the forefront simply because it’s going to be the wave of the future,” state Assemblyman John Amodeo, a Republican from Atlantic County, told the Wall Street Journal. “If it went nationally and internationally, we could make a lot.”

Lesniak said time was of the essence, particularly with bills being considered by the Iowa and California legislatures.

“We need to work as quickly as possible to bring this bill back to the governor's desk, and position Atlantic City to become the Silicon Valley of the high-tech gaming sector,” he said. “New Jersey can still become the first state in the nation to offer legalized internet wagering, and by leading the way, we position the Garden State to reap the benefits of getting in on the ground floor of a multi-million dollar market.”

While legalized online gaming would have benefited the Atlantic City casinos, the city’s major operator, Caesars Entertainment, lobbied strongly against the bill. Caesars is taking a more national approach and favors instead a federal bill legalizing online poker. At a recent conference in London, Caesars Senior Vice President of Communications and Government Affairs Jan Jones called the New Jersey bill “dangerous” to that goal of a federal measure.

“We’ve always felt that the first focus should be trying to enact federal legislation,” she said.

Christie’s veto message didn’t address any possible federal problems with the bill. Experts had questioned whether the Justice Department would have challenged the bill in court under the tenets of the Unlawful Internet Gambling Enforcement Act (UIGEA) of 2006 or the long-standing Wire Act that has been used to prevent gambling across state lines and the transfer of money electronically for gambling purposes.

The Poker Players Alliance was circumspect about Christie’s veto.

“We firmly believe that licensing and regulating online poker is the best and most effective way to protect consumers, protect Americans’ internet freedom and generate much needed revenue,” said PPA Chairman and former U.S. Senator Al D’Amato. “However, the PPA also firmly believes that given the borderless nature of the internet, these interests would be best served by federal legislation that would provide licensing and regulation of interstate poker, as opposed to state-by-state regulation, whereby players in New Jersey could only play with other players in the Garden State. 

“The actions by New Jersey and other states to push for needed licensing and regulation at the state level should serve as a wake-up call to the U.S. Congress that there is public support to create a safe, regulated online gaming market place and that it is time for them to act.”

Meanwhile, lawmakers in Florida, California and Iowa are working on gambling bills that would regulate online poker.

Florida lawmakers are expected to consider legislation that would allow dog and horse tracks and jai-alai frontons to create portals to legal online poker rooms. Each card room would give the state 10 percent of revenues—the same amount given from live poker rooms.

"We want to legalize it, regulate it and bring the revenue to Florida. To me it’s common sense to protect our players," said Democratic Rep. Joseph Abruzzo, who introduced an internet poker bill last year and will reintroduce the measure in the upcoming session. (He recently said he may raise the state’s revenue cut to 20 percent.) A similar bill was introduced in the Senate.

According to the bill, the state would contract with up to three sites as a hub, with the websites of Florida's 23 parimutuels that have card rooms serving as portals. Players would access one of the websites to play with other Florida players. The company that runs the hubs would give a small portion from each pot to the card rooms.

A Senate committee report estimated by the third year of online poker, the state could net revenue of nearly $37 million. Abruzzo said a gaming company that previously studied the issue projected higher returns. Currently about 900,000 Floridians are registered to play online poker; one-third play for money, according to independent studies.

Florida has card rooms in 23 parimutuel facilities in Florida. “Internet poker would be another step in that evolution,” said Florida lobbyist David Roberts of Capital Action Consulting.

However, Roberts and Iarossi agree that convincing the legislature to approve internet poker will be difficult. “It’s very hard to pass something,” Roberts said. “It’s much easier to kill it.”

In the Iowa Senate, a committee will soon vote on an internet poker bill by the end of the week. Democratic Senator and President Pro Tempore Jeff Danielson included internet poker in a wide-ranging gambling bill. The measure would allow only Iowa’s existing casinos to offer intrastate online poker through one shared poker network, Danielson told Gambling Compliance.

An internet poker site in Iowa could generate up to $35 million in annual tax revenues for the state, said Kirk Uhler, vice president for government affairs at U.S. Digital Gaming. U.S. Digital Gaming is one of the companies hoping to operate Iowa’s online poker network if Danielson’s bill becomes law. An estimated 150,000 Iowans play internet poker. “We think it is a viable marketplace,” Uhler said.

Tim Albrecht, spokesman for Governor Terry Branstad, said the governor has not taken a position on the online poker bill. Branstad has proposed raising taxes in the land-based casinos from 22 percent to 36 percent.

Danielson said he introduced his bill to protect online poker players. “They don’t realize it’s illegal. There is a disconnect between what people are actually doing online and what the law actually is,” he said. “Even if it doesn’t pass this year, my bill will at least have the benefit of raising the issue because Internet gambling is not going away.”

In California, lawmakers were watching New Jersey’s pioneering efforts in online gaming very closely, although proponents of legalizing online poker in the Golden State say they are not concerned with what another state does.

"We're focused on our efforts here," said Ryan Hightower, of the California Online Poker Association last week. This group is a consortium composed of 28 gaming tribes led by the Morongo Band of Mission Indians and 13 card rooms.

Jan Beverley, general manager of one of those card rooms, the Lucky Lady Casino last week were optimistic about success. According to 10News San Diego he said, “It could be very lucrative. We would want to try to be a part of that. I think it will be good for California to get some revenues from it because people are going to play no matter what.”

Congress made online gaming illegal in 2006, but left individual states the option of making it legal within their jurisdictions and to their citizens only. About two-thirds of those polled in California favor such a law.

It is estimated that 2 million Californians, or more than half of the national players, accounting for $2 billion annually defy this law. The state could be collecting as much as $1 billion a year in taxes, says Hightower. The biggest offshore websites are Poker Stars and Full Tilt Poker, both who are considered criminal enterprises by the U.S. Justice Department.

Such a law would also serve the interests of players, say supporters, because some players have found it hard to collect their winnings from the offshore gaming sites.

This is the second year that bills addressing online gaming have been introduced in the legislature. There are two bills, both of them in the Senate. One would allow three operators based anywhere to operate online gaming websites under California licenses. The other bill would not limit the number of licenses but would restrict their issuance to businesses and tribes based in the state.

Opponents of legalizing online gaming in California include the aforementioned offshore gaming websites, some gaming tribes and Caesars Entertainment Inc., which wants a federal bill rather than state bills.

One other state cropped up last week too; a state in the midst of a brutal budget debate. In Wisconsin, where Governor Scott Walker has spurred a stand-off with the state’s public employees unions over proposed $1.25 billion in cuts to schools and local government, some lawmakers in that state are proposing legalizing internet gaming as a way to capture new revenue that has up until now been untapped.

By Staff