Five talking points from Lesniak's grand plans for New Jersey
eGR analyses the five key points from Senator Raymond Lesniak's latest New Jersey egaming bill, proposing to allow the state to issue foreign gambling permits to operators
1. Legal inconsistencies
The first draft of Senator Raymond Lesniak’s Restricted Foreign Internet Wagering (RFIW) bill has several legal inconsistencies that make it uncompetitive compared to jurisdictions like Alderney, Gibraltar, and Malta. For a start, all the significant online operators have already applied for a license in New Jersey. Those that have not applied either have a problem with acquiring a license in the US, or their product is related to sports books, which cannot be licensed in the States in the first place.
What’s more, the bill is intended to attract B2C operators rather than B2B suppliers. To qualify as an operator the entity must be a licensed casino in the US, or any other jurisdiction. On the other hand, other jurisdictions where online gaming is legal do not have the same restrictions.
2. Counting the costs
Perhaps one of the greatest hurdles for operators relocating to New Jersey is the overall cost of doing business in the state, which is significantly higher than other jurisdictions around the world. New Jersey’s application costs are around four to five times higher than those in other locations, higher than some of the regulated European markets in fact.
This is not helped by the annual $200,000 license fee proposed under the bill, higher than most jurisdictions. Interestingly, the state’s Division of Gaming Enforcement’s technical testing fees are the cheapest in the industry at $113 per hour, but attorney fees in New Jersey are two to three times higher than Europe. Compared to other jurisdictions, where the whole licensing process costs less than $150,000, New Jersey simply can’t compete.
3. Relocation relocation
The whole idea behind the bill is to create jobs in New Jersey, but at the moment there are no resources in the state experienced in online gaming. Resources will therefore have to be relocated from outside the country. Most New Jersey operators have established offices close to New York City and Philadelphia, where living costs are much higher than other areas in the US, and certainly more than in European cities.
The greatest operational hurdle is the placement of equipment “ such as gaming servers “ which under the bill would have to be located in one of Atlantic City’s bricks-and-mortar casinos. Re-locating equipment is an expensive process. On top of that, people who have access to such equipment in the casino need to be approved by the DGE, creating an issue for overseas operators. On top of that, casinos will not allow staff from other operators to access their data floor, where the servers are likely to be held.
4. Taxation
Lesniak proposes a gaming tax of 10% of gross gaming revenue, plus another 5% for an “alternative and investment” tax. This is significantly higher than tax rates in competing jurisdictions, which either have no gaming tax, or a gaming tax that is capped at $500,000 annually. To lessen the taxation blow, the bill includes a caveat that will allow New Jersey based operators to claim tax credits against taxes incurred in other jurisdictions. However it is unlikely to be enough to outweigh the initial gaming tax.
5. Federal intervention
The New Jersey Casino Act deems that gaming has to take place in Atlantic City, and is only available to New Jersey residents. Currently players have be over 21 years of age, higher than the global standard of 18, and have to be geo-located inside the state borders to play, including a three mile limit on the sea-side of the state to stay within the US international border. Outside those limits the Wire Act comes into force, so Lesniak will have to demonstrate to the federal government how he intends to go around that.