Analysis: Mixed reactions meet New Jersey egaming law
Stocks of European operators with NJ ties see strong uplift, while California business group slams bill for "weakening" eligibility requirements to enter gambling market.
It was anti-climatic in the end but after almost four years, two vetoes and a whole load of uncertainty, New Jersey’s online gambling bill was finally signed into law yesterday, ushering in a new era for the US gaming industry.
The milestone event has already had positive ramifications for the share prices of companies hoping to have a crack at the market when it opens, while commentators from elsewhere in the US have criticised the bill’s backers for failing to keep out what have been described as “questionable corporations”.
In a thinly-veiled criticism of the state’s refusal to include a so-called ‘bad actor’ clause to prevent operators which accepted post-UIGEA bets from US customers (a provision removed from the bill last year), California Tribal Business Alliance chairman Robert Smith said New Jersey “appears to be weakening the eligibility requirements needed to obtain a gaming licence”.
Smith’s comments follow Nevada’s move last week to enact a five-year ban on any company “ such as PokerStars “ which ‘willingly accepted’ wagers after 2006. Conversely, Stars could yet find itself licensed in New Jersey should the Department of Gaming Enforcement allow its proposed US$40m acquisition of the Atlantic Club casino to go through.
“While the local market in New Jersey may be driving these sorts of decisions, in California we cannot allow for reciprocity with states that have lower standards and softer controls opening the doors to questionable corporations, which now appears to be the case in New Jersey,” said Smith. “Gaming at all levels should be held to the same, very high standards set for tribal gaming agencies in California.”
Meanwhile, in a statement made on the Senate floor prior to voting against the bill, Republican Michael Doherty said the bill was perpetuating a model “with its head stuck in the sand”, adding that “voting for this today is just allowing a bad policy to continue”.
But Governor Chris Christie’s swift signing of the bill following near-unanimous approval in the Assembly and Senate was met with far more positive reactions elsewhere. New Jersey now becomes the third US state to legalise online gaming after Nevada and Delaware, but as the eleventh most populous jurisdiction with almost 9m residents, it can truly be seen as a watershed moment for players, operators and suppliers alike.
The legislation’s key sponsor Senator Raymond Lesniak called it “a historic moment for Atlantic City and the state of New Jersey”, while Casino Control Commission Chairman Matthew Levinson claimed online gaming “holds the potential to provide a boost to the city’s casino operators as they rebound from the effects of the economy and increased competition, while adding another dimension to efforts to reinvigorate the city”.
Democrat Lesniak’s first attempt to legalise online gambling in the state was back in 2010 and he has fought long and hard to convince Christie that egaming will not cannibalise land-based profits, and that it would in fact give Atlantic City’s 12 casinos the lifeline they so badly need through an alternative revenue stream.
But it’s not just New Jersey’s gambling companies that are set to benefit. The share prices of two European operators “ 888 and bwin.party “ both with agreements already in place to provide online gaming software to leading New Jersey licensees, rose sharply.
888’s share price has risen by around 6% since the FTSE250 opened this morning based on the company providing Caesars with its online poker platform in the Garden State, capping off a strong start to 2013 which has seen a 26.2% hike. That’s a 163% improvement since the same time last year.
Meanwhile bwin.party, set to act as the software provider to New Jersey licensee Boyd Gaming, benefitted from a 12% boost which sees its stock up by 22.3% this year to date.
Both 888 and bwin.party will hope the brand recognition and marketing spend of their partners (Caesars controls four of Atlantic City’s dozen casinos while Boyd owns the significant Borgata Hotel Casino & Spa) will allow them to take a cut of New Jersey’s predicted revenue which will reach US$410m in year one, according data specialist H2 Gambling Capital.
Morgan Stanley increased its earnings per share (EPS) forecasts for 2015 by 5% for bwin.party and 24% for 888, adding that the long-term potential from the US market could be worth up to 460p per share for 888 and 560p per share for bwin.party.
The Poker Players Alliance, for so long a supporter of federal online poker regulation, commended Christie for signing the bill. Its executive director John Pappas said in a statement: “New Jersey has gone ‘all in.’ Residents now will have access to a safe and regulated online gaming market, and the state will have a new source for revenue and job creation “ something the federal government has failed to do thus far. The US represents the largest percentage of internet poker players worldwide, so there is clearly a want and a need for a legal and regulated online gambling market. New Jersey will now serve as a leader in this thriving industry.”
Indeed, now the state has crossed the regulatory finish line, the race to take the lead in a nationwide market can now begin. Attention will no doubt now turn to the logistics of interstate compacts, with both New Jersey and Nevada hoping to become the dominant force in the process, but for now Lesniak and co can bask in the glory of winning a hard-fought battle.