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New Jersey’s move into online gambling brings test for casino industry

By Christopher Palmeri and Elise Young
Bloomberg News

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New Jersey resident Trever Walton has been visiting casinos from Atlantic City to Las Vegas for more than two decades.

Now that the Garden State has legalized online gambling, he can wager from the comfort of his own home as well.

As the most populous state to allow residents to place bets over the Internet, New Jersey will test whether virtual and land-based casinos can thrive. Gambling companies in Atlantic City, where revenue has shrunk for almost seven years, and their online partners lobbied for legalization, arguing that Web-based poker, blackjack and slots would bring in fresh revenue and bolster their properties.

“This is going to be lucrative for the casinos,” Walton, a 44-year-old technology manager from Westfield, N.J., said in an interview. “You can win money online and then go cash in. You tell yourself, ‘I have $500 now to go to the Taj Mahal.’ You feel like it’s a free trip.”

Hotel owners such as Caesars Entertainment plan to use their marketing muscle, including loyalty programs and casino perks, to cross-promote online and in-person wagering. The companies will advertise on TV and even on room keys to reach New Jersey’s 8.9 million residents, as well as visitors.

“You’re going to see a lot of integration, a lot of tie-ins to land properties,” said Mitch Garber, chief executive officer of Caesars Interactive Entertainment.

Six casinos, including ones owned by Boyd Gaming, Tropicana Entertainment and Trump Entertainment Resorts, received permission to offer Web-based betting, according to the state’s website.

State officials are optimistic. New Jersey, which began testing on Nov. 21, has been inundated with players, said David Rebuck, director of the state’s Division of Gaming Enforcement. More than 10,000 players registered in the first three days, he said.

In March, Gov. Chris Christie forecast $1.2 billion in online revenue for the operators this fiscal year and $180 million in tax collections. That compares with a Bloomberg estimate of $425 million in revenue for New Jersey in calendar 2014, or 83 percent of the U.S. total.

The market faces obstacles, including opposition from Sheldon Adelson, founder and CEO of Las Vegas Sands, the world’s biggest casino operator. He is campaigning for federal legislation to ban Web betting.

Adelson said in a June opinion piece on Forbes.com that losses to land-based casinos “could be substantial and even lead to their eventual demise.” He has also raised moral objections to online betting, and has argued casino patrons are more easily monitored than someone playing at home.

Technical kinks also have to be worked out. Bank of America, Wells Fargo and American Express are refusing to allow their credit cards to be used for online gambling, and some would-be players have experienced problems signing up for trials.

Reviving the state’s casino industry was a key part of New Jersey’s decision to legalize Internet wagering for visitors and residents within its borders in February.

Gambling revenue in Atlantic City fell 40 percent to $3.05 billion in 2012 from a 2006 peak, as neighboring states such as Pennsylvania expanded their offerings. The New Jersey law signed by Christie, a Republican, requires computer hardware to be located in Atlantic City casinos.

Other states will be watching New Jersey to see if online betting takes off, according to Robert Heller, president of Spectrum Gaming Capital, a consulting firm based in New York.


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