New Jersey Legislation - No Shared Liquidity and Too Much Optimism?

While Senator Raymond Lesniak claims that his proposed bill can make the US State of New Jersey a hub for international online gaming, the sharing of player pool is not possible with the international market and the draft is therefore too optimistic in its goals.

New Jersey Senator Raymond Lesniak announced last week that his bill, then to be filed to the state legislation, would enable New Jersey to accept players from outside the USA. The proposal would establish Restricted Foreign Internet Wagering category licenses that would be given to operators in the state, allowing them to accept players from any foreign country where the local legislation allows or does not forbid online play. However, as it turns out, this would not enable sharing the liquidity between international and New Jersey players.

According to Lesniak, the state would instead provide an authentication that the business these companies pursue is legit. “These companies, now located in Gibraltar or Isle of Man or any other offshore places, don’t have the stability—the stamp of approval—that gives a lot of credibility to their product,” he is quoted saying at a news conference in Atlantic City.

Operators with the license would be required to deposit $100,000 as part of the application procedure (non-refundable), a $200,000 initial fee and an annual $100,000 renewal fee, as well as another $100,000 annually to support problem gambling initiatives. All the operators would have to contribute, furthermore, to an annual fund of $20 million for three years that would go towards the development of the horseracing industry of the state.

Operators would have to locate their servers, equipment and employees in New Jersey, from where they would be able to serve overseas users – but not vice versa. The companies would be required to pay a tax of 10% after revenues from foreign players plus 2.5% investment alternative to support the development of the New Jersey industry; or, alternatively, a total of 15% tax. Lesniak and his consultant, senior economist Adam Ozimek estimate a potential income of $4.5 billion on an annual level from the legislation, in addition to creating around 10,000 jobs.

Even Lesniak admits, though, that the bill is still very much subject to vetoes from Governor Chris Christie. Also, the World Trade Organization might have a say in allowing New Jersey operators to offer poker to foreign players but not the other way around, not to mention the question whether operators would truly be devoted enough to move under the jurisdiction of New Jersey from that of their current offshore regulators.