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Dealer’s Choice: New Jersey, Nevada Online Gambling Pros and Cons

TAGs: Brian Sandoval, chris christie, dealers choice, Editorial, Full Tilt, Jason Kirk, Nevada, New Jersey Online Gambling, PokerStars, WSOP

Nevada and New Jersey have grabbed the attention of the gaming industry and the media with their new online gambling laws. Nevada’s only allows for online poker, while New Jersey’s allows for a wider range of gambling games. But there are plenty of other differences between the two. So which state has the upper hand going forward? It depends on what aspect of the market you’re looking at.

Dealer’s Choice: New Jersey, Nevada Online Gambling Pros and Cons

TAXES: NEVADA

New Jersey is taxing casinos’ online winnings at 15 percent, while Nevada will withhold 6.75 percent of the money online poker rooms rake from their players. Since these costs are passed on to players in their entirety, Nevada is a clear winner here.

SPEED: TIE

Nevada is already out front in the race to bring the first online poker rooms to market by virtue of having licensed the first operators in the country, even if Gov. Brian Sandoval’s remarks last week to executives and government officials that Nevada has been “at the forefront of online gaming” are a bit disingenuous. (The entities who have historically been at the forefront are the ones who created the online poker industry, not the ones who opposed it.) But none of those operators are actually offering poker to the public yet.

New Jersey’s law requires the State Division of Gaming Enforcement to set a starting date, which is expected to be anywhere from three to six months from now. It’s possible that one of Nevada’s earliest online poker rooms could be running by the time New Jersey begins taking bets online, especially since Nevada seems to be more concerned with speed now that the Garden State is in on the game. But neither state has a real advantage here.

IMMEDIATE ECONOMIC IMPACT: NEW JERSEY

christie-signs-new-jersey-online-gambling-lawIn New Jersey, meanwhile, the new law doesn’t include a “bad actor” clause. That means that companies who started up years ago and have spent the intervening time learning how to operate successfully can step right into the marketplace and begin delivering the products people want and the tax revenue the state desperately desires.

On the other hand Nevada, whose government exists to a large degree on the backs of the gaming industry, has gone out of its way to make sure that there’s punishment for companies who did business in the U.S. back when Las Vegas didn’t want to go near the online market. That means there’s an entire start-up cycle for businesses looking to enter the market. That in turn means there will be very little immediate economic impact for the state.

Nevada’s biggest strength at this particular moment is being set up to serve as a regulator of choice when other states decide to legalize interstate online gambling. Doing anything more than that requires much higher liquidity than Nevada is going to have until several other states (or just California) jump on board. In the long term there’s little question that the expansion of live poker tournaments in Las Vegas, fueled by low-cost satellite tournaments online, will be great for the casinos’ bottom line. It’s just going to be a while before that becomes a reality.

LIQUIDITY: NEW JERSEY

Nevada has a population of just 2.75 million, which is what the earliest operators to market will have to deal with until other states legalize online poker and enter into compacts with the Silver State. That’s not likely to happen in the next year, and even then there will be additional waiting periods required by bureaucracy.

New Jersey has more than three times the population of Nevada. It also only requires that bets be placed within New Jersey, rather than requiring residency. That means grinders from New York City and Philadelphia could work in New Jersey by day and go home at night. Considering that the greater NYC area alone now has a population of roughly 19 million people, that significantly tips the balance in New Jersey’s favor.

SOFTWARE: NEW JERSEY

Nevada licensees are still testing their software right now. In fact, some of them have asked for additional time. With no operating rooms a year after initially applying for licenses, any advantage from being the first state to legalize is essentially nil.

In New Jersey, the lack of a “bad actor” clause means the best online poker software in the world – namely PokerStars and Full Tilt – can be accessible to players in the state from the very beginning. It’s already been tested in the real world for a decade. The question of software for other online gambling games is up in the air, but New Jersey won’t face any competition in that arena for the foreseeable future so it’s a moot point.

BRICK AND MORTAR: NEVADA

Online poker and online gambling in general might eventually replace much of the land-based casino business, but if that happens it’s going to be a few decades down the line. In the meantime part of the reason states want to legalize various forms of online gambling is to help their gaming industries grow.

In the case of New Jersey, the new online gambling law is designed to prop up Atlantic City. The beachside resort is falling into the ocean, financially speaking, and Chris Christie vetoed online gambling legislation once because it didn’t do enough to protect the state gaming industry’s anchor. The plan is for online gambling to draw new players to the casinos, but it isn’t entirely clear how successful that will be or how it will actually work in practice. The one sure thing legalizing online gaming would do is allow PokerStars to buy the ailing Atlantic Club, saving the jobs of everyone who works there.

By contrast, Las Vegas is doing fine. It isn’t exactly Macau, but it also isn’t going anywhere anytime soon. Where the effect of full online gambling on American brick-and-mortar casinos is completely without precedent, the effect of online poker on B&M casinos has had one very high-profile test case. Just ask the owners of the World Series of Poker how they did every summer before the UIGEA passed in 2006 and you can see the appeal online poker has for Vegas.

OVERALL: NEW JERSEY

Nevada banked on legalizing online poker as a sort of soft path to eventual full online gambling. That put it ahead of the rest of the country, but its approach suddenly looks quaint compared to New Jersey’s groundbreaking new law. The quaint law has much lower taxes, which will prompt plenty of smaller players to try to break into the business, but it also doesn’t have the liquidity to stand on its own. The groundbreaking law allows bets anywhere in the state, with no residency requirement, and aims to channel new business to land-based casinos from a potentially large player pool in neighboring states.

For now, perhaps the most important aspect of both laws plans allow for interstate compacts to expand their reach. Don’t be surprised if Nevada, instead of trying to compete directly with New Jersey as a regulator of choice for other states, finds a way to smooth over any obstacles. Working with its eastern counterpart could create the basis for a nationwide online poker player pool, which in turn would set up the conditions for a second American poker boom. It’s a long way from reality, but cooperation between Nevada and New Jersey could make it happen.

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