Five Years In, NJ Online Gambling Reaches Unprecedented Heights With Room To Grow

Any expectations or projections George Rover had five years ago he kept to himself.

In 2013, Rover and the rest of the New Jersey Division of Gaming Enforcement staff were simply asked to execute legislative requests. They were to build an NJ online gambling environment that cultivated a potentially booming industry.

That said, recalls the former deputy director with the DGE, the record-breaking revenue figures set by NJ gambling sites in 2018 seemed likely.

It all began Nov. 26, 2013, nine months after then-Gov. Chris Christie signed internet gambling into law. The first online casinos went live in New Jersey after a five-day soft launch that began Nov. 21.

That day set off arguably one of the most successful industries in the world.

Creating NJ online gambling environment was ‘intense’

Rover, who retired from the DGE in November 2016, remembered a “general understanding” of the public that legalizing and regulating online gambling was “where the world was going.”

An expansive market operated in Europe combined with the existence of a large, unregulated and untaxed black market stateside provided enough motivation for NJ legislators to make a move on legalizing the industry.

From a regulatory perspective, said Rover, who now serves as managing partner with consulting company Princeton Global Strategies, “we just felt the illegal black market was so huge that the only way to address it was to bring these companies into the legal, regulated market. Big motivation.”

With the DGE, Rover handled “all aspects” of the online gaming rollout in 2013, he recalled in a recent phone interview, from licensing to supervising lab decisions.

Essentially, Rover said, the DGE had 270 days to have the online gambling industry set to go live after Christie signed legislation in February 2013, including the creation of regulations, licensing and finalizing technical testing of platforms.

“That was a heavy lift for our agency,” Rover said. He added: “It was intense, but it was fun.”

The ‘perfect person’ at the helm

Fortunately, Rover emphasized, the presence of DGE director David Rebuck helped the agency move forward with relative ease.

“We didn’t know a lot about online gaming. Dave Rebuck was the perfect person for the job because he just gets a broad array of issues, and he knows how to work really well with his staff and he empowers his staff. He also embraced us working with operators overseas who clearly had more experience than we did in the online market. When you put those two things together, I think that’s the only reason it got done on time, and it was, I would say, a hundred percent successful.”

‘Bullish’ on potential industry boom

First and foremost, Rover said, understand that regulators “get told what to do by the legislator, the governor and the attorney general. And our job is to just execute on what we’re asked to do.”

As such, any expectations — “and I know there were some early expectations that were very high,” Rover recalled — were out of the DGE’s control.

“Our job,” Rover laid out, “was to create an environment where the online industry could do as well as the operators and the affiliates and the marketers and the casinos could make it go. From an expectation, on a revenue standpoint, the regulators, we never really looked at it. Our job was simply to stand up an online system that showed integrity, dealt with responsible gaming and functioned properly. After that, it’s really out of the hands of the regulators.”

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Cultivating a healthy market

Still, just before retiring in 2016, Rover remembered telling his team that online gambling generating between $25 million and $28 million a month seemed quite realistic. Perhaps even a $300 million annually within two years.

“I was pretty bullish even before I retired about where the numbers were going to go,” Rover said, “in part because I saw how invested the operators were and wanting to make it work, both the casino licensees as well as, in some cases, the operators that they were partnering with from overseas. They were just committed, not just in delivering the content and the product, but they started becoming more committed to the marketing aspect of it.”

The foundation of NJ online gambling, said David Schwartz, director of the Center for Gaming Research at UNLV, was conducive to the industry’s rise.

“I think it’s a matter of taking the approach where the regulators are interested in the overall health of the market,” Schwartz said in a phone call, “and not necessarily maximizing short-term gains.”

Revenue maximization certainly took hold in New Jersey. And quickly.

NJ online gambling takes off

In the first month of regulated online gambling, five license holders combined for $980,165 in revenue and $147,023 in state tax.

Compare that with October 2018, the biggest month in the industry’s history$26,753,878 in revenue,$4,016,533 in taxes, and close to two dozen sites.

In 2017, obviously the last full year of online gambling in New Jersey, online casinos combined for $245.6 million in revenue, reflecting an almost 25 percent increase from the record-breaking 2016 calendar year, which featured $196.7 million.

This year, through October, year-to-date revenue stood at $242.75 million.

“I think they have been the model for online gaming in general,” Schwartz said of the Garden State, “just because Nevada doesn’t have the other games. They just have sports betting and poker. So I think New Jersey really is the model for other states to follow.”

For 20-months straight, NJ online casinos have generated at least $20 million a month. And in 2018 alone, the record for most revenue reported has been set five times.

“I think it’s the market size,” Schwartz offers as an explanation for New Jersey’s growth, “but also they’re the biggest state so far, as far as population goes, to have all forms of casino gaming available online.”

DGE set the stage for NJ sports betting

When the DGE released September’s financials, Rebuck mentioned the influence of NJ sports betting, which launched in June 2018.

“Driven by the explosive growth in sports wagering and continuing improvements in Internet gaming and brick-and-mortar casino win results,” Rebuck said, “the gaming industry produced another month of superb revenue increases.”

Rover recalled that landmark 2013 year, during which it seemed appropriate for the DGE to build an online gambling environment that could also cultivate regulated sports betting.

“We always felt that sports betting was going to happen,” Rover said. “We always felt that PASPA was clearly an unconstitutional law. And we always believed that the online casino gaming structure we set up would allow us to transition very easily to a sports betting platform, because geolocation, KYC (Know Your Customer, confirming customer identities), revenue reporting, all those mysteries we had solved already with casino gaming and therefore we felt getting sports betting up and running online would not be that difficult.

“And, in fact, that’s exactly what the division did. They were ready to go in the middle of June, certainly by July. … We really felt that once you had the casino online piece solved, engrafting sports betting platforms on top of that was just not that big a deal.”

Once again, that logic proved prescient.

Since DraftKings Sportsbook kicked off mobile wagering in August, NJ online sports betting has totaled more than $300 million in handle (compared with $296.4 million on the retail side) and $24.5 million in revenue (compared with $27.4 million at brick-and-mortar sportsbooks).

More growth still possible

NJ online gambling continues to rise toward unprecedented heights. Potentially, that rise could go on uninterrupted.

But that depends on public participation, Schwartz said.

“If more people decide they want to play online, obviously the industry can grow,” he said. “If it’s a slower process, then it’s going to be limited.”

Schwartz noted that he could not make predictions as to whether players will continue to patronize the online industry. Who can?

Similarly, Rover said he is “not really qualified” to make projections on the future of NJ online gambling. “I am not an expert,” he emphasized.

Rover said he believes there is still ample room for NJ online gambling expansion.

“I don’t see why there’s any barrier there,” he said. “From what I understand, and again, I am not an expert, a large part of New Jersey really hasn’t been penetrated vis-à-vis marketing, and they’re already at the ($300 million, $325 million) category.

“Half a billion dollars seems definitely within reach within the next year or two. But again, I am definitely not an expert on that.”

The next five years of online gambling in New Jersey may prove to be very interesting indeed.

About the Author

Grant Lucas

Grant Lucas is a longtime sportswriter who has covered the high school, collegiate, and professional levels. A graduate of Linfield College in McMinnville, Grant has covered games and written features and columns surrounding prep sports, Linfield, and Oregon State athletics and the Portland Trail Blazers throughout his career.