If an online gambling operator serves so-called “gray markets” for casino games and/or online poker, can that company get an iGaming license in New Jersey?

The answer appears to be “maybe,” after the New Jersey Division of Gaming Enforcement issued a Director’s Advisory Bulletin issued this week.

What NJ says on gray markets

The advisory bulletin attempts to clarify the NJDGE’S stance toward NJ online gambling operators that are in gray markets. From the bulletin:

The Division of Gaming Enforcement is cognizant that its own applicant and licensed internet gaming platform providers also operate in other jurisdictions. Jurisdictions where the legality of Internet gaming operations is an open question are often referred to as “grey markets,” as opposed to “black markets” where it is clear that Internet gaming is prohibited and the government has taken action to stop online gaming activity. …

…the Division will individually examine each jurisdiction in which a New Jersey applicant or licensee operates pursuant to the above analysis to determine whether  Internet gaming activities in that jurisdiction are objectionable and would therefore be considered a negative factor in assessing suitability for licensure.

The bulletin also notes that operators taking customers in jurisdictions widely regarded as “black markets” — such as most of the United States — would not be suitable for licensure.

So what’s a gray market, according to NJ?

The best and commonly used example of a “gray market” is Canada, a jurisdiction that most online gambling operators serve. That includes PokerStars, the most recently licensed online gaming site in New Jersey.

Gray markets, though, vary in how “gray” they can be. The NJDGE used the example of some European Union nations in the bulletin:

The domestic Internet gaming policies of certain Member States are currently the subject of legal uncertainty which arises out of a contradiction between EU market principles and the unwillingness of certain Member States to surrender local control. In those Member States where this ongoing legal conflict between EU and local law exists, it would be problematic for an outside gaming regulator such as New Jersey to reach a conclusion regarding the ultimate legality of the Member State’s Internet gaming policies.

So, can you serve both some EU markets and New Jersey without issue? It appears so, according to the bulletin.

But when is a gray market too gray? The bulletin attempts to define when it believes a market becomes “gray enough” to warrant action in NJ:

…the division will examine whether or not the jurisdiction has a law that specifically prohibits Internet gaming and, if so, whether the jurisdiction has taken affirmative, concrete action to enforce that law. Types of affirmative, concrete enforcement actions include the government instituting a criminal or civil action against operators in the jurisdiction or the issuance of a formal cease and desist letter sent by a senior government official to an Internet gaming operator, or affirmatively notifying this Division of its prohibition.

GVC/PartyPoker and gray markets?

The bulletin is of particular interest as it relates to GVC Holdings and its takeover of bwin.party earlier this year. PartyPoker, of course, is a licensed online poker operator in New Jersey.

Following the GVC purchase, PartyPoker returned to 21 markets, all of which the online poker operator exited in 2013, and all of which are considered gray markets.

Is the bulletin a precusor to PartyPoker’s NJ license being pulled? It will be interesting to see how New Jersey applies the principles in the bulletin to this case.

Dustin Gouker

About

Aside from his role as editor at LegalSportsReport.com, Dustin Gouker writes extensively about the legal online gaming and US online poker industries, having played poker recreationally for his entire adult life. He has also covered sports for The Washington Post and the D.C. Examiner, among others.