Internet gambling has recently been legalized in the state of New Jersey and will be implemented in November. This development is likely the next significant area of growth for what has been a relatively stable and mature industry domestically for the past 5 years. I will preface that I am not an anti-gaming moralist. I work with the industry and recognize the benefits it brings to our state. As a New Jersey resident and father of two, I also recognize that I would want to be informed on the matter and how this might affect me or my community. This article is solely an attempt to raise awareness of internet gaming and its implementation.

Legalization of I-gaming

In February, Governor Christie signed legislation that allows gambling over the internet within the boundaries of the state of NJ. Anyone that is physically in the state can play all casino games available at an Atlantic City casino, on a computer, laptop, cell phone, tablet or any other mobile device. In other words, one can play Blackjack, Poker, Roulette, Craps and Slots from the comfort of their own home at any time of day.

Why Now?

Since 2007 Atlantic City has experienced a substantial decline in gaming revenue and profitability due to increased competition in neighboring states (NY, PA and MD), the financial crisis of 2008, and other one-time events such as super storm Sandy. The most recent exhibit of the AC decline was that its newest property, Revel, went bankrupt less than a year after opening. At its peak in 2007, AC casinos generated $5.2 billion in gaming revenue yet, for the latest twelve month period ended May 31^, 2013 gaming revenue was only $2.9 billion. Looking at those numbers, it is easy to see why internet gaming has been legalized. By allowing internet gambling, NJ state legislators have provided an additional way for Atlantic City Casinos to reach gamblers who do not want to visit AC’s land based properties. By only allowing AC casinos to operate online gaming platforms, the hope is that internet gaming can generate incremental revenue for AC.

Security of Internet gaming sites

The New Jersey Division of Gaming Enforcement “(DGE”) has recently released I-Gaming draft regulations, which have not been officially approved by the state yet, but does provide insight into what the online gaming platform will entail, and insight into how the DGE will maintain security and transparency online. To open an online account a player must be 21 years old. When a player opens an account the player’s age and identification will be verified by checking it against a 3^rd party census database or government database. Alternatively, the host site may require a player to provide 2 forms of identification to open an account. Every time a player wants to log on he/she must provide a password as well as answer two challenge questions correctly. The site that the player chooses to play on will be required to verify the player’s identity once every hour. Internet gaming sites may also feature “self-exclusion” options whereby one can limit wagers, size of account deposits, loss limits and limits on time spent on a particular site. At this time the DGE is working with the state on finalizing regulations for I-Gaming.

At a recent gaming conference, someone asked the internet gaming panel how well these sites could prevent his 13 year old son from gambling. The panel unanimously agreed that the I-gaming companies have been so well versed in security, after operating overseas for 15 years that over 99% of players are over 21. One panel member did say that although these companies will be monitoring player activity, including how many mouse clicks to how many wagers were placed, per interval of time, “there is still no security measure in place for bad parents”, which got a good laugh from the crowd. Internet gaming might impact the future of Atlantic City, but it certainly could impact us as NJ residents over the short term and is something to be mindful of.

David Isaacson was a credit research analyst covering gaming and leisure companies. He can be reached at dji215_stern.nyu.edu.

By David Isaacson