U.S. Sports Betting Market: Could New Jersey Eclipse Nevada To Become No.1?
The ever-optimistic Director of the New Jersey Division of Gaming Enforcement (DGE), David Rebuck, made a bold proclamation late this July when he told Gambling Compliance website that his goal is for the Garden State to be the top sports betting market in the United States (U.S.). Well, could it happen?
Bordered on the north and east by the state of New York, to the east by the Atlantic Ocean, on the west by Pennsylvania and Delaware to the southwest, New Jersey is the fourth-smallest state by area but the 11th-most populous, with around 9 million residents as of 2017. It also has the most densely populated of the fifty U.S. states and was the third-wealthiest state by median household income as of 2016.
While New Jersey would find it a tall order to support a bigger sports betting market than New York or California, should those states go live, overtaking Nevada is “not nearly as far-fetched” as it might sound according to Adam Small, President and chief analyst at DGS Media, which tracks and analyses New Jersey’s emerging sports betting and online gambling industry through its website, NJOnlineGambling.com.
Based upon recent filings with the DGE and issued on July 12 2018, the total Gaming revenue in New Jersey this June was $233.6 million. The figure compared to $217.7 million in the corresponding month in 2017, which equates to a 7.3% increase.
To put those figures into some perspective, Nevada Gaming Control Board, the regulator for the sector in the state, revealed late this January that casinos on The Strip won about $571.5 million from gamblers in December 2017. It represented a decline of 3.2% over the previous year and followed monthly gaming revenue falls of over 6% during October and November last year.
The three-month decline in Las Vegas was attributed in large part to falling Baccarat revenues, with December witnessing an almost 30% drop compared with the year before.
While analysts including Tuna Amobi, an analyst at CFRA Research, noted at the time that the “deceleration” for Las Vegas was somewhat surprising, state-wide Nevada casinos posted a total “gaming win” of $960.4 million in December – less than 1% higher than the year before. And, casinos in Reno witnessed a 10% jump for the December month by contrast.
U.S. Betting Landscape
Philip Bowcock, CEO of British bookmakers William Hill, speaking on the back of the company’s earnings call this May referred to the need to approach each state in the U.S. like “a different country” and listed a number of states he expected to be in play in preparation for a potential repeal [at the time] of the Professional and Amateur Sports Provision Act 1992 (PASPA).
The William Hill CEO, in explaining that the company was investing in “not just technology” to be ready for sports betting the U.S. has made Nevada its American headquarters. Since the regulations will be different in each state, he added “we will likely have to have a call center in each state as well for customer services.”
It was on May 14, 2018, that the U.S. Supreme Court opened the way for individual states to introduce legislation allowing sports betting if they felt so inclined, by striking down a federal law that had in essence prohibited it.
This outcome, which was the result of a long-running attempt by New Jersey to legalize sports betting within Atlantic City, following a non-binding referendum of its citizens back in 2011 in favour of this, saw a ruling (Murphy versus National Collegiate Athletic Association, No. 16-476), heard in its final form.
The upshot was that the sports betting market in the U.S. could see a dramatic change. And, according to estimates from Gambling Compliance could be worth between $2 bilion and $5.8 billion annually in gross gambling revenues over the next five to seven years.
What PASPA did was to make it unlawful for a state to sponsor, operate, advertise, license, promote or authorize sports betting, and for private individuals to be able to do the equivalent. Just four states had maintained exceptions to this prohibition, and most notably Nevada, which allowed sports betting in casinos. It meant that it has had a near-monopoly in the U.S. on sports betting.
Delaware, Oregon and Montana were also allowed to carry on with the limited forms of sports lotteries, which they had permitted before 1992. But one thing PASPA did not do was criminalize the act of sports betting.
While the Supreme Court judges in the case around PAPSA voted by 7-2 to declare the entire law unconstitutional, it has not made sports betting legal in the U.S. Rather it put the ball in the proverbial court of individual state to legalize and regulate sports betting – if they so deemed. This is just as they have already done with a variety of non-sports gambling like casino gambling.
So, let us delve down and have a look at the respective advantages of Nevada and New Jersey.
Ever since the Stardust Hotel-Casino on Las Vegas Strip, a popular haunt of Frank Sinatra and his Rat Pack chums as well as illusionists Siegfried and Roy, opened the first modern sports book in 1976, sports betting has been a major draw for Las Vegas casinos. Today there are nearly 200 facilities that will take your bets in the ‘Silver State’, and still only a handful in all other states combined.
Commenting in a recent article on NJOnlineGambling.com, Small explained that: “This is an advantage for Nevada well beyond simply being ‘first to market,’ as the vast majority of professionals in America that are needed to manage a successful sports book are based there.”
He pointed out that: “As a result, companies like William Hill have chosen to set up their U.S. headquarters in Nevada.”
“In New Jersey, new sport books have to compete for talent with several other states that have launched or are launching sports betting this year, as well as other casinos and tracks housed in the Garden State,” Small explained.
Given that sports betting has only just recently become legal in New Jersey – as opposed to Las Vegas/Nevada – these are new sports betting establishments that are only just opening shop. Phil Murphy, the Governor of New Jersey signed a law on June 11, 2018 that authorized legal sports betting in New Jersey, ending a nearly decade-long saga that included a multi-million court battle against the nation’s top sports leagues and a landmark ruling from the nation’s highest court.
Since Rebuck was appointed and officially sworn in back in January 2012 as Director of New Jersey’s DGE, the casino regulatory agency within the Department of Law and Public Safety, he has actively pursued legislation to offer alternate forms of gaming in Atlantic City and revenue to the state.
Within the area of sports betting, Governor Christie signed a bill authorizing sports betting in Atlantic City casinos and New Jersey Racetracks. And, under Rebucks’ direction, the Division promulgated and adopted regulations in October 2012, thereby allowing sports betting. The filing of litigation and resulting court case and the diligence in pursuant of sports betting brought attention to New Jersey.
Rebuck, a member of the Pennsylvania and New Jersey Bar, has also been closely involved in the legalization and implementation of Internet gaming in New Jersey. As such proposed Internet gaming regulations were able to be adopted and become effective in October 21, 2013, less than three months after Governor Christie signed the law legalizing Internet gaming in the state.
Under his direction, the Division also developed regulations that authorized Atlantic City casinos to offer fantasy sports tournaments, mobile wagering and interstate wide-area progressive slot play.
There is also now “a rush to hire” in the U.S. from Europe, Small pointed out, but visa restrictions could make this challenging. “Hiring is going to be a real issue for aspiring books outside of Nevada,” he contended.
On top of that, billions of dollars are brought to Nevada each year by millions of tourists. “Even if New Jersey casinos are capable of replicating the operations of their Nevada counterparts, it is hard to believe they will ever be able to replicate the massive international appeal of Las Vegas,” the analyst noted.
New Jersey’s Advantages
While Las Vegas has tremendous pulling power and appeal for tourists, New Jersey’s population is simply much bigger, and wealthier. Just take a glance at the respective numbers.
Nevada is the sixteenth richest state in the U.S. with a per capita income of $21,989 (2000). By contrast, New Jersey with its c.9 million population had a per capita income of $35,928 (2012) and median household income of $71,637 (2012). But then the heavy hitters on the betting front – including the Chinese – who head to Las Vegas are from outside the state.
That said, these factors have propelled New Jersey online gambling into a quarter-billion dollar a year industry. “That is important because online will be the key to sports betting success as well,” said Small. “Online sports betting should produce a ton more revenue than brick and mortar and could be a major driver of growth.”
He further explained that: “In Nevada, well, online sports betting is just terrible. One can make bets on mobile apps, sure, but a requirement to register in person at a casino limits the growth potential. Off-site online sports betting is much less of a tourist attraction than brick and mortar sports books. And, of course most of Las Vegas’ revenues derives from tourists.”
Meanwhile, New Jersey has done itself a favor by getting its online industry started ahead of border states Delaware and Pennsylvania. “New Jersey is, amazingly, the first state in the U.S. to offer off-site mobile betting without an in-person registration requirement. The pay-off should be substantial,” Small asserted. Note though that Delaware became the first state to launch legal sports betting since the U.S. Supreme Court decision to lift a 25-year old federal ban.
Prospects for Other U.S. States
New Jersey online sports books might lose some revenue to neighboring states once they are online too – especially Pennsylvania and New York. New York City and Philadelphia area customers, who might cross the river to make bets, would “likely cease to do so once they have options in their own states”, Small ventured.
New York is, in fact, the state that will have the “biggest impact” on New Jersey according to the analyst, depending on how things progress with its own plans for betting.
As things stand today, New Jersey venues (especially Meadowlands) stand to gain in a big way from the hesitance of New York, it is suggested by Small. Similarly, the millions of people who live in New York City only need to hop on a train to make online bets at a legal New Jersey betting site.
Even before the decision to overturn PAPSA, a number of states had already moved to initiate legislation that would allow sports betting in one shape or another should the Act be overturned. Among this list of first movers were New Jersey, Delaware, West Virginia and Mississippi for some form legalized sports betting in 2018 to be in place.
A further wave of states – including California, Illinois, Michigan, New York and Rhode Island – might face something of a race against time to pass agreed legislation on sports betting before the end of their current legislative sessions according to international law firm Bird & Bird. Or, failing that they will have to wait until next year to do so.
As PASPA is already repealed, and beyond the states already running (New Jersey, Delaware, Mississippi, Nevada) and those coming soon (West Virginia, Rhode Island), Small ventured that we are “probably going to see New York and Connecticut pass laws within a year and several other states start moving on it soon.” It could turn out be a pretty diverse set of states.
Indeed, a whole host of states are likely to introduce legislative proposals in the early part of 2019 it is thought, with possibly as many as 25 to 40 states allowing sports betting in some form within the next five to seven years.
“It is unlikely New Jersey will see a surge in tourism because of sports betting, particularly once several states in the region have also opened for business. However, the short-term effects should be positive for having gotten to market quickly,” Small argued.
According to Small and the analyst team of iGaming professionals at NJOnlineGambling.com, New Jersey “has its work cut out” if they want to be the leading provider of sports betting in the U.S., as heavy regional competition, relatively low levels (compared to Las Vegas) of gambling tourism, and scarcity of talent will challenge the Garden State’s ambitions.
That said, David Rebuck and the state of New Jersey, have been ambitious before about blazing trails in the modern, digital gambling world. So, one cannot discount the notion entirely, even if for now it might appear a somewhat long shot. Nonetheless, there is much to play for and up for grabs.
Note: A brief state-by-state overview of the sports betting legislative landscape across all 50 U.S. states can be viewed via this link.