ew Jersey’s online poker franchise has failed to attract as many resident players as needed and even being overshadowed by the growth of other types of online games in its first three years.
The Pennsylvania Legislature recently passed a budget that anticipates $100 million in revenue from online gambling on poker and casino-style games in the first year of operation. If a bill to legalize online gambling that already has passed in the state House of Representatives is approved by the Senate this fall, New Jersey regulators and a leading industry lobbyist say there is a strong possibility that a lucrative partnership will be reached quickly between the neighboring states.
And for Garden State poker players, allowing Pennsylvania players to compete across state lines would greatly expand “liquidity” — the critical mass of players needed to make it easier for those at all skill and stakes levels to find others to compete against. (Online casino gambling sites use geolocation technology to pinpoint a player’s location, barring anyone beyond state lines.)
There also could be a nationwide ripple effect: Pennsylvania’s approval could open the floodgates for other states to follow suit, potentially allowing New Jersey to add its players to the growing pool
State tax revenues from online poker — which have stagnated while those generated by other forms of online gambling, such as slot machines and roulette, have skyrocketed — also could rise significantly.
Poker’s share of New Jersey’s revenues from online gambling — excluding Internet-based betting on horse races, which has been permitted in the state since the passage of a law in Trenton in 2002 — has fallen off that of the other games, from a high of 39 percent in the first full month of play in December 2013 to just 12 percent in June 2016. Online poker generated $3.5 million in tax revenue for the state in 2015.
Atlantic City’s casinos recorded a new record of $17.4 million in online gambling profits for July, the state Division of Gaming Enforcement announced on Friday, an increase of 39 percent over July 2015 that has become a typical increase in recent months. Poker accounted for just $2 million in profits for the second straight month.
Rep. John Payne, the chairman of Pennsylvania’s House Gaming Oversight Committee and the primary sponsor of the online gambling bill, told reporters earlier this year that the state’s budget woes ultimately will entice enough elected officials to support the new source of revenue. “They’re not going to find votes for [higher] taxes in an election year,” Payne said.
And John Pappas, executive director of the Poker Players Alliance, an advocacy group that represents nearly a million online players, said that Pennsylvania seems to have surged ahead of California and Michigan in what has been a leisurely race to become the third state to legalize a spectrum of casino games, following New Jersey and Delaware in the fall of 2013 (Nevada only offers online poker).
“There’s still some work to be done, but the revenue is booked [in Pennsylvania’s budget], and I think the case for legalization as being an issue of consumer protection has been very well made,” Pappas said. “We’ll see the battle lines drawn in the next couple of months, though.”
David Rebuck, executive director of New Jersey’s Division of Gaming Enforcement, said there is an ongoing dialogue among regulators in Trenton and Pennsylvania about a sharing arrangement for online poker players. Division officials, he said, have told officials in Pennsylvania that a poker compact would help their online poker revenues grow much more quickly than if the state goes it alone.
“We just need a few more states to fall by the wayside [and legalize online gambling] for the ball to really get rolling,” Rebuck said.
“Pennsylvania probably is the next state to go, and that will be an interesting time for us”
An arrangement, if one is struck, would put New Jersey regulators in the position of working with their counterparts in Pennsylvania, where the decision to allow casinos in 2006 contributed to a decline in Atlantic City’s gambling revenues by about half, to just $2.5 billion last year. The sharp erosion of revenues at the city’s dozen casinos — four of which closed in 2014, with a fifth, the Trump Taj Mahal to follow suit in October — was a major factor that proponents cited when pushing for New Jersey to allow online betting on casino-style games in 2013.
Bill Pascrell III, a longtime lobbyist for gambling interests, predicts that an online poker deal between New Jersey and Pennsylvania would happen very quickly. But he added that his discussions with various Pennsylvania lawmakers have convinced him that it is not a “fait accompli.” Pascrell includes Florida, Illinois and Michigan among the states that he believes might soon follow Pennsylvania’s lead if the games are legalized there.
The three states that offer some form of online gambling — Nevada, New Jersey and Delaware — have a history of being early adapters of new gambling options.
Rebuck said if a more traditional state like Pennsylvania were to jump in, it would “send a message to other jurisdictions that we’re going in this direction, and maybe [they] should look at it, too.”
Pappas is another believer in Pennsylvania as the keystone for a major national expansion of online gambling.
“Pennsylvania is important because it would be another domino to fall,” Pappas said. “But it’s not just about them; it’s about whether then New York or Connecticut is next to go. Pennsylvania isn’t a savior, but it’s a good building block.”
Joe Lupo, an executive at Atlantic City’s Borgata Casino, which offers online poker on its own website as well as through a partnership with partypoker.com, is among those eager to see states sharing pools of online poker players.
“Any compact will definitely help poker,” said Lupo, whose casino has dominated the Atlantic City market since it opened in 2003. “The key is liquidity: the more tables open, the more flexibility, more options, the better. A compact would be great for Pennsylvania and great for New Jersey.”
“Adding Pennsylvania and New York would be a home run for the region,” Lupo added. “That would create enough volume to create a poker gorilla”
With both states aboard, Lupo said, it would become cost-effective to pay for advertising in the expensive New York City and Philadelphia television markets, where a large majority of viewers would be potential players.
Professional poker players like Daniel Sewnig of Fair Lawn are among those who see the legalization of online poker in Pennsylvania as a first step in a wider national expansion.
“As nice as it would be to add Pennsylvania, it would be a bigger deal for America as a whole,” said Sewnig, 25. “Then I think the wheel starts rolling for a New York, or a California.”
As a player, the latter would be of particular interest for Sewnig because the three-hour time difference might mean that more players will be online at hours when the number of players in New Jersey lags.
Sewnig said it’s not unusual for amateurs playing in so-called “cash games” online in New Jersey — where one can play just a few hands in a session if they want to, compared with the hours-long commitment required for tournaments — to perhaps see only four or five such contests ongoing at a given time for lack of players. As a result, it could take 15 or 20 minutes for a virtual seat at one of the games to open up as players cash out.
In contrast, Sewnig, a tournament player who pays an entry fee and earns a prize depending on his finish, said he is able to find up to 15 or so suitable events per night.
Sewnig says that the current reality in New Jersey online “cash game” poker is that only at night is there enough action for players to easily find a seat.
“I typically start playing around 7 p.m., since most people have to work, and maybe play until 1 or 2 a.m., depending how long I last in the later games,” he said. “I have friends in other countries [and time zones] who can play anytime they want. So the thing that would allow me to play earlier, which I would prefer, would be if states from different time zones are added.”
Chris Grove, who covers the U.S. Internet gambling industry at onlinepokerreport.com, said the focus on Pennsylvania makes sense because he believes that entering into partnerships with other states is the only realistic way for New Jersey to grow its revenues from online poker. But he added several cautionary notes.
“Sites can spend more on marketing or on promotions for existing players, but at the end of the day, there is a hard cap on the number of people in New Jersey who are interested in playing poker online,” Grove said.
Grove, like Lupo, is not convinced that Pennsylvania alone is the answer to New Jersey’s online poker issues. He noted that three independent operators currently offer online poker in New Jersey since the worldwide industry giant PokerStars entered the market in partnership with Resorts Atlantic City casino in March. Grove said that the legalization of online poker in Pennsylvania would bring even more operators into the picture, greatly undercutting the advantage to be gained from having more online poker players in the same environment.
“Adding Pennsylvania would help, but you are chopping up the market a little more, and you still are talking about being inherently limited by population” of just two states, Grove said.
And while Grove said he expects Pennsylvania to adopt online poker and casino gambling in the fall or early 2017, he believes the stakes are higher than many in the industry realize.
“It comes down to Pennsylvania,” Grove said. “They need the money, and the state is relatively united. If they can’t get this across the finish line at this point, it’s hard to see how another state would. A few years ago, I would have thought that [widespread] legalization of online gaming was more inevitable. But so far, the status quo still rules.”