New Jersey Pushes Forward to Legalize Internet Gaming

The New Jersey Legislature took another step towards legalizing online gaming in New Jersey. On May 10, 2012, the New Jersey Assembly Regulatory Oversight and Gaming Committee introduced amendments to the prospective internet gaming legislation which was recently passed by a State Senate committee. The amendments provide additional clarity with respect to the licensing of prospective internet gaming service providers. The proposal also increases the tax rate on internet gaming revenue and provides additional safeguards to keep out dubious internet gaming companies that have facilitated what the U.S. government considers to be illegal wagering from U.S. residents.

The proposed amendments to the New Jersey Casino Control Act do provide the opportunity for an internet gaming service provider to share in internet gaming gross revenue with a New Jersey casino licensee. This is significant in that the New Jersey Casino Control Act has historically only permitted the sharing of gaming revenue in very limited circumstances. In fact, licensed slot machine manufacturers still cannot share in a percentage of gaming revenue in what are called “participation games” – the sole exception being permitted participation on multi area progressive slot system machines.

Another significant licensing issue puts forth in the Assembly committee’s amendments is the requirement that prior to providing any internet gaming services to a New Jersey casino, the internet gaming service provider must be fully vetted and licensed by the New Jersey Division of Gaming Enforcement. The revised sections to the internet gaming legislation also specifically bar any prospective internet service provider who knowingly and willingly, offered, accepted or made available bets or wagers using the internet from persons located in the United States after December 31, 2006, unless such activity was licensed by a Federal or State authority. That date is significant as it was the effective date of the federal Unlawful Internet Gaming Enforcement Act, which effectively prohibited the facilitation and enabling of interstate internet gambling in the United States. The New Jersey internet gaming legislation goes even further in that it bars all persons that may have facilitated such post, December 31, 2006 internet wagers from the U.S. including those who simply provided intellectual property, trademarks and website support to an operator who offered such bets and wagers.

While several of the Committee members continued to express concerns regarding the constitutionality of internet waging under the New Jersey Constitution, proponents of the legislation continue to maintain that internet wagering would be constitutional since all bets and wagers would emanate from Atlantic City New Jersey, where all computer servers and related equipment must be located under the proposed legislation.

As for when this legislation may be passed, there have been press reports that Governor Christie may continue to have some reservations but there is a consensus that the internet gaming legislation is vital to the Atlantic City casino industry and it has the support of the casino industry. This latest committee action continues to move forward the prospect of legal, regulated and taxed, internet wagering in New Jersey.

© 2009- Duane Morris LLP. Duane Morris is a registered service mark of Duane Morris LLP.

The opinions expressed on this blog are those of the author and are not to be construed as legal advice.

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