New Jersey Sports Betting Still at the Top Year After PASPA

May 13th, 2019

New Jersey Sports Betting Still at the Top Year After PASPA

The U.S. Supreme Court’s decision to repeal the Professional and Amateur Sports Protection Act on May 14, 2018, has changed the American sports betting landscape.

As we hit the one-year anniversary, Gambling.com looks at the impact of PASPA’s repeal, where sports betting stands in America and what the future holds.

The state that led the repeal of the federal sports betting ban has been the industry’s biggest beneficiary since that point. But its success is steeped in more than an early start taking bets.

In the year since the ban was overturned, more than three dozen states have considered legalizing sports betting. None of those have had remotely the financial success as New Jersey.

The Garden State’s gambling tradition, geographical advantages and population density are all factors. But its smart regulatory policies are the most important avenues for its success. While other states have created similar structures, none have replicated New Jersey’s balance of easy customer access and an inviting business environments.

Until they do, New Jersey will remain the most lucrative gaming market to take bets post-ban repeal. The state has taken in more than $2 billion in bets since that point, and may soon overtake Nevada, long the nation’s only legal sports betting market, as the largest overall.

Legal Challenges, Implementation Both Critical

New Jersey’s success was no doubt aided by its leading role in establishing the national market. After years of legal challenges getting to that point, it was ready to create the infrastructure to do so.

As a means to stimulate slumping state gaming revenues in the wake of the Great Recession, Gov. Chris Christie, lawmakers including Sen. Ray Lesniak and gaming industry leaders such as Monmouth Park CEO Dennis Drazin championed sports betting legislation. After voters overwhelmingly backed legal wagering in a public referendum, state officials began a legal challenge to overturn the federal ban that preempted them from doing so.

Enacted as the Professional and Amateur Sports Protection Act, or PASPA, the federal ban stood for more than two decades as the barrier to any new state seeking sports betting. Backed by America’s leading sports leagues, New Jersey’s lawsuits bounced through the courts for years. Multiple rejections in lower courts seemed to doom its challenges. But a long-shot appeal to the Supreme Court in 2017 revived the state’s chances.

New Jersey representatives argued before the court that PASPA violated the constitution’s anti-commandeering clause, preventing the authority of states to pass laws. The justices agreed, and on May 14th, 2018, the federal ban was struck down.

Nearly a decade’s worth of legal wrangling subsequently enabled states the ability to take the estimated $150 billion annual black market into a regulated sphere. It was New Jersey’s moves in the preceding weeks that enabled to be the most lucrative market to do so.

After the ruling, lawmakers in Trenton spent several weeks finalizing the regulations and legal requirements for its new-found sports betting opportunity. Delaware, which had a limited exemption under PASPA, actually moved quicker than New Jersey to take a legal single-game wager, but that short lead in the expansion race wouldn’t last long.

Key differences in New Jersey’s regulations compared to those of Delaware, and every other state so far, enabled it to quickly leapfrog the competition.

Low Tax Rates, Widespread Access Prove Key

Located between two of the nation’s largest metropolitan areas, New Jersey has a population advantage shared by few other states to legalize sports betting. But its ways of going about that act have been more paramount in its success.

Mobile betting has, more than any other factor, spurred New Jersey’s success. Unlike other early adopters including Mississippi and Delaware, New Jersey permits eligible bettors to place a wager with a licensed site from anywhere in the state.

Though it has the East Coast’s largest gaming market in Atlantic City as well as multiple horse tracks across the state, around 80 percent of the more than $2 billion wagered in New Jersey so far has come online.

New Jersey was the first state to allow online casino gaming, and many of the same elected officials behind those offerings realized the importance of a robust internet-based sports betting operation. Though online properties must affiliate with a land-based host, each is eligible to subcontract out three licenses, or “skins”, to third-party vendors, creating myriad gaming opportunities for players and a competitive environment for operators.

Nevada is the only other state now taking online sports bets. But players must first register in-person at a licensed gaming facility in order to do so. This would be more problematic in New Jersey, with far fewer land-based gaming options and much larger distances to travel in order to place a bet, meaning would-be legal players would be more inclined to stay with offshore sites or unregulated bookmakers.

West Virginia, Pennsylvania, Rhode Island, Indiana and Washington, D.C. have all approved online betting and plan to take a wager sometime this year, but with fewer skins offered than in New Jersey, meaning their online markets may pale in comparison.

These states could be hindered by tax rates. New Jersey followed closely behind the industry lead of Nevada, taking in-person sports bets at 8.5 percent of winnings and online options at 13 percent. The competitive tax rates have spurred gaming industry participation, and much of success, in stark contrast to exorbitant rates in other jurisdictions.

Rhode Island, with the nation’s highest rate at 51 percent and no online betting, only garnered a fraction of its projections when it began taking bets late last year. Lawmakers overwhelmingly supported online expansion in 2019, but with the steep rates (and only one provider), the market will likely still fall short of expectations.

Multiple offerings, easy sign-ups, mobile access and low taxes are all foundations of the market’s success. But so are the regulators themselves.

New Jersey officials view regulators, such as Division of Gaming Enforcement head David Rebuck, as partners in a successful market. Speaking at a recent industry conference in Secaucus, Rebuck said that collaboration is another key component of New Jersey’s success, and allows industry stakeholders, player pools and government tax revenues to thrive.

New Jersey’s success has in part inspired other states to also legalize sports betting. But they have often failed to implement the policies that have allowed them to match it. This has been a boon for a New Jersey, but a handicap on the nation’s sports gambling potential overall.

Other States Should Follow New Jersey’s Lead

If state governments are to capture as much as they can of the $150 billion black market, legalizing sports betting won’t be enough. They will need to charge low taxes, offer mobile access and work with regulators to reach that potential.

Permitting online options in particular has not been easy. Opponents in statehouses across the country have publicly feared mobile gaming will "corrupt children” and “bankrupt families.” What they have failed to realize is anyone with a smartphone has access to hundreds of offshore sites already: anyone who wants to bet on sports can do so now.

And there’s a long list of benefits through regulated gambling to those who may be most prone to abusing it. Most states considering gaming legislation channel some of the tax revenues to gambling addiction programs. Though it may only be a small slice of expected revenues, it is still more than problem gamblers would have had access to previously.

And as tempting as it might be politically for lawmakers to tout a high tax rate, these actually hurt overall revenues. Pennsylvania, with a 36 percent rate, saw would-be operators hold out for months, and about half the eligible facilities still have no plans to take sports bets.

Overall, eight jurisdictions take bets now, six more will do so sometime this year and a handful more could before the end of 2019. None of them combine New Jersey’s array of offerings, tax rate, mobile access and regulatory oversight.

Until, or if, they do, New Jersey will continue as the nation’s most lucrative market – and the gold standard for legal betting in the U.S.