Internet gambling is expected to bring millions of dollars into Atlantic City’s casinos, but whether it will be a billion-dollar market has become a thorny point in budget discussions in Trenton.
“Where did you get the number?” state Sen. Paul Sarlo, D-Bergen, Passaic, asked state Treasurer Andrew Sidamon-Eristoff, during a lengthy Budget and Appropriations Committee hearing Monday. “You picked it out of the air?”
Gov. Chris Christie and his administration have estimated Internet gambling would net the state $180 million in taxes in the fiscal year that starts July. But with a tax rate of 15 percent, casinos would have to rake in $1.2 billion in Internet gambling revenues in order to meet that estimate — a calculation that had Sarlo and other lawmakers locking horns with Sidamon-Eristoff at the Senate committee hearing.
“We based it on the enacted legislation, and we were given to understand that the industry is rearing to go and will be ready to ramp up,” Sidamon-Eristoff answered. “There are certain estimates out there that are pretty aggressive. And we think there is reason to be very, very sanguine.”
But David Rosen, the budget chief of the bipartisan Office of Legislative Services who also testified in front of the committee, questioned the basis for treasury’s estimates.
“OLS has been unable to identify any independent source that endorses such an estimate,” he said. “We would welcome receipt of such analysis, but remain skeptical.”
Nearly every industry analyst — including those who lobbied for legalization of Internet gambling — has issued lower predictions on how much money Internet gambling would bring to New Jersey in its first year. Estimates vary from $210 million to $850 million.
Econsult Corp., a Philadelphia research firm that developed estimates in 2010 at the request of Washington, D.C.-based lobbying group, Interactive Media Entertainment and Gaming Association, estimated gross Internet gambling revenues in New Jersey at about $210 million to $250 million in the first year.
Those estimates were based on the state being able to quickly turn out regulations and casinos just as quickly starting up operations, researcher Adam Ozimek said.
“It really depends on the speed that the industry rolls out,” he said.
The New Jersey Division of Gaming Enforcement has not yet published regulations governing Internet gambling and casinos have made no filings for an Internet gambling permit, spokeswoman Lisa Spengler said. The start of the fiscal year is only three months away.
Econsult’s estimates are on the lower end of what analysts believe to be New Jersey’s market. At the high end are estimates from Wells Fargo earlier this year, which said the potential market in New Jersey during the first year was between $650 million and $850 million assuming 5.8 million adult players — or about 86 percent of the adult population in 2010, according to census figures — spending $111 to $149 annually online.
Other estimates, such as from London, England-based H2 Gambling Capital, a firm that specializes in international gambling data, have Atlantic City casinos netting about $400 million in the first year.
Company spokesman Simon Holliday said the Italian Internet gambling market in 2012 was $1.2 billion, but that included online proceeds from sports betting — an activity New Jersey is barred from authorizing pending the appeal of a federal court injunction.
Some industry observers, such as Joe Brennan Jr, director of the IMEGA group that commissioned the Econsult study, said New Jersey might be able to realize $1.2 billion in revenue but that would require regulations to be published, licenses issued and casinos ready to go online within the next few months.
“If they get up and running, I think it’s a possibility because I think there’s a lot of pent-up demand,” Brennan said. “It’s a potentially reachable number.”
New Jersey is one of the first states to legalize online gambling. Nevada only authorized online poker while lottery officials in Delaware are in the midst of issuing a single license to operate the state’s online system.
State Sen. Jeff Van Drew, D-Cape May, Cumberland, Atlantic, who sat through the committee hearing, said treasury’s estimates “may be a little optimistic.”
“If they’re right, it’s good for us,” he said.
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