Gov. Chris Christie vetoed Thursday a bill that would have created the first-ever intrastate online gaming system, declaring it would break the state's constitutional limits that keep gambling in Atlantic City.

But Democratic supporters of the plan said Christie's message held out hope, noting that he would work with them on a solution that could again put New Jersey ahead of other states in legalizing the practice for residents within its borders.

The governor, a Republican, used his veto message to reiterate his administration's "commitment" to Atlantic City, specifically to protect the resort from the threat of making what he called "convenience gambling" available anywhere within reach of an Internet connection.

The state's constitution allows gambling only within the limits of Atlantic City.

The bill, championed by Sen. Raymond Lesniak, D-Union, wanted to open up a network of online-gaming portals operated solely by casino companies who were already licensed in New Jersey. By specifying that all equipment used for the portals -- including the computer servers themselves -- sit in Atlantic City, Lesniak argued the state could allow the practice without bending or breaking the constitution.

Christie disagreed.

Among his reasons for the veto, Christie wrote that allowing customers to bet through any computer terminal left open the chance of "commercial business" such as nightclubs and cafes becoming gambling hubs around the state. The bill, he said, further created a "legal fiction" that a bet placed anywhere in New Jersey counted as an Atlantic City bet.

Casino industry sources liked the governor's interpretation.

"You could be in your pajamas in Paramus and still place a bet," said Israel Posner, director of the Lloyd D. Levenson Institute of Gaming, Hospitality and Tourism at The Richard Stockton College of New Jersey.

He added he was not surprised at the governor's veto, which also highlighted Christie's opposition to a plan within the bill for some Internet gaming revenue to be used for horse-racing purses.

"This entire concept opens up so many questions and obstacles, some legal and some technical, that it's not just a quick way to gain revenue," Posner said.

The veto was applauded by the Casino Association of New Jersey, a trade group representing Atlantic City's gaming industry. The association said online gambling should instead be passed by New Jersey voters in a ballot referendum during the November election.

In a statement, the association argued that a referendum would provide the legal and regulatory framework to allow licensed and "transparent" New Jersey companies to offer Internet gambling.

"The right way to get this bill done to avoid costly and time-consuming legal wrangling is through a referendum placed before voters on this November's ballot, and we are committed to working with the governor and our legislative leadership to make that happen," Bob Griffin, the association president, said in the statement.

William J. Pascrell, III, who lobbied for the bill on behalf of a group of online gaming operators known as iMega, said Thursday that he understood the call for a public ballot question.

"If we need to have a referendum, then we're ready to do that," Pascrell said.

But not all casinos favor state action on the issue. Some would prefer progress at the federal level.

Gary Loveman, chairman and chief executive officer of Caesars Entertainment Corp., said his company would prefer to see Congress legalize online gambling nationwide instead of having each state pass its own legislation.

Loveman noted that Caesars, the world's largest gaming company and owner of four Atlantic City casinos, has been lobbying the House and Senate to allow gamblers to play poker over the Internet. He added that Caesars is trying to persuade Congress that online poker can be safely regulated.

"I am cautiously optimistic we can do that," he told gaming analysts during a Feb. 25 conference call regarding Caesars' fourth-quarter earnings.

Lawmakers said they would not wait for federal decisions on the issue.

Sen. Jim Whelan, D-Atlantic, said he would work with Lesniak to draft new legislation that closed the loophole that might create "cyber-gaming cafes."

"But we won't be waiting around," Whelan said.

Pascrell concurred that speed was necessary.

"It's not a case of if, but when New Jersey will have this legally," he added. "But if we wait, Iowa, California, Florida could be eating our lunch."

Each of those states has introduced proposals to allow forms of online gambling within their borders.

Meanwhile, New Jersey's example has drawn interest from outside states and legal observers.

Jeremy Frey, a lawyer with Pepper Hamilton LLC, based in Philadelphia and New York, said New Jersey's attempt to create its own system had hit on critical questions at the heart of online gaming.

As far as where the bet is placed, he said, "The case law indicates that the courts favor including the location of the player, or ‘where the button is pressed,'" he said.

But New Jersey's attempt to regulate online gaming through bricks-and-mortar casinos was not new, he said: "That has been mentioned in federal circles."

Lesniak issued a statement Thursday saying he was "encouraged" by the governor's commitment to expanding gaming options and especially to look again at online gaming.

"We need to work as quickly as possible to bring this bill back to the Governor's desk and position Atlantic City to become the Silicon Valley of the high-tech gaming sector," he said.

Republicans were quick to support Christie's veto. Assemblyman John Amodeo, R-Atlantic, praised the governor's hard line on ending horse-racing subsidies. Assemblyman Vince Polistina, said he respected Christie's "continued focus on revitalizing Atlantic City," and said legal Internet wagering would become part of that discussion "at some point."

Contact Juliet Fletcher: