New Jersey has joined the race to become the first state to legalize Internet gambling.
A bill ready for consideration when lawmakers convene this week would put New Jersey in the running to approve online wager games, such as poker, ahead of efforts by other states such as California.
“There are probably 500,000 online poker players in New Jersey alone. And we’re missing out on around $100 million in revenue,” said state Sen. Raymond Lesniak, D-Union, the bill’s sponsor.
The move would empower only licensed New Jersey casinos, all of which are located in Atlantic City, to run Web sites that offer such games.
Lesniak argued Sunday that a recent decision by a federal court of appeals, which knocked down the broad legalization of online gambling, has given New Jersey a window.
“The court said such activities must be restricted within the borders of a state,” Lesniak said. “We would restrict the games to New Jersey residents. And I believe that would satisfy that ruling.”
The text of the bill specifically would allow “New Jersey residents to place wagers on casino games via the Internet.”
In addition, the bill would require that the equipment used to operate Internet wagering be located in a restricted area of a casino hotel or in a secure facility off the premises of the casino hotel, “but within the territorial limits of Atlantic County.”
The practice of computer gambling has grown in the past decade through the explosion of Web sites that connect players from individual terminals across the world. Gambling online is legal in some countries, but not the U.S.
Federal laws forbid gambling without a valid casino license, which can only be obtained in states that have legalized gambling in brick-and-mortar gaming halls.
In 2006, U.S banks were ordered to block their credit and debit cards from carrying payments to online gambling companies, leaving would-be players without a way to pay.
But federal attitudes toward the ban on Internet wager-games have been shifting.
U.S. Rep. Barney Frank, D-Mass., has been an advocate for legalizing and regulating the practice. He and U.S. Rep. Jim McDermott, D-Wash., introduced legislation in 2009 that would set up a federal-state framework allowing the practice and enforcing taxation.
In October 2009, a report by the Joint Committee on Taxation looked at the financial benefit of regulating Internet gambling.
The committee’s report estimated that tax and licensing revenues would bring in nearly $42 billion over 10 years.
A group of advocates for legalization, the Safe and Secure Internet Gambling Initiative, argue that unregulated players in the U.S. currently gamble more than $100 billion each year.
“It would be a big boost to the casino industry in Atlantic City,” Lesniak said. “It’s a bold move, and in this economy we need bold moves.”
Recent figures released by the New Jersey Casino Control Commission show the state’s gaming industry took home just $3.9 billion from gamblers in 2009, a 13.2 percent decline compared with 2008 and its worst showing since 1997.
New revenues could also bolster state coffers at a higher tax rate than traditional casino earnings. Lesniak’s proposal would authorize an annual tax of 20 percent on gross revenue from Internet wagering, 12 percent more than that currently charged to any of Atlantic City’s casino operators. Those revenues are paid to the Casino Revenue Fund.
State Sen. Jim Whelan, D-Atlantic, said boosting the tax rates was a suggestion he made to Lesniak during preliminary discussions about the bill. He said he offered the idea as a way to counter the possibility of Internet gaming weakening the customer base for the city’s 11 casinos.
“I suspect that that is a concern, obviously,” he said. “But this is one of those situations that maybe we can regain some of the edge that we’re losing.”
But Lesniak’s proposal has already stirred resentment from opponents of gambling who have seen the effects of compulsive gambling firsthand. Arnold Wexler, former executive director of the Council on Compulsive Gambling of New Jersey, said legalizing Internet gaming would make it easier for people to “lose their life.”
“It’s about time the legislators took their head out of the sand and start understanding the problems of compulsive gambling,” said Arnie Wexler, former executive director of the Council on Compulsive Gambling of New Jersey. “When is the state going to stop trying to use gambling to fix all of the government’s ills?”
Wexler said he has operated a national hotline for compulsive gamblers and claimed one-third of the calls come from gamblers between the ages of 12 and 25. With that same age range being common among computer users, Wexler said the two are a bad combination.
“A lot of these young kids that know the computer inside out are going to find a way to start gambling,” Wexler said. “How are they going to prevent (underage gambling)? Unless (Lesniak) think he’s going to sit and watch each kid.”
Highlights of the bill
State Sen. Raymond Lesniak’s proposal would allow “New Jersey residents to place wagers on casino games via the Internet.”
It would create a Division of Internet Wagering under the direction of the state Casino Control Commission.
An annual tax of 20 percent would be placed on gross revenue from Internet wagering.
The Casino Control Commission and the New Jersey Racing Commission would allow the operation of terminals at racetracks at which “individuals who have registered to participate in Internet wagering may wager on games conducted at casinos in Atlantic City.” Those terminals would be identical in appearance to casino slot machines.
The bill would require that equipment used to operate an Internet wagering site be located in a restricted area of a casino hotel or in a secure facility off the premises of the casino hotel, “but within the territorial limits of Atlantic County.”
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