New Jersey decision on online gambling creates international ripples

New Jersey governor Chris Christie’s conditional veto on the legalisation of online gambling continued to generate international ripples of interest through Friday and Saturday, with positive comments from analysts and associations, and soaring prices in the stock of publicly quoted online gambling companies in both Europe and the United States.

The consensus appeared to be that the governor’s positive comments about online gambling, together with his relatively easily met pre-conditions before he will sign the legalisation bill into law, make for a favourable outlook for New Jersey in particular and the United States in general, with European companies possibly benefitting from US partnerships.

The future addition of New Jersey to other states with legalised online gambling or poker like Nevada and Delaware, and the possibility of interstate compacts, was also seen as a positive move.

Several key points have emerged from analyst studies of Governor Christie’s 31-page statement on his conditional veto, and what he wants to see in a revised bill.

In addition to the widely publicised 10-year trial period and 15 percent tax rate, analysts noted that he did not require the inclusion in the bill of provisions barring foreign companies with questionable previous US records from forming partnerships with Atlantic City casino companies, which will have exclusive operational control of online gambling in the state.

Amongst others, that will no doubt please Pokerstars parent Rational Group, which is in the process of acquiring the Atlantic Club boardwalk land casino .

Another positive element was that the governor has not attempted to confine New Jersey online gambling to poker alone – he appears to have accepted the concept of a more complete legalisation as a way to re-vitalise his ailing AC land casinos.

The semantics of one of the governor’s requirements has analysts speculating on his position regarding future collaborative agreements with other like-minded states…for example in deals that might widen the online poker player pool.

Governor Christie specifically asks for a change in language in the current measure, seeking to insert “reciprocal agreement” in place of the more general “interstate compact.”  Does that imply a single agreement with, say, a state like Nevada which is not only a similar state gambling giant but is currently working on language that would permit its governor to negotiate with possible inter-state partners?

There are divided opinions on the question, with some viewing a restricted ability to collaborate as unwise, bearing in mind the likelihood that other states could be influenced by and might emulate New Jersey’s legalisation move.

On the other hand, the alliance of two of America’s main gambling states, even if only on poker, would be formidable, giving New Jersey the benefit of Nevada’s highly developed poker licensing and regulatory experience, and Nevada’s much-needed access to a significant player pool derived from New Jersey’s total population of 9 million people.

Whatever the governor’s motives, there is little doubt that his conditional veto was well-received by both industry observers and bodies like the Poker Players Alliance.

Perhaps more importantly, there was an immediate surge of interest in online gambling stocks on both sides of the Atlantic, with US gambling groups like Caesars Entertainment, MGM and Boyd Gaming all benefitting substantially.

Caesars rise was especially strong – up 38 percent.

The San Francisco-based social gaming giant with online gambling plans, Zynga, also received an 11 percent boost, along with Canadian online gambling group Amaya Gaming.

Across the pond, Bwin.Party – which has a partnership with Boyd in place – saw its shares rise as much as 23 percent, the biggest one day jump in over a year, whilst the investors pushed shares to an 18 percent rise – the highest in 4 years – in the already buoyant 888 Holdings, which has a partnership with the interactive division of Caesars Entertainment.

William Hill and Betfair experienced more moderate gains of just over 5 percent.

Dennis Farrell, a gambling-industry analyst for Wells Fargo, told The Wall Street Journal that online gambling could generate between $650 million and $850 million in annual revenue for the industry in the near term, assuming around 5.8 million people gamble on the sites.

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