New Jersey's Online Gambling Impact

New Jersey is about to launch online gambling, and with it, the effects of a ground-breaking event are expected.

The existing online gambling community, by and large, holds no real excitement about New Jersey, because of the fact that it does not really involve them, but rather the current gaming license-holders in the state.

However, that does not mean that there is not an element of skepticism about the launch as it relates to what impact it is going to have on the citizens of New Jersey as they partake in gambling, on a legal basis, that is more convenient than it has ever been before.

The date of the launch is November 26, although there is a "soft" launch slated for November 21 to see if there are "all systems go." The passage of the bill legalizing and regulating online gambling in the Garden State has obviously met with more than its fair share of controversy, and much of it comes from the fact that gambling opponents fear a widespread increase in problem gamblers. There is going to be so much access to the online casino games that it will almost inevitably create an atmosphere by which more gamblers are created, and those who had problems to begin with will see those problems become exacerbated.

Some of the concern also involves the connection being gambling, credit cards, banks and debt. Because of the fact that the consumer can just log on and play, the transaction that gets them started is going to be executed with a credit or debit card.

Immediately that involves banks. And if it is a credit card we are talking about, it is going to naturally involve credit. The casinos get paid, so they don't get hurt, but it is the bank that is extending credit to gamblers, which is an odd place for them to be considering the existence of the UIGEA, which is an act prohibiting banks from being involved in transactions that are related to online gambling. Not that any bank activity in this direction would violate that act, because it is legal and regulated. But that is a precarious position for banks to be in.

Critics are afraid that there is the potential for an unprecedented explosion in consumer debt, taking into consideration that New Jersey currently ranks second in the United States with regard to credit card debt per consumer (Alaska is #1). The limit that a customer can open up an account for with any single Atlantic City casino's online gambling extension is $2500. With a dozen casinos, that raises the proposition that the player could have as much as $30,000 in possible gambling debt right from the beginning. When that happens, how much of that is going to turn into bad debt? And when banks get too much of that to handle, how long will they continue to take part in financing an internet gambler's habits? These are questions that are being asked, and they are far from illegitimate.

Beyond that, there is the matter of how far it will extend beyond New Jersey. Much of the inspiration for the legalization of online gambling is rooted in the presence of competition for Atlantic City with some of the neighboring regions, namely that which surrounds Philadelphia, Delaware and New York. If New Jersey succeeds in its revenue quest through online gambling - and there is no reason it shouldn't, considering that any and all the games that are offered through the land-based casinos in Atlantic City will also be available to the internet customer - will those surrounding states become involved in the online market as well? How about those that have no proximity to New Jersey whatsoever? It is no secret that many states have been watching and waiting to see what comes out of New Jersey, and so one could expect that there could be a trigger effect.

They are all looking for a revenue fix, as was the Garden State, which had seen its intake reduced from $5.2 billion to the #3 billion it is on track to produce this year. They may get that fix, but at what cost? Could an explosive increase in access create a financial crisis, or at least exacerbate the one that America is trying to pull itself out of now?

That could possibly be the case. And of course, there is every logical reason to associate the easy access to gambling with a negative social and financial effect that could become greatly accelerated when compared with the effect of the one created by physical casinos.

In fact, New Jersey's governor, Chris Christie, originally vetoed the online gambling act because of some of those very concerns. He said "Our state cannot carelessly create a new generation of addicted gamers, sitting in their houses, using laptops or iPads, gambling away their salaries and their futures."

He is right to have concerns, but at the same time, because of the concern for the future of Atlantic City itself, he has had to balance the pros and cons of such a thing. Those who welcome internet gambling would argue something with much validity, in that the vast majority of people who gamble, whether it is in a Boardwalk casino, race track or online gaming establishment, are able to do it in a recreational manner, without putting themselves or those around them at risk. Should they be compromised by the minority who are not able to handle it? Maybe, say the critics, if that minority does enough damage.

Christie is getting his money's worth out of the internet gambling move; the tax is going to be 15%, which on the expected amount of gambling revenue, should bring in $160 million to the state in the first seven months of operation. There is money that is going to be set aside for treatment of compulsive gambling. There are restrictions on the age (21) and the location (only within the state's borders) of customers.

Will it all be worth it in the end? More to the point, will it all be worth it in the middle? We're just going to have to "roll the dice" (pardon the pun) and find out.