The Current State of New Jersey Gambling — NJ Online Casinos & Atlantic City Casinos

• • While many thought that online gambling might cannibalize Atlantic City brick-and-mortar casinos, the biggest threats come from stagnation and out-of-state competition.
• • Online Casinos and Boardwalk establishments Each Have Their Own Value in the New Jersey Market, with the Former Offering Greater Convenience and the Latter a More Lavish Experience.
• • The New Jersey Gaming Market Continues to be Profitable, but a Willingness to Adapt and Evolve is Needed for Expanded Growth.

Online Gambling has been a convenient option for placing bets in New Jersey ever since the state legalized internet gambling. However, for gamblers who prefer the excitement of a casino floor, the Atlantic City boardwalk casinos still provide locals and tourists alike with a wonderful option.

Do the New Jersey online gaming and brick-and-mortar casinos benefit one another, or is it possible that online gaming cannibalizes profits from Atlantic City casinos? Now that online gaming has been live in New Jersey for nine years, we may have some initial answers.

An Overview of the New Jersey Casino Market

The Atlantic City boardwalk has been a staple of gambling in the United States ever since the mid-19th century, when it started as a small seaside spot with big real estate opportunities.

In 1976, citizens successfully passed a referendum making gambling legal within Atlantic City, laying the groundwork to making Atlantic City the gambling capital of the East Coast.

Existing hotels added legal casinos towards the end of the 1970’s. In1978, Resorts Atlantic City opened the first legalized casino, followed by Caesars Boardwalk Regency (which became Caesars Atlantic City) and Bally’s Park Place (which ditched the Monopoly-game moniker to become Bally’s Atlantic City) by the time 1980 rolled around.

Today, the Atlantic City Boardwalk hosts nine casinos: Bally’s Atlantic City, Borgata Hotel Casino & Spa, Caesars Atlantic City, Golden Nugget Atlantic City, Harrah’s Resort, Ocean Resort Casino, Resorts Casino Hotel, Tropicana Casino Resort, and Hard Rock Atlantic City.

Atlantic City casinos, like most in-person businesses, suffered mightily from covid restrictions. On March 16, 2020, all Atlantic City’s casinos closed due to government regulations to contain the outbreak of the novel coronavirus. Then, on July 2, 2020, after 108 days of closures, casinos were allowed to open at 25% capacity. However, Borgata didn’t open until late July and allowed indoor dining at 25% capacity in September.

In accordance with changing CDC guidelines, Atlantic City allowed venues to open to 35% capacity in February 2021 and then 50% in May 2021 following the increase in fully vaccinated individuals and reduced regulations on mask-wearing and social distancing for vaccinated people.

In the fall of 2021, Atlantic City casino executives painted a dire picture of the local market, telling legislative policymakers that if they didn’t cut tax burdens four the city’s nine casinos could close.

Fearing closures and the associated layoffs, legislatures quickly altered the formula used to determine how much casinos pay the city, its school district, and the county to operate. This ultimately resulted in the casinos ultimately paying tens of millions less in taxes than they otherwise would have.

New Jersey boardwalk casinos seem to be on the rebound.  Resorts casino president Mark Giannantonio told U.S. News that he is “fairly optimistic” about 2023.

“In 2022 we were buffeted by a difficult economy and very high inflation, and we’re beginning to see that come down,” Giannantonio said, adding that local initiatives on improving safety and cleanliness are cause for optimism.

“That’s going to add a new level of confidence. Our customers will see a difference and hopefully that will lead to more visitation.”

Getting back to pre-covid levels at their brick-and-mortar casinos is Atlantic City’s seems within reach. In-person winnings from gamblers in 2022 finally surpassed pre-pandemic levels of 2019 — a long-sought goal of the Atlantic City casino industry. The casinos won $2.78 billion from in-person gamblers in 2022, compared with $2.68 billion in 2019.

But only three of the nine casinos — Borgata, Ocean and Resorts — had more in-person revenue in 2022 than they did in 2019.

The Growth of Online Casinos in New Jersey

In January 2011, the New Jersey Legislature passed a bill sponsored by Raymond Lesniak to allow online gambling by New Jersey residents over 21. Because the state constitution allows casino gambling only in Atlantic City, the legislation mandated that the computer servers operating the online gambling websites be located at licensed casinos in Atlantic City.

The Lesniak bill evaded federal prohibitions against online gambling by authorizing the Casino Control Commission to create regulations to ensure the bets were placed from inside New Jersey.

However, New Jersey Governor Chris Christie vetoed the legislation because of concerns that “allowing customers to bet through any computer terminal left open the chance of commercial businesses such as nightclubs and cafes becoming gambling hubs around the state”, and “the bill further created a legal fiction that a bet placed anywhere in New Jersey counted as an Atlantic City bet“.

In December 2011, the United States Justice Department issued a legal opinion that the Federal Wire Act prohibits only online sports betting, not online casino games. 

To address Christie’s concerns, new legislation was drafted that prohibits businesses other than Atlantic City casinos from advertising online gambling or allowing their facilities to be used for online gambling. On February 26, 2013, a revised bill permitting Internet gambling was overwhelming approved by the New Jersey Legislature, and then signed into law by Chris Christie. The law legalizes online casino gambling for a ten-year trial period, restricts the operation of the websites to Atlantic City casinos, and imposes a 15% tax on online gambling revenue comparted to an 8% tax on brick-and-mortar casino revenue.

Online casinos opened for business via a synchronized launch on November 21, 2013. At launch, game options were limited, but by 2017, twelve separate online casino brands offered many hundreds of games including a wide variety that have been brought over from the traditional casino world.

When New Jersey initially legalized online casino play in 2013, they were one of the first states in the U.S. to experiment with online gambling. At the time, there were a lot of unknowns revolving around how its introduction would impact established casinos within the state. Therefore, a sunset date acted as a built-in assurance for legislators to check in and see if the law needed adjusting.

The 2013 law is written such that online casino platforms are not separate entities, but rather an extension of the nine Atlantic City casinos. The selling point behind the expansion was to give those brick-and-mortar casinos another revenue source.

Initially, there were fears that online casinos might instead cannibalize the profits of brick-and-mortar casinos. That concern was particularly potent because Atlantic City casinos employ so many people in the state directly, as well as drive other industries that service the casinos.

New Jersey’s position as one of the first states to offer an online casino, alongside its open market, quickly made it one of the leading states for online gambling revenue. This dominance continued through 2006, when gross gambling revenue for New Jersey hit a record $5.2 billion. Revenue began decreasing after that, largely due to competition from casinos in other states, particularly neighboring Pennsylvania. 

The online New Jersey casino industry has not become stagnant, and it ended 2022 with double-digit growth. However, some believe the New Jersey market is showing some signs of slowing amid competition from neighboring states.

PlayUSA’s annual online gambling expansion report suggested New Jersey’s mature gambling market may be approaching a ceiling, citing recent revenue trends.

“While New Jersey is still on track to end the year [2022] with double-digit growth, the past few months of data reveal the first signs of an actual pullback,” the report’s authors said. “New York’s expansion is no doubt responsible for some of the falloff, but it’s also apparent that maturity itself is approaching.”

The industry group’s “lookahead line” has New Jersey slipping backward in 2023 but said the market could also see modest growth. 

The report noted Illinois is also giving New Jersey a run for its money, as its gambling market nears maturity. 

“If things continue along this trajectory, the two markets should be pretty much equal in size by the end of 2023—generating between $11 billion and $12 billion in handle for the year,” the report stated. “Illinois should inch ahead of New Jersey soon by virtue of the population disparity alone.” 

If New Jersey online casinos truly are reaching their peak it would significantly impact overall gambling revenue in New Jersey. While New Jersey’s gambling revenue matched its all-time high of $5.2 billion in 2022, only half that amount was won by casinos from in-person gamblers. With New York now permitting online gaming, New Jersey will face even steeper local competition.

If online casinos in New Jersey truly have neared their maximum profit margin, Atlantic City casinos will need to up their game if they intend to increase overall profit margins.

Impact of Online Gambling on Brick-and-Mortar Casinos

Figures released last month by the New Jersey Division of Gaming Enforcement show the casinos, the horse tracks that take sports bets, and online partners of both types of gambling won $5.21 billion last year, up 10% from a year earlier and matching a level last seen in 2006. That was just before the advent of casino gambling in neighboring Pennsylvania sent New Jersey’s gambling industry into a downward spiral that eventually led to the closures of five of the 12 Atlantic City casinos that were operating at the time.

When factoring in their online platforms, six Atlantic City casinos had more total gambling revenue in 2022 than they did the year before.

Borgata Hotel Casino & Spa lead the market, winning $1.3 billion in overall gambling revenue, up 18.2%. Golden Nugget Casino won $581 million, up 10.2%. Hard Rock Hotel & Casino Atlantic City won $576 million, up 12.7%. Ocean Casino Resort won $389 million, up 13.6%. Tropicana Casino won $365 million, up 2.9%, and Bally’s won $198 million, up 37.3%.

Meanwhile, Harrah’s Resort Atlantic City won $258 million, down 3.4%; Caesars won $239 million, down 1%; and Resorts Casino Hotel won $168 million, down 0.3%.

Resorts Digital, Resorts Casino Hotel’s online arm, won $546 million, up 21.3%, while Caesars Interactive NJwon $113 million, up 1%.

In terms of in-person gambling revenue, Borgatawon $724 million, up 19.5%. Hard Rock won $492 million, up 14.2%; Ocean won $356 million, up 16.3%; Harrah’s won $257 million, down 3.2%; Tropicanawon $248 million, down 1.8%; Caesarswon $235 million, down 0.7%; Resortswon $167 million, up 0.8%; Bally’s won $153 million, up 9.4%; and Golden Nugget won $148 million, up 1.1%.

New Jersey’s casinos and horse tracks took nearly $11 billion worth of sports bets in 2022, slightly more than in 2021.

Some Atlantic City boardwalk casino traffic is still limited by gamblers who are either still concerned about covid exposure, or simply grew used to gambling from the comfort of their own home. Others may prefer the lower-stakes offerings that online casinos often provide. These online advantages only increase when you factor in consistent new offerings by online gambling venues, such as live online dealers and gaming that is not available in person, such as fast fold poker.

While digital slot machines and video poker have been available in most casinos for the better part of the last decade, recently, casinos have also been adopting newer, more skill-based video games to appeal to a younger demographic. Casinos have seen the stranglehold video games have on younger audiences and are hoping to capitalize on this with their own video-based gambling games.

These gambling videogames are primarily offered online only. However, this has crossover potential, as it’s only a matter of time before we see a huge increase in arcade-like gambling machines on the gaming floor of casinos. In the near future, you may be visiting a casino to bet money on your performance in one of your favorite e-sport games.

Brick-and-mortar casinos provide other benefits that online casinos would be hard-pressed to match. First and foremost is the atmosphere—brick-and-mortar casinos offer a level of excitement that online casinos will never be able to match. You will never be able to log on to an online casino and get that same feeling of walking into a live casino and seeing the flashing lights, loud music, and crowded tables.

In addition, brick-and-mortar casinos are a great place to socialize and meet new people. If you’re the type who enjoys interacting with others while you gamble, then a brick-and-mortar casino is likely the better choice for you. Atlantic City casinos often offer promotions and tournaments that are unavailable online, Finally, when you are ready to call it a night, you can cash out your chips and walk out with money in hand. While withdrawal time from online casinos have decreased of late, they cannot immediately put cash in your pocket.

Atlantic City brick-and-mortar casinos’ biggest perks may be off the casino floor. Gamblers can patronize all the boardwalk has to offer, including excellent food and drinks, shopping, and live music and stand-up comedy. Factor in the opportunity to spend the night in a luxury hotel room, and you realize that Atlantic City casinos are all about the experience.

That being said, the first rule of real estate is location, location, location, and no gambling location is more convenient than your laptop or phone. It seems likely that the best possible outcome for the New Jersey gambling market is enticing players to use mobile gaming within the state for everyday gaming and to still frequent the Atlantic City Boardwalk for more immersive gambling experiences.

How Sports Betting Factors into the New Jersey Gambling Market

In January 2012, New Jersey Governor Chris Christie signed legislation allowing sports betting in New Jersey after it was approved by a 2-to-1 margin in a voter referendum.

The law permitted any of the state’s casinos and racetracks to offer gambling on professional and college sports, but prohibited them from accepting bets on college events played in New Jersey, or out-of-state games involving New Jersey college teams. The New Jersey Division of Gaming Enforcement subsequently issued regulations for sports betting.

In response, the National Collegiate Athletic Association, the National Basketball Association, the National Football League, the National Hockey League, and Major League Baseball filed a federal lawsuit against New Jersey to prevent sports betting, based on the Professional and Amateur Sports Protection Act of 1992 which banned sports betting in all but four states.

 In February 2013, United States District Court judge Michael A. Shipp ruled in favor of the athletic leagues, and barred New Jersey from issuing sports betting licenses. The court ruled that under the Commerce Clause of the United States Constitution, the regulation of gambling and the granting of a grandfather clause to four states is within Congress’s power. In September 2013, a three-judge panel from the 3rd Circuit Court of Appeals voted 2-1 to uphold Shipp’s decision.

On June 27, 2017, the Supreme Court agreed to hear Christie v. National Collegiate Athletic Association. On May 14, 2018, the court issued its opinion in Murphy v. National Collegiate Athletic Association (the case was renamed due to the election of Phil Murphy as governor). The Court overturned the Appellate Court’s decision, ruling that the Professional and Amateur Sports Protection Act was unconstitutional. Justice Alito wrote the opinion supporting New Jersey’s assertion.

This allowed New Jersey to implement legalized sports betting. On June 11, 2018, Governor Phil Murphy signed Assembly Bill 4111, legalizing sports betting at casinos and racetracks within New Jersey. It also allowed casinos and racetracks to seek approval for online and mobile sports betting after thirty days. The first online sports bet was taken in August 2018.

Much like the online casino gaming that preceded it, New Jersey mobile sports gambling benefited from its early entry into the market. Just one year after the state’s surprising high court victory brought legalized sports betting to any state that wanted it, New Jersey become the sports betting capital of the country. 

Powered by betting on mobile devices and by New Yorkers flooding across the border to place wagers, New Jersey quickly paced all competition in the booming sports betting industry.

Bettors wagered more in New Jersey than in any other state in the country during May of 2019, edging past Nevada and the famed Las Vegas sports books by $1.5 million. New Jersey sports books took in $318.9 million in bets, while Nevada took in $317.4 million.

For years, the argument for legalizing sports betting was that it would be a shot of adrenaline for New Jersey’s languishing casinos and horse racing tracks. This new revenue source was also expected to draw a more consistent, year-round crowd to venues that struggle to subsist largely on summer surges. 

The short-term results seemed to support that argument, particularly for New Jersey horse tracks. In fact, the owners of the state’s two biggest horse tracks credited sports betting with lifting their fortunes. 

“I don’t know how much longer I could have kept that place open losing millions of dollars a year just because I love harness racing,” said Jeffery Gural, operator of the sportsbook at Meadowlands track, the year after sports gambling opened in New Jersey. “At some point, you pull the plug. So, it’s helped everybody.”

Dennis Drazen, the operator of the Monmouth Park racetrack and a central force in the effort to legalize sports betting, said the track most likely would not have been able to make the case for the subsidy without the introduction of sports betting, which showed that the track was viable.

The new wagering business added dozens of jobs at the track for sports betting and additional jobs for security and food and beverage sales.

“It’s put the track on sound fiscal footing,” Drazen said. 

In Atlantic City, the impact of sports betting was mixed. Most boardwalk casinos saw revenue decline in the year after sports betting was legalized, but most attributed that decline to two new casinos — the Hard Rock and Ocean Resorts — opening the previous year and diluting business. 

In 2022, New Jersey casinos, racetracks and their partners sports wagering revenue increased by 49% to $87.7 million in December 2022. The Meadowlands—where FanDuel,PointsBet and Superbook operate—led sports betting revenue market share at 50.4%, with Resorts Digital where DraftKings and Fox Bet operate, coming in second at 25%. New Jersey’s casinos and horse tracks took nearly $11 billion worth of sports bets in 2022, just a tiny bit more than they did in 2021.

Of that $11 billion, the casinos, tracks and their online partners kept $726 million as revenue after paying off winning bets and other expenses.

$726 million, while a massive number, did however constitute a decline in New Jersey sports wagering revenue. Overall, sports waging revenue decreased by 7% for the year-to-date period. Many are looking to neighboring New York for this lost revenue.

From Jan. 8, when the New York expansion to internet sports betting went into effect, to the end of the month, patrons wagered nearly $2 billion at the online sportsbooks, according to the New York State Gaming Commission, topping New Jersey’s prior record of $1.3 billion set in October.

New York’s sportsbooks topped New Jersey by $631 million, where the handle – or how much was bet on sports – reached close to $1.35 billion, according to the New Jersey Division of Gaming Enforcement.

“New York will definitely take a bit of steam out of New Jersey’s numbers,” Joe Lupo, president of Hard Rock Atlantic City, as well as the gambling trade group the Casino Association of New Jersey told NJBIZ. “I don’t think there’s any concern. It is what it is.”

The week before the Super Bowl, Gov. Phil Murphy said there some bettors “who literally had been crossing the George Washington Bridge” from New York City, “placing a bet inside the four walls, maybe at the Meadowlands or in their car online and going back to New York.”

“Presumably a good amount of that traffic will cease,” he continued during a Feb. 7 COVID-19 briefing. “That does not mean that we still won’t have a very good book of business.”

FanDuel runs the retail sportsbook for the Meadowlands Racetrack just down the road from the Lincoln Tunnel. “No retail operator in New Jersey will be impacted more by New York’s sports betting expansion more than FanDuel’s Meadowlands sportsbook,” said David Danzis, an analyst at PlayNJ.com, in a Feb. 16 analysis on New Jersey’s January numbers.

“FanDuel has dominated both the online and retail markets since the beginning, in part, because of its close proximity to New York City. For the first time since New Jersey launched sports betting, FanDuel’s market supremacy in the state is threatened.”

However, several factors may qualify New York’s comparably fast start. Although online wagering makes up the lion’s share of bets placed on sports, New Jersey went a month and a half after their initial legalization with retail-only offerings, and only at three of the state’s nine casinos and two of its three racetracks. Of those nine casinos, both Hard Rock and Ocean Casino Resort opened just a few weeks after the Supreme Court decision.

By the end of July 2018, patrons bet just over $57 million at the retail sites, and by the end of the following month when online betting was legalized, they wagered another $95 million, most of it online or via mobile gaming.

“Other casinos and racetracks followed when brick-and-mortar sportsbooks were constructed and partnerships with providers were established, which created a phased implementation statewide,” explained Jane Bokunewicz, coordinator at Stockton University’s Lloyd D. Levenson Institute of Gaming, Hospitality and Tourism just outside of Atlantic City.

Bokunewicz also noted that “in New Jersey some operators took a wait-and-see approach before investing in costly infrastructure projects.”

Consumers were wary about the new product, and banks were hesitant to “allow credit cards to be used for betting,” added former state Sen. Ray Lesniak, a Democrat who played a key role in the state’s sports-betting legalization efforts before his retirement in 2018. “That dissipated over time as banks came around that sports betting was legit.”

Unlike the New Jersey sports betting debut, online gaming was already a proven commodity when it opened in New York.

Another key difference was the quiet sports calendar when New Jersey opened its sports betting market in June 2018. There was the World Cup and Major League Baseball, but the number of interesting games was small until the NFL and college football seasons started, followed by college and NBA basketball.

In addition, gambling companies are currently spending hundreds of millions of dollars on promotions and advertising for sports betting at a level almost unimaginable in the summer of 2018.

“You have the entire football season of advertising,” Joe Lupo said. “You had BetMGM and DraftKings advertising on all major league ballparks – Green Monster wall of Fenway, or the rinks of all NHL ice rinks … you’ve had so much more advertising over the last two years, especially for the last four months. You had all this buildup to the month of January.”

Murphy and Lupo predict that New Jersey will continue to be a major market leader, even if trailing New York at times. The sheer level of promotions to get people hooked – Caesars offered a bet $20, get $300 promo for the Super Bowl, for example – will start to taper off.

“You have online companies losing hundreds of millions of dollars,” Lupo noted. “They won’t continue to promote at the current level once they increase their databases to a level and get a market acquisition that they’re comfortable with.”

Nonetheless, considering the negative impact that legalization of gaming in Pennsylvania had on New Jersey gambling revenue, along with predictions that New Jersey online wagering may have plateaued, it is a situation worth monitoring—particularly considering over 90% of New Jersey sports bets are placed online.

What the Future Holds

While New Jersey casinos—both online and on the Atlantic City boardwalk—continue to show profits, the future is not without its hurdles. However, the majority of those financial concerns do not tend to pit online casinos against brick-and-mortar establishments. Rather the biggest threats appear to be continued competition of other states—particularly those nearby—legalize gambling, combined with the potential of a local market plateau.

Sarah Grady, assistant director of the Lloyd Levenson Institute at Stockton University, which studies the Atlantic City gambling industry, pointed out that it took an enormous amount of work by the casinos and New Jersey state government in 2022 to replicate the levels of 2006, when gambling revenue consisted solely of what was won from in-person gamblers.

“To compare these returns, it is important to consider how much the market has changed in the past 16 years,” she said. “To achieve the returns we have today took a substantial expansion and diversification of the New Jersey gaming product to compete with increased competition from neighboring states.”

Some believe that the New Jersey gambling market, and the Atlantic City Boardwalk in particular, will continue to expand when outside factors become more favorable. “In 2022, the Atlantic City casino industry continued to face challenges, including the lingering effects from the pandemic, a difficult economy and high inflation,” said Mark Giannantonio, president of the Casino Association of New Jersey. “As we move into a new year, Atlantic City casinos are committed to providing the best possible experience for our customers, which includes making significant investments that will continue to solidify Atlantic City’s position as a world-class resort destination with top-notch dining, shopping and entertainment offerings.”

Others are pushing for more diversification. A five-person panel made up of casino industry experts recently discussed the future of the industry as part of the event recognizing the 45^th anniversary of voters legalizing casino gaming in New Jersey. The panel, which was hosted by the Lloyd D. Levenson Institute of Gaming, Hospitality and Tourism at Stockton University, suggested that sportsbooks and esports might be the keys to Atlantic City’s continued success.

“The customer is always going to determine the industry, and a lot of those folks are young right now, and they game online and do things differently than what was offered in the past,” said Michael Epps, former commissioner of the New Jersey Casino Control Commission, as reported by The Press of Atlantic City.

The main takeaway from the session was that the casino sector will have to continue to evolve to continue to attract customers.

Legalized casino gambling has succeeded beyond initial expectations, according to Steven Perskie, a former lawmaker who helped draft gaming legislation in the 1970s. But moving forward, casino executives should emphasize sports betting to maintain that momentum, the panelists agreed on Thursday.

But going forward, an evolution towards esports should be atop the casinos’ objectives, panelists said. The experts also all agreed there is a need for the city’s gaming halls to offer more than slot machines and dealer-run card tables.

The good news for New Jersey is that the state is used to being at the forefront of gambling. With a history of leading the way for both online casinos and sportsbooks, the New Jersey gambling market is the ideal place to unveil the next evolution in gaming.