Cantillon: New Jersey bets big on online gaming

Online gambling is set to become a reality in New Jersey, which recently legalised the practice, late this year or early 2014. The precise timing is not important, as the legislation has been passed and, at this point, the real issue is just how much the market will be worth.

A number of European operators, including Paddy Power, are understood to be eyeing the opportunity that New Jersey's liberalisation of its gambling laws might create, although the Irish bookmaker was adamant at its annual general meeting this month that entry to any US state would depend on the cost of getting in and the size of the market involved.

David Jennings and Simon McGrotty, analysts with Dublin stockbroking firm Davy, yesterday published an introductory look the opportunity that might present itself to European players. Their first point is that the 12 bricks and mortar casinos in Atlantic City will be the first beneficiaries.

Some of those 12 are struggling, and the legislation opens the door for them to take on partners already experienced in offering online gaming, specifically poker and casino games, as sports betting is not included the new regime. The obvious candidates are European operators such as Paddy Power, Bwin, Playtech and William Hill, according to the Davy note.

Along with that, Jennings and McGrotty suggest that New Jersey may offer the Europeans the chance to introduce their own brands to an online audience, which could give them some insights into what other US markets might – or might not – offer.

Bwin has already dived in, with a strategic agreement with Boyd operator of the biggest casino in Atlantic City. It will get 65 per cent of any joint operation and 10 per cent to 15 per cent of any Boyd standalone venture that uses Bwin technology.

In terms of scale, there are some very optimistic numbers coming from New Jersey governor, Chris Christie. His current budget is projecting a $180 million tax take from gambling. Jennings and McGrotty say that this implies an overall value for the market of $2.1 billion.

“That number looks excessive to us and others,” they say. Instead, they point out that the independent New Jersey Office of Legislative Services this week estimated that the market – rather than the actual tax take – could be worth $220 million in 2014.