In 2014 the online gaming operators in New Jersey generated $122 million in Gross Gaming Revenue, just 1/10th of the foolhardy estimates Governor Chris Christie forecasted, and less than 1/2 of several more conservative estimates.
Of that $122 million, New Jersey’s cut (online gaming is taxed at 15%) was $18.4 million. Not a large amount, but it’s $18.4 million New Jersey’s budget didn’t possess before online gaming came to the state. Still, in the grand scheme of a state’s budget this is a near insignificant amount.
However, this number doesn’t tell the entire story of online gambling’s economic impact on the Garden State. The tax revenue garnered from iGaming operators is just a piece of the pie, and doesn’t take into account the taxable income on the players’ end, the jobs created and marketing dollars spent by iGaming companies, or the licensing fees paid by iGaming operators and their vendors.
The byproducts of regulation
Let’s not forget that each online operator had to pay an upfront $400,000 licensing fee, and since seven casinos ponied up that amount, the state made $2.8 million in operator licensing fees alone in 2013. A $250,000 license renewal fee is also due in July each year, so with five active operators, New Jersey will pocket another $1.25 million per annum from operator licensing fees alone.
Tack on the dozens of service provider and vendor licenses that have been granted and this number will rise even higher – As former Illinois Senator Everett Dirkson would take credit for saying, “$1,000 here, $1,000 there, and pretty soon you’re talking about serious money.”
Direct economic impact of licensing fees: $1.5 million – $2 million per year
The number of jobs directly linked to online gaming in the state of New Jersey is unknown, but after speaking to several people with firsthand knowledge of the situation I would confidently estimate the number to be somewhere in the neighborhood of 300 dedicated iGaming employees in New Jersey, 50% of which are high-skilled (marketing, tech, R&D, etc.) positions.
These 300 jobs that didn’t exist prior to iGaming employ people who pay state and local taxes and spend money in New Jersey’s economy.
Economic impact of job creation: Unclear, but potentially as high as $1 million
Freedom to market
With online casinos and online poker sites operating in a fully-legalized and regulated environment, these companies now have the freedom to market and advertise like any other industry. Virtually every operator did just that, spending millions of dollars on radio, Internet, TV, and print advertisements.
Much of this money was paid to businesses in New Jersey, with the money staying in New Jersey and finding its way into the New Jersey economy and likely leading to the creation of new jobs. It’s hard to quantify, but without these heavy marketing campaigns who knows if some of these businesses would have laid off employees, and certain jobs might not exist – such as dedicated iGaming reporters.
Take for example partypoker’s historic multi-year deal with the Prudential Center, New Jersey Devils, and Philadelphia 76ers. The deal (estimated to have cost seven-figures) stipulated that partypoker would open kiosks at games and events, and these kiosks had to be manned.
By itself it’s only a dozen or so seasonal, part-time jobs, veritable small potatoes, but if we look at the totality of the industry, and the tens of millions of dollars spent on marketing initiatives in 2014, the number of jobs directly and indirectly linked to online gaming becomes quite substantial.
The wages from these new jobs and revenue streams from the New Jersey businesses receiving those advertising dollars not only boost New Jersey’s economy, they are also taxable.
Economic impact of marketing: Unclear, but likely tens of millions of dollars
Taxes on winnings
Another byproduct of regulation few people are discussing is the state’s new-found ability to accurately track and tax gambling winnings.
New Jersey online gaming sites send players W-2G tax forms on all slot winnings above $1,200, and on table game winnings above $5,000.
For table games, this is actually a stricter and more exacting policy than you’ll find in a brick & mortar casino, since it’s difficult for land-based casinos to track each individual player’s wins and losses in a single session of blackjack, pai-gow and other table games, whereas this information is 100% trackable online.
A prime example of this occurred in late 2014 when Cathy Ruela hit a $1.3 million online slot jackpot at HarrahsCasino.com in New Jersey. Prior to legalization, a player hitting an online slot jackpot would simply have their online account credited with that amount – hopefully, depending on the credibility of the black market site. Post regulation this jackpot is now reported to the IRS.
Mrs. Ruela will (unfortunately for her) have to pay the federal government roughly 25% of her winnings, along with another 9% going to the state – New Jersey utilizes a progressive income tax rate between 1.4% and 8.9% depending on income.
From this singular $1.3 million jackpot, New Jersey collected $115,700.
Economic impact: Unclear, but likely between $500,000 – $1 million
Even without factoring the indirect economic boost from job creation and marketing spend, New Jersey’s coffers were almost certainly bolstered by well over $20 million from licensing fees, tax revenue imposed on iGaming operators, and taxable income from the players in 2014.
The true economic impact is still unknown, and let us not lose sight of the fact that this was the first full year of online gaming in the Garden State. Many analysts feel the industry could double in size in just a few years.