The Fight … A Look Back at a Year of Legal Online Gambling

New Jersey has given us a lot to look at

On November 26, 2014, New Jersey’s online gambling industry celebrated its first birthday.

It was an important milestone for online gaming in the United States. Analysts and pundits could now turn to facts on the ground, instead of relying on hypothetical scenarios and what if’s.

New Jersey
Depending on your purview, New Jersey’s first year of legalized online gambling could be seen as either a success (regulatory) or a failure (financially), but, as with most things in life, the truth tends to reside somewhere in the middle. Year 1 of online gaming in New Jersey can best be termed as a mixed bag.

The Soft Launch acts as a harbinger of future troubles

On November 21, 2013, roughly a dozen 100 percent legal online gaming sites suddenly sprang into being in New Jersey.

For five days, these operators had an unenviable task; proving to the New Jersey Division of Gaming Enforcement that they were ready, willing, and able to provide regulated online gaming within the borders of the state.

Among the participants in the synchronized launch were Atlantic City casinos Tropicana, Borgata, Caesars, Trump Plaza, Trump Taj Mahal, and their iGaming partners, 888, partypoker, Ultimate Gaming, Betfair, and Gamesys — Golden Nugget and Bally Technologies would join the fray a couple weeks later.

The trial period was not without its problems. Across the board players complained of geolocation and disconnect issues. They were stymied and frustrated by declined credit card transactions and stripped-down software platforms they deemed five to 10 years out of date.

Still, the players registered accounts and flocked to the online gaming tables. After five days, the “Soft Launch” trial was deemed a success by the NJ DGE, and online gambling was officially green-lighted on November 26, 2013.

Problems persist

Even with the DGE’s blessing, the frustrating issues that plagued the soft launch were by and large unresolved. Some of these problems have been virtually stamped out or modestly improved over the past 12 months, while other issues still persist.

Geolocation

Geolocation was the least of New Jersey’s early problems, and the incremental improvements in the process have virtually eradicated geolocation issues in the state — mobile disconnect issues remain a problem.

The latest data shows geolocation success rates better than 95 percent , and the early disconnect issues have been dramatically reduced as regulators have grown more comfortable with geolocation technology and reduced restrictions on buffer zones around the state’s borders.

Payment processing

On the other hand, payment processing was a major problem right out of the gate, and while it has been improved, it remains a serious issue as we head into Year 2.
Attempted Visa deposits in November of 2013 had a mere 10 percent approval rate, a number that has since risen as high as 50 percent, while MasterCard approval rates, which began below 50 percent are now better than 70 percent.

Fortunately new credit card codes and the possible arrival of PayPal are expected to dramatically decrease credit card denials .

Intrusive player verification

One unexpected hurdle New Jersey online gaming operators encountered was instead of acting as a beacon to players, the safeguards and regulations turned out to be a repellent. The intrusive registration process, particularly the divulging of the registrant’s Social Security number, drove players away from legal online poker tables .
Unfortunately this is part of regulated online gambling, and hopefully something players will eventually grow accustomed to.

Liquidity

New Jersey’s population of nearly 9 million was being touted as large enough to sustain a vibrant online poker economy. In some people’s minds, now that online poker had been legalized, people would be flocking to the online poker tables like it was 2004 all over again.

Unfortunately, what we discovered (and what many of us had realized all along) was New Jersey was closer to having an unsustainable online poker ecology than a self-sustaining one.

That being said, New Jersey may not be a success in its own right but the Garden State has clearly demonstrated what is possible down the road, if states and perhaps the federal government can figure out a way to pool players and increase liquidity.

Fears were misplaced

The good news is, from a regulatory perspective, the regulations have worked better than most people expected.

To date, there has not been a single case of an underage player or an out-of-state player playing at a licensed New Jersey online gaming site.

Despite what Andy Abboud stated in front of the Pennsylvania legislature , the lack of reported incidents is not because the industry cannot spot or prevent them. One of the reasons the regulations have handcuffed the operators is because the DGE decided overregulation of the industry was how they would prove the naysayers wrong.

The DGE’s real-time geolocation data center constantly identifies and prohibits out of state players from accessing the site. Likewise, the intrusive player verification policies that so frustrate legitimate players are able to identify underage players and players attempting to defraud the system by entering false information.

Is it perfect?

No.

At some point, underage players will be caught, as will someone who is using North Korean hacking techniques just so they can play in a $20 tournament at a New Jersey online poker room from Kansas. No system is foolproof — just ask Target, Home Depot, and the government.

To expect online gambling to prevent every instance of unlawful behavior is ridiculous when we don’t impose this same threshold on any other industry, including the land-based gaming industry where even Sheldon Adelson’s casinos are routinely fined for allowing underage gambling and serving minors alcohol.

Another regulatory success was the seamless closure of Ultimate Poker and Ultimate Casino. This negative quickly turned into a positive, allowing the DGE and the operators in the state to prove that player funds were in fact safe and secure and kept in segregated accounts.

Ultimate Gaming players were paid promptly, and even players who were unaware of the closing of the site and did not withdraw their funds were sent their account balances via checks to their registered addresses.

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January 2015