New Jersey Online Gambling Revenue Estimates Vary Widely

Since Governor Christie signed New Jersey’s Internet gambling bill into law earlier this year, estimating the potential value to the state has become a popular pastime among the consultants and pundits. One thing is abundantly clear after examining some of the numbers being published: Noone knows what to expect when the first games go online.

This week, Governor Chris Christie unveiled a new state budget that estimates $180 million in new tax revenue from online gambling. To generate that number using the state’s 15% tax rate on gambling profits, the online gambling operations would have to win $1.2 billion from gamblers. That’s an ambitious guess, given that these games do not even exist yet.

Not surprisingly, the Governor’s number has drawn a lot of skepticism. The industry’s own trade groups have published numbers that are sharply lower. Still, state Treasurer Andrew Sidamon-Eristoff defended the $180 million number for next fiscal year in a letter sent to the legislative bedge chief. (See the article in the Press of Atlantic City: New Jersey treasurer insists Internet gambling could net $1.2 billion.)

The controversy over the revenue estimates has been brewing for a while, as seen in this Wall Street Journal article: N.J. Gambles on Revenue in Online Bets.

Other consulting groups have come in with much lower estimates of the size of the New Jersey market. A London-based group called GamblingData issued a report this week estimating New Jersey’s first year revenue at $262 million, a figure that is lower by nearly 80%. A study commissioned in 2010 resulted in a similar, but even lower estimate of $210 million to $250 million in the first year.

I hope the games in New Jersey prove to be a boon for the struggling casino industry in the state, but I worry that over-optimistic revenue estimates such as those presented in the Governor’s budget will poison the well and create problems for the prospects in other states.

But, as these widely varying estimates show, noone will know the real size of this market until the games go live. Hopefully we won’t have much longer to wait.