New Jersey, whose online casino ecosystem has continued to move from strength to strength throughout the year, is a region that is often considered the benchmark for other states to follow both in terms of its regulatory framework and the scale and scope of the market.

However, should the Garden State, the catalyst for the repeal of PASPA which ultimately led to the rollout of legal online sports betting and igaming across the USA, be taking fleeting glances over its shoulder.

As others play catch-up in terms of the number of active operators and the revenues being generated, is New Jersey’s position as standard setter coming under threat from regions that have learned lessons from its mistakes and potentially created a better environment for the sector to thrive?  

To delve into the debate, Adam Noble, CEO of online casino brand PlayStar, and Allan Petrilli, VP of sales and growth at marketing analytics platform provider Intelitics, spoke to the SBC Leaders magazine.

Following New Jersey setting yet more records through September, as its igaming environment produced a $122.6m high in gross gaming revenue, Noble and Petrilli begin by examining the state’s position as the ‘standard’ or ‘blueprint’ for others to potentially follow.

The former, although acknowledging that New Jersey “has been a benchmark for igaming in the US for many years,” suggests that that’s “not to say it has been a super successful benchmark for all of that time”.

“…if you can make it in New Jersey, you can make it anywhere”

Adam Noble, CEO of PlayStar.

Noble says that it’s “easy” to get carried away with the numbers witnessed through recent months, and pointed to an igaming market that was “small in comparison” just two years earlier despite being live since 2013.

“The two significant events that changed that were the repeal of PASPA and COVID, and it has certainly been on a tear ever since. From a regulatory perspective, most certainly it’s been a benchmark and arguably set some of the highest entry requirements for licensing the world over, and so it should,” he explains.

“There is a famous saying that is attributed to a little town across the water from New Jersey, but it certainly applies here, and that is if you can make it in New Jersey, you can make it anywhere.

“The main reason behind this is most definitely the first mover advantage. New Jersey was a market where igaming was in existence for several years prior to the repeal and people were familiar with gambling online. 

“That put it in a leading position and since then it has taken full advantage of this head start. This proved hugely beneficial during the COVID-19 pandemic when land-based casinos were forced to close.”

Petrilli addresses a market that is “undoubtedly” going to be the standard for others to follow, citing longevity as well as “incredible success” in terms of adoption and life-time value operators are extracting from players. 

“The numbers also give confidence that even with new brands entering the market, liquidity continues to grow for all rather than it being distributed and weakened for the operators already live,” he comments.

“Competition fosters innovation and this ultimately helps drive the market forwards”

Allan Petrilli, VP of sales and growth at Intelitics.

“In the past 12 months, the New Jersey online casino market has sky-rocketed from a revenue perspective and there are signs this is not solely based on the COVID bump that the industry experienced. Growth is sustainable and that is why New Jersey remains the benchmark for other states to meet.”

Following the differing perspectives offered when looking at the influence the pandemic has had on the area’s online uptick, attention switches to look at those that are bidding to join the US’ online casino gold rush.

While numerous other regions bid to join the legalised ecosystem, what could they learn from New Jersey? And, alternatively, are there any aspects that they should be looking to avoid?  

Petrilli argues that it goes back to the age-old question of whether you prefer a large share of a small pie or a small share of a large pie.

“The multi-skin model adopted by New Jersey is something that other states are looking at and will likely roll-out when they go online. It allows for much faster market access, more competition, better choice for consumers but also more tax revenue for the state. 

“Competition fosters innovation and this ultimately helps drive the market forwards with new products, improved user experiences and smart marketing tactics. Other states will undoubtedly want to see this in their borders. 

“Lawmakers and regulators in other states will also want to weigh up the pros and cons of different tax rates, such as those in New Jersey (15 per cent) and Pennsylvania (54 per cent).

“In New Jersey, it could be argued the lower tax rate is helping to accelerate growth which in turn is generating additional taxes for the state. Over taxation can have the opposite effect.”

“But the issue right now is the slowness of new markets coming online”

Allan Petrilli, VP of sales and growth at Intelitics.

Continuing down this avenue, Noble confidently asserts that the lessons which are being learned from the New Jersey model are evidently being utilised and implemented elsewhere.

“There are examples of other states using New Jersey’s regulatory framework as the blueprint for theirs and others that are taking a hybrid approach where the regulatory framework is implemented and the technical standards set, with certified independent testing houses then responsible for ensuring that operators and suppliers meet these requirements. 

“There are also commercial learnings to be taken from the Garden State. While it seems that markets like Pennsylvania and Michigan have been an overnight success, these states have been able to monitor how New Jersey’s online casino market has played out and use its failures and successes to guide their approach. The impact this has had on the early success of these states should not be underestimated.”

Despite the pace being set in New Jersey, the chasing pack are certainly not resting on their laurels after entering the US’ legalised ecosystem, with, at the time of writing, Michigan recently joining the Garden State and Pennsylvania as the only three states to ever produce $100m in igaming revenue over the course of a month. 

With this in mind, and looking at states that are currently legalised, or are well down the road to being, which could, or will, eventually move on par and beyond those currently leading the way? 

“Taking a glimpse at the success of New Jersey it would be reasonable to assume that in order to emulate its achievements, an igaming market requires a good size population, a reasonably high GDP and a sensible tax rate on GGR. However, shortly after Pennsylvania went live, the tax rate assumption was dispelled and similarly in Michigan regarding GDP,” Noble adds.

“Given the fact there are only two igaming markets live that are in the top 12 for population of US states it is almost certain (regulation pending) that many of these larger states will be on par and/or overtake the existing live markets by a long way in the coming years.”

Petrilli echoed the sentiments of his fellow interviewee, suggesting that the ultimate size and success of a market will come down to its total population and the regulations that are put in place. 

“Obviously, if a state the size of New York regulates online casino it is going to be a massive market,” he concludes. “But the issue right now is the slowness of new markets coming online – many states are focused on sports betting but are ignoring online casino. Until more states embrace online casino, New Jersey, Pennsylvania, Michigan, etc will continue to lead the way.“

This article was featured in the latest edition of the SBC Leaders magazine.