Three years ago it sounded like a fantasy, but New Jersey’s steady dominance in sports betting is increasing the buzz about the Garden State becoming the Silicon Valley of the online gaming industry.
The “explosion” of online gambling during COVID-19 produced a “start-up ecosystem” that is highly distributed, according to Lloyd Danzig, managing partner of Sharp Alpha Advisors, a venture capital firm in New York City investing in sports-betting technology companies.
“Still, there are clusters of early-stage technology companies serving the industry, with the greatest concentration in the state of New Jersey,” Danzig told VIXIO GamblingCompliance in an email.
Danzig, who donned a baseball cap for his appearance last week on a panel at the East Coast Gaming Congress in Atlantic City, praised New Jersey’s favorable gambling tax rates and business-friendly regulatory environment, a wealth of business-to-customer brands able to access the market, and a gaming commissioner with a reputation for openness and innovation.
The gaming commissioner Danzig referred to is David Rebuck, the director of the New Jersey Division of Gaming Enforcement.
“New Jersey’s population spends more on sports betting as a percentage of personal consumption expenditures than any other state in the country,” Danzig said.
“It is also located conveniently to the talent and capital tools of New York City and in proximity to several of the world’s most valuable sports franchises as well as headquarters for every major American sports league.”
The Morgan Stanley Multicultural Innovation Lab recently collaborated with the New Jersey Economic Development Authority to recruit multicultural entrepreneurial talent in a plan called NJ Accelerate.
But Michael Busler, a finance professor at Stockton University near Atlantic City, is not as convinced New Jersey is on its way to becoming the Silicon Valley of internet gambling.
“Frankly, I don’t think it [NJ Accelerate] will work because of the tax burden placed on New Jersey residents,” Busler said.
Most start-up technology companies pay very attractive salaries, and the state income tax is as high as 12 percent, according to Busler.
He said New Jersey has the highest property tax in the country and a 6.62 percent sales tax.
“The tax environment is horrible,” Busler said. “That’s why companies are leaving California and going to places like Texas. Why would they come to New Jersey?”
Many in the U.S. online gambling market are already there, however.
Jane Bokunewicz, director of the Lloyd Levenson Institute at Stockton University, noted that at least three Atlantic City casinos already have started their own internet gaming companies, with most leading U.S. operators having offices in Jersey City, Hoboken or other cities just outside New York, even if they are headquartered in other states such as Colorado or Massachusetts.
The New Jersey Economic Development Authority is supporting an esports innovation center at Stockton University and a financial technology workforce development center at New Jersey City University, Bokunewicz said.
Developing the esports market in New Jersey is also Rebuck’s next major goal as director of the state's Division of Gaming Enforcement, according to sources.
“The conditions are ripe for New Jersey to become the epicenter of online gaming development and operations,” Bokunewicz said.
Barbara DeMarco, a lobbyist for Continent 8 Technologies, said the Atlantic City Convention Center has become the home of a world-class data center for internet gambling which helped keep the New Jersey casino industry afloat during COVID-19.
“If the data center had not been built, internet gaming and sports wagering platforms would have had to rely on the land-based casino data rooms which frankly cannot keep up with the technological needs of the online industry,” DeMarco said.
It was Ray Lesniak, the former New Jersey Democratic state senator who shepherded online casino and sports-betting bills through the state legislature, who envisioned his state becoming the Silicon Valley of internet gambling.
In July 2018, Lesniak expanded his vision, saying he wanted New Jersey to become “the Mecca of internet gaming as an international hub.”
In an interview this week, Lesniak said other states and countries should follow the New Jersey model.
“They don’t need to re-invent the wheel,” he said.