Legislative framework of gambling regulation
◊ Status: Law stated as at 01-Nov-2016 | Jurisdiction: New Jersey, USA
The Casino Control Act, New Jersey Statutes Annotated (NJSA) 5:12-1 et seq, is the casino gambling enabling legislation in New Jersey. It was initially enacted in 1978 after the voters in New Jersey approved a constitutional amendment permitting gambling in Atlantic City. Gambling is prohibited under the general criminal statutes of New Jersey at Chapter 2C (NJSA 2C:37-1 and NJSA 2A:40-1 et seq), except as permitted under the Casino Control Act.
Gambling is also regulated pursuant to the regulations adopted by the Division of Gaming Enforcement (DGE) and the Casino Control Commission (CCC) under NJSA 5:12-69g. Those regulations are found at Title 13 of the New Jersey Administrative Code (NJAC) (NJAC 13:69-1.1 etseq). These statutes and regulations are available from the DGE website (www.state.nj.us).
Online gambling is legal in New Jersey under the Casino Control Act. The Casino Control Act and its attendant regulations govern both land-based and online gambling. Sports-betting is not legal in New Jersey. However, wagering on horse racing is legal. Casino simulcast wagering is covered under the Casino Control Act. State-run lotteries are also legal in New Jersey.
Definitions of gambling
The New Jersey criminal statute defines “gambling” as “staking or risking something of value upon the outcome of a contest of chance or a future contingent event not under the actor’s control or influence, upon an agreement or understanding that he will receive something of value in the event of a certain outcome” (NJSA 2C:37-1(b)).
A “contest of chance” is any “contest, game, pool, gaming scheme or gaming device in which the outcome depends in a material degree upon an element of chance, notwithstanding that the skill of the contestants or some other persons may also be a factor therein” (NJSA 2C:37-1(a)). All wagers, bets or stakes dependant on any race or game, or on any gaming by lot or chance, or on any lot, chance, casualty or unknown or contingent event, will be unlawful (NJSA 2A:40-1).
These are broad definitions meant to capture all forms of gambling. Therefore, to the extent not permitted elsewhere under the New Jersey statutes, gambling is illegal. One of the exceptions from this general prohibition is casino gambling under the Casino Control Act, which includes traditional land-based casino-type gambling, online casino gambling, pari mutuel wagering on horse racing and horse race simulcasting (a state-run lottery is permitted under NJSA 5:9-1 et seq). “Gambling” is defined under the Casino Control Act as “the dealing, operating, carrying on, conducting, maintaining or exposing for pay of any game” (NJSA 5:12-22). “Game” is defined as “any banking or percentage game located within the casino or simulcasting facility played with cards, dice, tiles, dominoes, or any electronic, electrical, or mechanical device or machine for money, property, or any representative of value” (NJSA 5:12-21).
Online gambling was legalised in New Jersey by an amendment to the Casino Control Act in 2013. Since legal gambling was limited to Atlantic City by the constitutional amendment in 1978, the online gambling legislation specifically found that, provided the online gambling server was located in Atlantic City, the game would be conducted in Atlantic City and therefore not violate the specific limitation in the constitutional amendment limiting legal gambling to Atlantic City.
The Casino Control Act defines “internet gaming” as:
“the placing of wagers with a casino licensee at a casino located in Atlantic City using a computer network of both federal and non-federal interoperable packet switched data networks through which the casino licensee may offer authorized games to individuals who have established a wagering account with the casino licensee and who are physically present in this State, as authorized by the rules established by the division” (NJSA 5:12-28.1).
The Casino Control Act and attendant regulations require that the server supporting online gambling be located at a casino in Atlantic City, New Jersey, to satisfy the constitutional requirement that the bet take place in Atlantic City.
See above, General definition.
Regulation of land-based casino gambling and online gambling is managed by two government agencies. The Casino Control Commission (CCC) is primarily responsible for the issuance of individual and entity casino licences based on investigations performed by, and recommendations of, the Division of Gaming Enforcement (DGE). The DGE has sole authority regarding the issuance of online gambling licences.
The day-to-day operation of gaming companies is overseen by the DGE. The DGE is also responsible for review, testing and approval of all games before the games are offered to the public. This includes all online games. Game testing is done by the DGE in its own lab (a third-party testing lab certification is not sufficient for approval of a game).
The DGE is responsible for enforcement of the Casino Control Act and its attendant regulations. The DGE is also responsible for the issuance of complaints alleging violations of the Casino Control Act and its attendant regulations. Those complaints are heard by a DGE hearing officer with the right to appeal any decision of the hearing officer to the CCC.
The DGE issues Casino Hotel Alcoholic Beverage (CHAB) licences to entities operating establishments serving alcohol within an approved casino hotel complex. This includes the casino licensee as well as third-party vendors leasing space within the approved casino hotel complex. There is no limitation on the number of CHAB licences the DGE can issue. Establishments wishing to serve alcohol outside of an approved casino hotel complex must obtain one of a limited number of alcoholic beverage licences issued by the municipality of Atlantic City in conjunction with the State of New Jersey.
Poker is a game authorised in New Jersey by the Division of Gaming Enforcement (DGE) for play in both the land-based casinos and the online casinos. Chapter 69F of Title 13 of the New Jersey Administrative Code is entitled “Rules of the Game”. These rules govern all games approved by the DGE. Subchapter 14 provides certain definitions and rules governing the game of poker (NJSA 13:69F-14.1 et seq).
Horse racing is the only sports-type betting permitted in New Jersey. It is governed by the New Jersey Racing Commission under NJSA 5:5-22 et seq. Casino simulcast wagering is permitted within an approved casino simulcast facility under the Casino Simulcasting Act (NJSA 5:12-191).
All authorised table-type gambling games are provided in Chapter 69F of Title 13 of the New Jersey Administrative Code.
Slot and other machine gaming
A “slot machine” is:
“any mechanical, electrical or other device, contrivance or machine with, upon insertion of a coin, token or similar object therein, or upon payment of any consideration whatsoever, is available to play or operate, the play or operation of which, whether by reason of the skill of the operator or application of the element of chance, or both, may deliver or entitle the person playing or operating the machine to receive cash or tokens to be exchanged for cash, or to receive merchandise or anything of value whatsoever, whether the payoff is made automatically from the machine or in any other manner whatsoever, except that the cash equivalent value of any merchandise or other thing of value should not be included in determining the payout percentage of any slot machine” (NJSA 5:12-45).
This definition is applicable to both land-based and online gambling and takes into account the possibility of a skill element in the game.
The regulations authorising and regulating server-based gaming systems are contained in Chapter 69O of the New Jersey Administrative Code entitled “Internet and Mobile Gaming”. “Server-based gaming” is defined as, “all gaming activity conducted via a client terminal where the outcome of a game is determined by a random number generator maintained on a server or a dealer verified outcome from a simulcast table game” (NJAC 13:69O-1.1). This definition and the balance of the Chapter 69O regulations relate to land-based, online and mobile gaming in New Jersey.
Mobile gaming, as defined, is limited to devices geo-located to the physical boundary of an approved land-based casino hotel complex. With the approval of online gambling, the need for mobile gaming is essentially non-existent. Currently, no operator utilises this system of gaming in New Jersey. This is because online gaming allows for gaming on mobile devices located anywhere in New Jersey without the land-based casino hotel complex restriction. These regulations also contemplate live dealer table game simulcasting to remote terminals.
Bingo has a long history in New Jersey as a charity fundraising tool. Therefore, bingo games, while used in land-based casinos as marketing events, are not an authorised gambling game in land-based casinos. Recently, online platforms have been authorised by the DGE to offer variations on traditional bingo games as real money gambling games.
In 1969, New Jersey voters authorised a state-run lottery game by constitutional amendment. The enabling legislation can be found at NJSA 5:9-1 et seq and its attendant regulations can be found at NJAC 17:20-1.1 et seq. The enabling legislation does not permit video lottery machines (NJSA 5:9-7.1). It is presumed that the prohibition in 1969 related to video lottery machines was designed to ensure that slot machines were not introduced throughout New Jersey. This was ultimately addressed with the legalisation of gambling in Atlantic City, which legalisation allowed slot machines, but only in Atlantic City.
Keno is an approved game in New Jersey (NJAC 13:69F-15.1). The programme used to operate the random number generator is unique to the State of New Jersey and may not be used by any other jurisdiction with gaming (NJAC 13:69F-15.5).
There is no limit to the number of casino licences that can be issued for land-based casinos in Atlantic City, New Jersey. Land-based casinos may offer:
All traditional table-type games (as authorised by the Division of Gaming Enforcement (DGE)).
Slot machine games (including wide area progressive games).
Simulcast horse racing.
Land-based casinos are limited to the municipal boundaries of Atlantic City, New Jersey. There is a ballot question being presented to voters in New Jersey in the November 2016 election, which will ask New Jersey voters to authorise an amendment to the state constitution allowing an expansion of authorised land-based casino gambling to two locations no closer to Atlantic City than 75 miles.
In order to be eligible for a land-based casino gambling licence, an applicant must, through a rigorous licensing process, establish:
The licensing process requires the filing of an application by the licence applicant and all holding and intermediary companies through to the ultimate natural person owners of 5% or more of the licensee applicant along with certain officers, directors and key employees. Additionally, the applicant must have an “approved hotel” (NJSA 5:12-83), which must contain at least 500 hotel rooms of specific nature and dimension. An applicant/licensee with a 500-room hotel is permitted to have a casino room of 60,000 square feet. Each additional 100 rooms allows for an additional 10,000 square feet of casino space up to maximum of 200,000 square feet.
Each licensed land-based casino operator is eligible to purchase an online gambling permit. These permits are valid for one year and can be renewed on the payment of the required fee. The permit allows the permit holder to have up to five online casinos. Each customer-facing casino approved to operate on a land-based casino’s permit is referred to as a “skin”. Each online casino may offer all games approved by the DGE.
A land-based casino permit holder can contract with an online gaming platform provider to provide the online gaming platform on which the land-based casino permit holder will offer its online casino. The land-based casino permit holder may also allow the platform provider to offer its own branded casino and may contract to allow other brands to offer their online casino subject to the five skin limit. A land-based casino permit holder may have as many platform providers as it wishes, but only five customer-facing branded casino skins. Each platform provider and/or skin must apply for a casino service industry enterprise (CSIE) licence.
New Jersey Statute Annotated (NJSA) 5:12-82 provides the general rules regarding land-based casino licensee eligibility. An applicant for a land-based casino licence must be an entity created in the State of New Jersey. However, its holding company and intermediary companies can be entities created in other jurisdictions. Each applicant’s organisational documents must contain specific language regarding ownership restrictions and qualification and provide for the ability to remove any owner who cannot, or refuses to, qualify to the standards of the Casino Control Act (NJSA 5:12-82(d)).
Land-based casino applicants must obtain a casino licence in order to operate a casino in Atlantic City. The process for issuance of a licence can take nine months or longer from the date the application is deemed a complete filing by the DGE. If an applicant wishes to open for business before the issuance of a casino licence, the regulatory scheme authorises what is essentially a temporary licence and is known as “Interim Casino Authorization” (ICA) (NJSA 5:12-95.12). This process is only available after a complete application has been filed and the DGE has completed a preliminary background investigation of the applicant and its qualifiers and the preliminary investigation has not revealed any negative information. The applicant must deliver ownership of the applicant entity to a trust pending licensure, the investigation for which must be completed within nine months of the creation of the ICA trust subject to one three-month extension (NJSA 5:12-95.16).
Generally, online platform provider CSIE licence applicants will be subject to a similar time frame. While there is not an Interim Casino Authorization process for CSIEs, there is a temporary licensing process known as a “transactional waiver” (NJAC 13:69J-1.2B). As with the Interim Casino Authorization, a transactional waiver is not available to a CSIE unless a complete application has been filed and no negative information has been discovered during the preliminary background investigation. Companies supplying gaming-related goods to a casino or online casino operator must also obtain a CSIE licence (NJAC 13:69J-1.2).
Duration of licence and cost
Both casino licences and CSIE licences are indefinite in duration. However, both licences are subject to a re-submission requirement every five years (NJAC 13:69J-1.3B; NJAC 13:69C-11.1). There is no licence fee for a casino licence or a CSIE licence other than payment of the investigatory costs incurred by the DGE. However, an initial casino licence investigatory cost fee must not be less than US$200,000 (NJSA 5:12-139).
An online gambling permit is valid for one year. The online gambling permit fee is to be no less than US$400,000 for the first year and no less than US$250,000 for each renewal (NJSA 5:12-95.29).
Sports-betting is prohibited in New Jersey, other than wagering on horse racing under the New Jersey Racing Commission and the Casino Simulcasting Act. Any other game may be permitted subject to review and approval by the Division of Gaming Enforcement (DGE).
No person under the age at which a person is authorised to purchase and consume alcoholic beverages (currently 21 years old in New Jersey) may enter, or wager in, a licensed casino or simulcasting facility. There are exceptions for passage through, and for those licensed to work in, the casino facility (NJSA 5:12-119).
Certain political contributions are prohibited. In relation to gambling, the following must not directly or indirectly contribute money or anything of value to any candidate, political party or committee related to a political party (NJSA 5:12-138):
Holder of a casino licence (including any holding, intermediary or subsidiary company of it).
Officer of any of the above.
Casino key employee.
However, the provision must not be construed to prohibit any individual who is a candidate for the governing body of Atlantic City from contributing to the candidate’s own campaign.
The DGE maintains a list of excluded persons with whom licensees are prohibited from doing business (NJSA 5:12-71).
New Jersey has a comprehensive self-exclusion programme, that is, the voluntary process where a person with a gambling concern can have themselves excluded from specific gambling venues or from accessing gambling products provided by certain providers (NJSA 5:12-71.2). Patrons can add their name to the self-exclusion list under a process set forth in the regulations (NJAC 13:69G-2.1 et seq). The minimum period for self-exclusion is one year. Any monies won by a person on the exclusion or self-exclusion list must be retained by the casino licensee and forfeited to the State. Half of all forfeited amounts up to US$50,000 must be remitted to the State Department of Human Services to provide funds for compulsive gambling treatment and prevention programmes (NJSA 5:12-71.3).
Anti-money laundering legislation
Anti-money laundering is addressed at the federal level. For further information, see Gaming law in the United States (Nevada): overview.
Companies wishing to engage in online gambling in New Jersey may only do so in conjunction with a New Jersey licenced land-based casino operator who has obtained an online gambling permit. Once the relationship has been established, the operator must apply for and obtain a casino service industry enterprise (CSIE) licence from the Division of Gaming Enforcement (DGE). Licensed online gambling operators are able to offer any game approved by the DGE, which includes all traditional table games, slot games, poker, among others, but excludes sports-betting. The number of licences available is theoretically unlimited since any land-based licensed operator may get an online gambling permit and there is no limitation on land-based licences. Every permit holder can have up to five skins. However, as a practical matter, the number of economically feasible land-based operators is finite.
Any online gambling company is eligible to apply subject to the good character, honesty, integrity and financial stability requirements of the Casino Control Act and its attendant regulations.
Online gambling operators are required to apply for and obtain a CSIE licence. The application process will generally take about a year to two years from the time a complete application has been accepted by the DGE. The online gambling applications historically have taken a bit longer than other CSIE applications given the fact that most online gambling applicants are based in foreign jurisdictions and part of the investigatory process requires personal interviews of qualifiers. There is a process that allows for the issuance of a waiver of licensure to conduct business with a land-based casino licensee prior to the issuance of a CSIE licence known as a “transactional waiver” (NJAC 13:69J-1.2B). This waiver is available after a complete application has been filed and the DGE has completed its preliminary background checks.
Duration of licence and cost
CSIE licences do not expire but are subject to re-submission requirements every five years (NJAC 13:69J-1.3B). Failing to adhere to the re-submission requirements will result in a revocation of the licence.
Sports betting, other than casino simulcast wagering on horse racing pursuant to the Casino Simulcasting Act, is prohibited in New Jersey. Any other game may be permitted subject to review and approval by the Division of Gaming Enforcement (DGE).
No person under the age at which a person is authorised to purchase and consume alcoholic beverages (currently 21 years old in New Jersey) must enter, or wager in, a licensed casino or simulcasting facility. There are exceptions for passage through and for those licensed to work in the facility (NJSA 5:12-119). This prohibition is applicable to online gambling.
The DGE maintains a list of excluded persons with whom online gambling licensees are prohibited from doing business (NJSA 5:12-71).
Anti-money laundering legislation
Anti-money laundering is addressed at the federal level. For further information, see Gaming law in the United States (Nevada): overview.
B2B and B2C
B2B and B2C operations are subject to the same licensing and regulatory requirements.
There are no technical measures in place to restrict unlicensed operators from offering games in New Jersey. However, there is an extensive geo-location system in place to ensure that licensed New Jersey operators do not inadvertently offer their product to anyone located outside of New Jersey.
Mobile gambling and interactive gambling
Mobile gambling and online gambling are subject to the same regulatory structure, with one significant difference. Mobile gambling must only take place within an approved land-based casino hotel complex, while online gambling can take place anywhere in New Jersey. The use of a television to access a remote gaming server to conduct mobile or online gambling is permitted.
Only games that fall within the definition of “gambling” under NJSA 2C:37-1 or the general prohibition against gambling transactions under NJSA 2A:40-1 are subject to regulation. Therefore, a social game that does not offer a prize or charge consideration to play with respect to a game of chance is not subject to regulation or licensure under any gaming regime in New Jersey. Most social operators engaged in social gaming, which utilises games of chance, structure their product so that nothing is won based on the outcome of the game, other than credits that have no value other than for redemption for additional play.
NJSA 2C:37-1(d) defines “something of value” in the context of gambling. What this definition specifically excludes is “any form of promise involving extension of a privilege of playing at a game without charge on a mechanical or electronic amusement device, other than a slot machine as an award for the attainment of a certain score on the device” (NJSA 2C:37-1(d)). This section of the statute was last amended in 1982. It is widely believed that this section can be interpreted to include credits earned for additional play on social games of chance. Therefore, “winning” credits for additional play will not make the game a gambling game subject to regulation under the Casino Control Act.
While properly structured social games are not subject to the Casino Control Act, there may be other state laws applicable to any non-gambling business that may be applicable to social gaming businesses (such as, consumer fraud or tax laws).
Gambling debts are enforceable in New Jersey. Gambling debts are created by the issuance of a counter check by the casino licensee which is signed and returned to the casino licensee by the patron in exchange for cash or gaming chips. This counter check is known as a “marker”. The collection process has a very specific limitation. Until a collection matter is turned over to a licensed attorney, only a key licensed individual employed by a casino licensee can engage in collection activities on behalf of a casino licensee. Once the matter is turned over to an attorney licensed in the jurisdiction in which the collection activity is to be commenced, that attorney may engage in all legally permissible actions for gambling debt collection permitted in that jurisdiction. Those permissible actions may vary by state. In New Jersey, a suit for collection on a marker is the same as a suit for collection on a bad check and may be brought against the issuer of the marker. Once a judgment is obtained, the assets of the patron may be encumbered until the debt is satisfied.
Land-based casino operations are subject to a tax of 8% of gross revenue (NJSA 5:12-144). Additionally, there is an investment alternative tax in the net amount of 2.5% of gross revenue (NJSA 5:12-144.1). This investment alternative tax may be decreased to 1.25% if a licensee takes certain investment actions with respect to the tax. No licensee has to date failed to take those actions. Gross revenue is the total of all sums received from gambling operations (excluding simulcast revenues) less the total of all sums paid out as winnings but excluding the value of any non-cash prizes (NJSA 5:12-24).
There are also pass-through taxes that are the obligation of the licensee to collect but may be passed on to the consumer. These include a US$3.00 per room per night hotel room tax (NJSA 5:12-145.8) and a US$3.00 per car per day parking garage tax (NJSA 5:173.2). These taxes are due and payable on any room or parking privilege irrespective of whether or not the customer is charged for the underlying room or parking privilege.
There is also a fee of US$500 per slot machine in operation on the casino floor due and payable each year.
There is an annual tax imposed on gross gaming revenue from online gaming operations equal to 15% of gaming gross revenue (NJSA 5:12-95.19). The 8% tax imposed upon land-based operations does not apply. However, the investment alternative tax is an additional 5% tax on gross gaming revenue subject to reduction to 2.5% via the investment alternative tax described in NJSA 5:12-144.1.
Advertising of gambling operations is permitted in New Jersey but subject to regulation. Both the Casino Control Act at NJSA 5:12-70(a)(16) and the regulations at NJAC 13:69C-14.1 et seq, require the use of the phrase, “Bet With Your Head Not Over It” on all on-site advertising and the phrase, “If you or someone you know has a gambling problem and wants help, call 1-800-GAMBLER” or some comparable language as approved by the Division of Gaming Enforcement (DGE). Additionally, all advertising is subject to review by the DGE for accuracy, truthfulness and inappropriate sexual content (NJAC 13:69C-14.2).
Online gaming advertising is subject to the same regulatory standards as land-based operators.
Developments and reform
The legal status of land-based gambling has not changed significantly in recent years.
Online gambling was illegal in New Jersey until 26 February 2013. Online operators began legal online gaming operations (for example, table games, slot machines and poker) in New Jersey in November 2013. In August 2016, live dealer simulcast online gaming began in New Jersey.
A state-wide ballot question will be presented to New Jersey voters during the November 2016 election. This question seeks approval to amend the state constitution to allow two casinos north of Atlantic City not closer than 75 miles from the municipal boundaries of Atlantic City. If approved, enabling legislation will be enacted that will allow full land-based casino hotel complexes and allow each licensee to obtain an online gambling permit.
The Division of Gaming Enforcement (DGE) has engaged online gambling operators in a discussion regarding shared liquidity with UK-based poker players. So far the initiative has not advanced beyond the initial discussion. As additional United States jurisdictions come online, there will be significant discussion regarding shared liquidity. However, it is difficult to accurately project an outcome of those discussions.
New Jersey continues to evaluate options for legalisation of sports betting. Lobbying organisations on behalf of a variety of business interests and state level politicians (including New Jersey’s Governor) have lobbied members of the United States Congress to enact legislation allowing states to decide whether or not to permit sports betting. In addition, the New Jersey Attorney General has recently petitioned the United States Supreme Court to review the recent 3rd Circuit decision denying New Jersey’s attempt to enact legislation allowing sports betting.
The regulatory authorities
New Jersey Division of Gaming Enforcement (DGE)
1300 Atlantic Avenue
Atlantic City, NJ 08401
Description. The DGE oversee the day-to-day operation of gaming companies. The DGE is also responsible for review, testing and approval of all games before the games are offered to the public, including for online games. The DGE is responsible for enforcement of the Casino Control Act and its attendant regulations.
New Jersey Casino Control Commission (CCC)
Tennessee Avenue and Boardwalk
Atlantic City, NJ 08401
Description. The CCC is primarily responsible for the issuance of individual and entity casino licences based on investigations performed by, and recommendations of, the DGE.
New Jersey Casino Control Commission
Description. Official website of the New Jersey Casino Control Commission.
New Jersey Division of Gaming Enforcement
Description. Official website of the New Jersey Division of Gaming Enforcement.
Source: Practical Law