The Odds Lengthen on the Budget’s Big Bet on Online Gambling

With internet gambling set to begin in New Jersey in two weeks, serious doubts remain about the new games’ ability to hit the $160 million target in this year’s budget. While hitting that estimate seems less and less likely, the questions remain: How far off the mark will internet gambling revenues be, and what will that mean for the budget?

Recent analyses project that New Jersey casinos () will make $65 million – at best – on online poker in the first year of online gambling. If casinos generate only this much revenue from online poker, the state’s take – based on the 15 percent tax rate – would be just $6 million this budget year. Of course, it is not clear how much of the total online revenue will come from poker versus other games of chance.

Since there are limited data on poker’s share of internet gambling, we have calculated the likely overall revenue using different assumptions of poker’s share of betting.

poker chart

Should poker’s share of gambling income exceed 50 percent, then New Jersey’s take will be even less.

In order to generate $160 million in state tax revenue, casinos would need to win a total of $1.1 billion between November 26 and June 30 of next year. If poker generates at best $38 million during this period, then the other games – like roulette, blackjack and slots – would need to generate at least $1 billion, or $147 million per month. Last year the entire gambling industry generated $201.7 million in state revenue from about $2.5 billion in total casino wins – slightly more that $200 million of earnings per month. The claim that casinos will win last year’s take plus another 43 percent cannot be taken seriously.

Online poker is expected to grow, of course – the most recent report estimates it could be a $92 million industry in New Jersey within a decade, generating $14 million in annual tax revenue. But even at that level, it is highly unlikely that New Jersey would generate the revenue assumed in this year’s budget.

Will we collect $10 million? $30 million? Or a figure closer to $160 million? With a meager $300 million surplus in a $33 billion budget, any shortfall in internet gambling revenue will add to an already precarious budget situation with little room for error.

It is important to note that internet gambling was not created solely as a revenue generator for the state budget; the main intent was to help Atlantic City casinos generate additional revenue to avoid bankruptcy and help the state’s economy – especially in South Jersey. The administration’s seemingly unrealistic revenue estimates for online gambling may exacerbate what is already a soft economic recovery.

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