ASSEMBLY APPROPRIATIONS COMMITTEE

 

STATEMENT TO

 

ASSEMBLY, No. 4111

 

with committee amendments

 

STATE OF NEW JERSEY

 

DATED:  JUNE 4, 2018

 

      The Assembly Appropriations Committee reports favorably Assembly Bill No. 4111, with committee amendments.

      This bill allows casinos in Atlantic City and racetracks in this State to conduct wagering on professional and collegiate sports or athletic events. 

      A casino or racetrack may establish a sports wagering lounge independently at the casino or racetrack, or as a partnership between a casino and a racetrack at a racetrack location.  Under the bill, a “racetrack” includes the site of any former racetrack.  A former racetrack is defined as any former racetrack where a horse race meeting was conducted within 15 years prior to the effective date of N.J.S.A.5:12A-7 et seq.  Wagering on sports events will not include wagering on any collegiate sport or athletic event that takes place in New Jersey or on a sport or athletic event in which any New Jersey college team participates regardless of where the event takes place.  A “prohibited sports event” does not include the other games of a collegiate sport or athletic tournament in which a New Jersey college team participates, nor does it include any games of a collegiate tournament that occurs outside New Jersey even though some of the individual games or events are held in New Jersey.  A prohibited sports event includes all high school sports events but does not include international sports events in which persons under age 18 make up a minority of the participants.  A licensee or an entity with which the licensee has contracted to conduct a sports wagering operation will be eligible to receive a plenary retail consumption license for the sale of alcoholic beverages in, on, or about any premises licensed as a sports lounge.

      Wagers on a sports event could be placed in-person in a sports wagering lounge located at a casino or racetrack.  Thirty days after the effective date of the bill, an operator may also accept wagers by means of the Internet, including from persons who are not physically present in this State if the division determines that such wagering is not inconsistent with federal law or the law of the jurisdiction, including any foreign nation, in which any such person is located, or such wagering is conducted pursuant to a reciprocal agreement to which the State is a party that is not inconsistent with federal law.  Persons placing wagers must be at least 21 years of age.  The bill also provides that any person whose name appears on a casino exclusion list or any self-exclusion list of a casino or racetrack would not be permitted to engage in sports wagering.   Also excluded from sports wagering would be the operator, director, officer, owner, or employee of the operator or any relative thereof living in the same household, anyone with access to nonpublic confidential information held by the operator, and anyone who is an agent or proxy for any other person.

      Any person who is an athlete, coach, referee, team owner, employee of a sports governing body or its member teams, a player or referee personnel member, on any sports event overseen by that person’s sports governing body based on publicly available information, a person with access to certain types of exclusive information, or a person identified by any lists provided by the sports governing body to the division and the racing commission would not be permitted to place a wager on a sports event or to have any ownership interest in, control of, or otherwise be employed by an operator, a sports wagering licensee, or a facility in which a sports wagering lounge is located that is overseen by that person’s sports governing body.  Any person who violates this provision will be guilty of a disorderly persons offense and fined not less than $500 but not more than $1,000.

      An operator will immediately report to the division any criminal or disciplinary proceedings commenced against the operator in connection with its operations, any abnormal betting activity or patterns that may indicate a concern about the integrity of a sports event, any potential breach of a sports governing body’s rules or codes of conduct that pertain to sports wagering, any conduct that corrupts a betting outcome of a sports event for purposes of financial gain, including but not limited to match fixing, and suspicious or illegal wagering activities, including the use of funds derived from illegal activity, using agents to place wagers, or using false identification.

      An operator will maintain records of sports wagering operations in accordance with regulations promulgated by the division.

      A casino or racetrack will be required to demonstrate that it has the necessary financial responsibility and good character to operate a sports pool.  The division and the racing commission will have responsibility for licensing.  The bill provides that, in promulgating rules and regulations, the division may examine the rules and regulations currently in place in states conducting sports wagering, and may model such regulatory frameworks as far as practicable.  Persons engaged in wagering activities for a casino or racetrack will be either licensed as casino key employees or registered as casino employees.

      Under the bill, sports wagering revenue realized by a casino, less the amount paid out as winnings, will be subject to an 8.5 percent tax, except that sums received from Internet wagering on sports events, less the amount paid out as winnings, will be subject to a 13 percent tax, which will be paid to the Casino Revenue Fund. Sports wagering revenue realized by a casino will also be subject to the investment alternative tax established by section 3 of P.L.1984, c.218 (C.5:12-144.1), and the funds will be used exclusively for the Meet Atlantic City marketing program.  The sums actually received by the horse racing permit holder from any sports wagering operation, either jointly established with a casino or established independently or with non-casino partners, less only the total of all sums actually paid out as winnings to patrons, will be subject to an 8.5 percent tax, except that sums received from Internet wagering on sports events, less only the total of all sums actually paid out as winnings to patrons, will be subject to a 13 percent tax, to be collected by the division and paid to the State General Fund. Sums received by the horse racing permit holder will be subject to an additional tax of 1.25 percent on amounts received less the amount paid out as winnings from a sports wagering operation.  Also, a percentage of the fee paid for a license to operate a sports pool will be appropriated by the Legislature to the Department of Health to provide funds for compulsive gambling treatment and prevention programs, with the percentage determined by the division.

      It is the committee’s intent that prior to the promulgation of permanent rules by the division, the division will consult and meet with the professional sports leagues that play either games or tournaments within this State and our contiguous states.  The purpose of the consultation will be to share information on the types of bets permitted for each sport and enforcement of the same.

      The bill repeals sections 1, 2, and 4 of P.L.2014, c.62 (C.5:12A-7 through C.5:12A-9), which partially repealed certain provisions of a prior law that had authorized sports betting.

 

COMMITTEE AMENDMENTS:

      The committee amended the bill to:

      provide that the 1.25 percent tax on amounts received by racetracks from a sports wagering operation will be on the amount received less the amount paid out as winnings and will be paid to the Division of Local Government Services to be distributed, upon application, to a municipality or county in which a racetrack is located to be used for economic development purposes;

      clarify the location of racetrack and casino equipment used to accept wagers; and

      provide that provisions allowing online or Internet sports wagering will take effect 30 days after the effective date.

 

FISCAL IMPACT:

      The estimated State tax revenues that could be generated from sports betting are projected to range between $12 million and $17 million in the first full year of operation. To the extent that the start of operations will be delayed, tax revenues will be lower accordingly in FY 2019.  This estimate is predicated upon assumptions regarding the percentage of the adult population that places wagers on sports (28 percent), a projection of the average low and high annual spending on sports wagers ($1,500 and $1,700), and tax rates in accordance with the provisions in the legislation: 8.5 percent tax rate on gross revenue for in-person wagering at a casino, a 13 percent tax rate on internet wagering on sports, and an estimate for unclaimed winning tickets, “expired obligations.”

      Because sports wagering in New Jersey creates a new gaming market, uncertainty exists regarding projections of potential State tax revenues that would be derived from the legalization of sports betting.  While metrics from other locations where sport wagering is operative such as Nevada and in Europe, can be used to estimate the potential fiscal effects of legalized sports betting in New Jersey, competition from neighboring States, uncertainty between Internet and non-Internet wagering, consumer behavior, changes in the economy, and potential growth (positive or negative) in the sports wagering market can affect tax revenues.  As such, the OLS projects a range between which actual tax revenues from sports wagering may fall.  However, the OLS notes that reliable data measuring the current extent of illegal sports betting and the proportion of that market that would shift to a legal New Jersey market is unavailable.  In addition, revenues from and State expenditures for licensing and regulation of sports betting is indeterminate.