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July 25, 2014

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New Jersey lawmakers pass Internet gambling legislation

TRENTON, N.J. — New Jersey legislators gave final approval Tuesday to a bill legalizing gambling over the Internet, sending it to Gov. Chris Christie, who has indicated he will sign it quickly.

The state Assembly and Senate passed an updated version of the bill that Christie vetoed on Feb. 7, making the changes he asked for including setting a 10-year trial period for online betting, and raising the taxes on the Atlantic City casinos' online winnings.

Assuming Christie signs the bill — he said last week he would do so quickly if the legislature made the changes he wanted — New Jersey would become the third state in the nation to legalize gambling over the Internet. It also would represent the largest expansion of legalized gambling in New Jersey since the first casino began operating in Atlantic City in 1978.

Nevada and Delaware have passed laws legalizing Internet betting, which also is going on offshore, untaxed and unregulated.

"Finally, some good news for Atlantic City's future," said state Sen. Raymond Lesniak, one of the strongest proponents of online gambling. "Internet gaming will give an immediate boost to the outlook for Atlantic City's future, preventing the closing of at least one casino, and saving thousands of jobs. Now we can get to work making Atlantic City the Silicon Valley of Internet gaming by being the hub for other states to join."

The idea is to help the struggling casinos by attracting new gamblers who are not now visiting the casinos. The comps, like free hotel rooms, show tickets, meals or other freebies, would be accrued from online play, but would have to be redeemed in person at a casino, presumably enticing a player to spend more money while there.

The bill will not take effect until the state Division of Gaming Enforcement sets a start date, sometime between three and nine months after the law is signed. Casino executives have estimated it could take six months to a year to get the system up and running.

It would allow the playing online, for money, of any game currently offered by Atlantic City's 12 casinos; online poker is expected to be a particularly popular option.

Gamblers would have to set up online accounts with a particular casino, and could set daily limits on their play. They also would be subject to the same per-hand limits as gamblers physically present in the casino. Casino executives say final rules have to be approved by the gambling enforcement division, but they expect the state to require gamblers to have to appear in person at a casino to open their accounts and verify their age, identity and other personal information. Payouts could be made remotely to a credit card account or bank account when a player cashes out, if the state approves such an arrangement, the executives said.

They conceivably could even gamble through social media sites, as long as the sites worked with casinos who have an online gambling license, Lesniak said.

The casinos would utilize software programs that would, among other things, seek to verify that a person is at least 21 years old. Ted Friedman, CEO of Secure Trading, a Delaware Internet payment processor, said his firm's software validates player information, including age, against multiple public and private databases.

It also uses authentication tools that will ask the player a series of multiple choice questions that only the specific player would know the answer to. Based on the identity checks and answers provided, an algorithm is run to determine the confidence level that the player is who they say they are and are of legal age.

The bill would allow gamblers in other states to place bets in New Jersey as long as regulators determine such activity is not prohibited by federal or any state's law. It even has provisions for allowing people in other countries to play, although federal law would have to be changed before that could happen, Lesniak said.

The third time was the charm for online gambling in New Jersey. The legislature had passed two previous versions of the bill, only to see Christie veto them.

Christie vetoed New Jersey's first attempt at Internet gambling in March 2011, citing concerns about its constitutionality and worrying about the proliferation of illegal back-room Internet betting parlors that would be difficult to find and prosecute. A second bill tried to address those concerns by providing hefty fines for anyone who runs or even advertises such a back-room betting parlor.

But Christie still wasn't done objecting, noting in his Feb. 7 veto message that he had been torn over whether to expand gambling in New Jersey to such an extent. His two biggest requested changes were having Internet gambling reviewed by the state after 10 years to see how well it was working, and increasing the tax rate on the casinos' online winnings from 10 percent to 15 percent.

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