N.J.’s sports betting business is booming despite a restrictive law

The Rutgers men’s basketball team succeeded in avenging a Penn State thumping from earlier this season on Sunday in front of a sold-out Big Ten crowd in Piscataway, N.J.

But New Jersey residents who might have been itching to place a wager on the game had to make an exodus to neighboring states due to a strange quirk in the Garden State gambling laws.

Last fall, an overwhelming majority of New Jersey state voters checked “no” on a ballot measure that would have amended the state’s constitution to allow betting on New Jersey collegiate teams — like Rutgers — or wager on in-state collegiate sporting events. The restriction was originally put in place in 2011.

“At that time, the legalization of sports betting was somewhat politically controversial,” said Frank DiGiacomo, a partner and team lead of the Gaming Industry Practice Group with the Philadelphia law firm Duane Morris. “There were critics that raised concerns about allowing betting on college athletics and the potential for game-fixing or other types of gambling scandals. In order to garner more support for the referendum [in 2011], the New Jersey legislation specifically did not allow for betting on games involving New Jersey college teams — which they have jurisdiction over — or any in-state collegiate athletic event.”

When a 2018 Supreme Court ruling lifted the federal ban on legal sports wagering and invalidated the Professional and Amateur Sports Protection Act (or PASPA), New Jersey was the first state to roll out sports betting. By August of that year, DiGiacomo said, state casinos and sportsbook operators were taking legal sports bets, although the wagering restriction on New Jersey college teams and events was still active.

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But gaming experts don’t see much, if any, negative impact on New Jersey’s sports betting handle — the amount of money wagered by bettors — even if residents can’t throw down a bet on Seton Hall or Princeton teams.

“You might have some diehard Rutgers football or basketball fans, and maybe Seton Hall and Princeton fans making a trip,” said Bill Gelman, the managing editor for PlayNJ, an online outlet that tracks the gaming industry in the state. “But it’s not going to be anywhere near the amount of New York sports bettors that came to New Jersey before New York launched mobile sports betting [in January 2022].”

Joe Wiz, one of the country’s top sports betting analysts who has his own ESPN show, went a step further and said that even with a Big Ten game like the matchup between Rutgers and Penn State, no New Jersey resident was clamoring to leave New Jersey to satisfy a gambling itch.

“I don’t think anybody’s going to drive through the Lincoln or Holland Tunnels to place a bet on Rutgers, to be honest,” Wiz said. “The restriction on New Jersey college teams or college events does not matter. On any given night there may be 64 other college basketball games on the board. There are plenty of games to choose from. A team like Rutgers, even though they’ve been playing well, they are not like a national powerhouse team, Duke or Kentucky, where there are a lot of people betting on them.”

New Jersey is one of 30 states, plus the District of Columbia, where it is legal to bet on sports. In January, New Jersey sportsbooks — both online and brick-and-mortar retail locations like the Meadowlands Racing and Entertainment venue — took in a record $1.34 billion in sports wagers, according to PlayNJ. And that haul was a 10% increase from December 2021. The New Jersey attorney general’s office reported total gaming revenue of $381.7 million for January 2022.

By comparison, Pennsylvania sportsbooks took in a record $793.7 million in wagers for January, for a total revenue of $53.4 million, according to PlayPennsylvania. The expanded NFL season of 17 regular-season games may have been one contributor to a surge in wagers.

Last fall, New Jersey voters were presented with “Public Question No. 1″ on voting ballots, which asked: “Do you approve amending the Constitution to permit wagering through casinos and current or former horse racetracks on all college sport or athletic events?”

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Marie Jones, a partner at Fox Rothschild and the co-chair of the firm’s Gaming Practice Group, said she thinks the gaming industry’s reasons for pushing that ballot item last fall were twofold.

“Any change like that, there will be an increase in revenue,” Jones said. “The gaming industry felt like that restriction is over-limiting and not necessary. The prohibition is in New Jersey, not Pennsylvania, so you can go over the border and place a sports bet on Rutgers. But because they are close markets, some operators have had incidents where bets are placed in New Jersey on [state] sports teams and the operators have been fined. They have to make sure their controls are working and nothing slips up.”

According to Gelman, the PlayNJ editor, perhaps not enough of an effort was made to inform voters on what they were considering in the measure.

“Voters needed a better explanation of why to vote ‘yes’ or ‘no,’” Gelman said.

And DiGiacomo, the Duane Morris partner, said the conventional wisdom on why the referendum went down was because the ballot question “was not clear and somewhat confusing” to voters.”

“[The gaming industry] supported the referendum to do away with that provision,” DiGiacomo said. “The New Jersey voters didn’t quite understand why it was on the ballot to begin with or what it meant. In hindsight, the gaming industry and sportsbook operators — the proponents of the referendum — didn’t do a good enough job in educating the public on what the referendum questions would do. Virtually all other states, including Pennsylvania, that have legalized sports wagering since New Jersey has done so, do not have a similar restriction on wagering on their local college teams or college sporting events occurring within their states.”

Don’t expect gaming industry officials or New Jersey lawmakers to give up on trying to have that restriction removed, especially with the state scheduled to host the East Regional of the 2025 NCAA men’s basketball tournament at Newark’s Prudential Center.

“In reality, you have the potential for big national powers playing in New Jersey in 2025,” Gelman said. “There’s going to be a bigger attraction to bet on those games.”

Jones added: “I think there will be more of an effort to put that question back on the ballot. I don’t think that is the last you’ll hear of it.”

A greater challenge for gaming companies, like DraftKings, is long-term sustainability, according to Florida attorney Marc Dunbar, a shareholder in the firm Dean Mead and an expert in the gaming industry. While states that adopt measures to allow sports wagering are raking in millions in revenue, gaming companies struggle to keep customers, since there are so many options available now to the sports bettor.

“These companies are flushing billions of dollars down the drain for customer acquisitions, and customers aren’t proving to be very loyal,” said Dunbar, who has over 25 years experience in the gaming industry. “For example, FanDuel may give someone $1,000 in match money one week, and DraftKings may give the same the next week. People have half a dozen apps on their phones and are chasing the best deal.

“You can’t have companies continue to churn out advertising to try and get sports wagerers. These people are not a slot machine player you’re chasing. Sports wagering players do it regularly and are much more sophisticated bettors. They will play an arbitrage game against you — if they can evaluate an inefficiency in a line or spread position between two books, they’ll do it.”

Once New York allowed legal online sports wagering, the state made a staggering $1.625 billion in bets placed for a 23-day stretch in January (8-30), according to PlayNY.

But Gelman said there are “enough bettors to go around” in each state, and that New Jersey should continue to enjoy a robust gaming business despite the one restriction in place.

“I can tell you $143.7 million was wagered on the Super Bowl,” Gelman said. “Football remains No. 1 [in terms of revenue]. Basketball is next. I think it’s too soon to judge the impact of New York mobile betting on New Jersey and Pennsylvania. Let the sportsbooks establish roots in New York. I think by next NFL season, we’ll get to see the impact.”