Watchful eye: Experts say gaming industry, regulators continue to stay vigilant when it comes to handling problems

Not all business is good for business.

Nicholas Amato, of counsel in Genova Burns‘ Casinos & Gaming Industry Group, said there’s nothing New Jersey’s gaming operators want less than a problem gambler risking their livelihood, whether it’s through new online avenues or in their casinos. It’s bad public relations, he said, and bad for an industry that’s trying to put its best foot forward.

Most of all, New Jersey’s regulators don’t want to see it. And they’re making the gaming industry — which has spread sports wagering across 36 states by now — well aware of that.

“Controlling problem gambling is not something the state is just going to give lip service to,” Amato said. “The state is going to do everything in its power

Nicholas Amato. (File photos)

to stay in front of it.”

In April, the state’s Division of Gaming Enforcement leaders announced the creation of a responsible gaming coordinator post to handle these issues. The seat was filled by Deputy Attorney General Jamie McKelvey, who will work with the state’s gaming operators to keep them aligned with responsible gaming objectives.

Amato said it’s a one of the first times a state has created a position like this. And this new position is signaling, more than the state has already, that there’s going to be a watchful eye on how gaming companies are operating and advertising in the Garden State.

“Gaming operators have to advertise — no question,” Amato said. “But people have just been inundated with this. And it was clear that would have to be moderated. I can’t predict exactly what that’s going to look like in the future. But it’s obvious the Division of Gaming Enforcement is on it.”

Bill Pascrell III, a lobbyist with Trenton’s Princeton Public Affairs Group, said nothing about the still relatively nascent industry is totally settled and solved. Issues can, and will, arise. And those issues can require public policy or regulatory adjustment.

But, he argues that it’ll take a careful touch for the industry to continue generating promised tax dollars and job creation benefits. To be more exact, Pascrell is at odds with the efforts of a lawmaker in New York advancing a bill that would prohibit advertising altogether for online and digital sports betting.

“That would be a disaster,” he said. “Like a lot of how states originally handled sports betting legislation, the intent is admirable — but it’s just not appreciative of what would result if those bans would be put in place.”

Pascrell added that the sports betting business model is particularly reliant on volume. Gaming operators are looking to keep people engaged and betting as well as to constantly attract new customers — and, in their view, that will take some level of marketing.

New Jersey lawmakers, along with those in other states, have signaled they’re uncomfortable with that marketing going on at higher education campuses without enhanced checks on problem gambling. A bill introduced in May demands colleges and universities implement a gambling addiction prevention program if they’re inking advertisement deals with sportsbooks. State law still prohibits betting on New Jersey collegiate sports.

Meanwhile, Massachusetts recently banned marketing on college campuses outright. Maryland and Connecticut are moving to ban agreements public universities make to participate in marketing sports betting platforms.

Jeremy Kleiman.

Jeremy Kleiman, member at Saiber LLC, fully expects a slow domino fall of state legislatures pushing more responsible gambling protections and gambling advertising limitations.

“What often happens is a lot of watching what’s happening in other states, and, if other major regulators are starting to impose certain restrictions, their fellow regulators won’t be far behind in deciding on if they want to adopt those practices, as well,” Kleiman said.

What New Jersey has done this year is set forth some “best practices” through the Division of Gaming Enforcement as guidelines it expects the industry to follow.

Among those demands: That the industry not advertise misleading slogans about “guaranteed wins” or “risk free” bets; that there’s no advertising in mediums where the primary audience is underage; and that television marketing also advertises — and not in microscopic font — the state’s responsible gaming hotline.

Put bluntly, Kleiman said the unspoken agreement with the document is that gaming operators do things proactively if they don’t want to be force-fed more binding laws and regulations.

“New Jersey’s approach, at least so far, seems to be putting the burden on the operators to be responsible, to be proactive and self-regulate on the common sense use of advertising,” Kleiman said. “They want to make sure they know who they’re targeting and reigning in crazy promotional offers.”

Kleiman still thinks it’s possible that New Jersey, despite having a nationally regarded Division of Gaming Enforcement and already robust responsible gaming standards, might see some more changes hit the books in the coming years.

One thing all experts agree on? This issue will almost certainly be solved, at least to some degree, by technology.

Gaming operators already leverage validation tools that allow them to prevent underage gambling. There’s an expectation they’ll be using artificial intelligence monitoring to also analyze existing customer behavior to earlier flag customers that may be displaying addictive or compulsive behavior.

“I think that technology is the future,” Amato said. “And, in some ways, I think we’re already there.”

Explaining misconceptions

Bill Pascrell III of Princeton Public Affairs Group has seen — and, in his role in lobbying for the gaming sector, participated in — the expansion of sports betting in the country. It’s growing abroad just as quickly.

With the sector’s growth, he believes misconceptions have increased as well.

Bill Pascrell III.

“There’s a big message that people don’t always get, even those that allege they’re experts on the industry: The sports betting industry is a very thin margin business,” he said.

Pascrell claims it’s difficult to turn a profit, even when setting aside the industry’s many legacy costs: the licensing, insurance, risk management, compliance and anti-money laundering measures.

“It’s sexy; it gets a lot of attention,” he said. “Just about everyone that has some sense of the industry knows what FanDuel, DraftKings, BetMGM, Caesars and the rest (of those sports betting companies) are.”

But, the more profitable segment of the industry is internet gambling, Pascrell said. That’s where gross gaming revenues, or GGRs as he refers to it, have really exploded, particularly in the Garden State. Internet gambling largely stabilized an industry disrupted by the pandemic.

And, as sports betting gambling markets open up elsewhere, he’s no fan of attaching sunset clauses like those agreed on when the Garden State’s internet gambling went live. Although the state just reauthorized this form of gaming for another five years, he’d rather see it made a permanent fixture to remove any uncertainty around future investments.

There was some commentary that this regular authorization vote could set the stage for a future reevaluation of New Jersey’s gaming tax rates, which stand at 13% for online sports betting and 15% for internet gambling.

No surprise — Pascrell isn’t high on that, either.

“Right now, New Jersey’s industry has been growing because it has a better structure — and a tax rate that’s lower than New York — that lends itself to innovation,” he said. “You don’t want to overtax the industry. In my view, that will lead to the local industry not continuing to innovate as successfully in the future.”