The gambling industry can provide significant economic boosts to certain areas, creating new jobs and generating millions in tax money. This argument continues to be used by proponents of the industry in many states where certain verticals are not yet legal. However, a recent report shows that New Jersey’s online casino industry is not as beneficial as initially expected.
As reported by The Guardian, New Jersey, which was among the first states to legalize online gambling has indeed generated a lot of tax money for the state. However, this benefit has been offset by a variety of factors, analysts argue.
According to research commissioned by the Campaign for Fairer Gambling, $2.4 billion has been wagered online since 2022. This activity has ended up decreasing the state’s economic activity by roughly $180 million, experts add.
NERA Economic Consulting, which did the research, believes that if this $2.4 billion was spent elsewhere, the benefits for the state would have been much greater. According to the consultancy, spending this money in other sectors would have paid out more in wages across the state, which would then have been spent in other parts of the economy.
For comparison, the $2.4 billion spent on online gambling paid $110 million in wages, which ended up generating $22 million in spending. However, another recreational industry would have paid out $1 billion in wages, generating $200 million in spending, according to NERA.
To make matters worse, much of the tax money generated by the vertical end up offset by the costs tied to online gambling-related issues, according to a study by the National Institute for Economic and Social Research in London.
The Industry’s Promises Were Way Too Optimistic, NERA Says
In addition to compiling its report, NERA was asked to evaluate an earlier report commissioned by iDEA Growth – a gambling advocacy firm representing companies such as DraftKings and FanDuel. The report in question concerns the industry’s ability to create new jobs and bolster economies.
According to iDEA Growth, the online gambling sector has been able to generate $2 billion in economic output, as well as 6,552 jobs. In addition, the sector has paid out $401 million in wages and has contributed almost $260 million to taxes between late 2013 and 2018.
However, NERA argued that other industries would have generated more from the same levels of spending. According to the consultancy, iDEA Growth’s report does not consider what other industries could have done with this money.
As reported by The Guardian, Derek Webb, Campaign for Fairer Gambling’s founder said that a lot of states are legalizing online verticals “based on false assumptions,” only to learn that the industry’s promises were way too optimistic.
America’s iGambling gold rush got out of hand quickly because the debate has been dominated by advocates for unfettered proliferation.
Derek Webb, founder, Campaign for Fairer Gambling
iDEA Disagrees with Campaign for Fairer Gambling’s Points
iDEA’s founder and general counsel, Jeff Ifrah, responded to the NERA report, saying that comparing it to the iDEA report is like comparing apples to oranges. Ifrah pointed out that his team’s research was clearly focused on the economic impact of online gambling, while NERA’s research focused on the social costs instead.
In addition, Ifrah pointed out that the NERA report is misleading because it does not mention many supporting roles that are integral to online gambling and overlooks the exponential growth of jobs within New Jersey’s iGaming sector.
The NERA report is misleading for many reasons and betrays a basic misunderstanding of the most fundamental aspects of the legal iGaming industry: Without legalized iGaming, consumers turn to illegal, offshore sites that offer zero protection to players nor any economic benefits to the state.
Jeff Ifrah, founder, iDEA Growth
The Guardian tried to get New Jersey’s regulator to weigh in on the matter as well but received no response.