After The Gold Rush, Gambling May Be Detrimental To Economy Says New Jersey Study

Nevada has the Vegas Strip, New Jersey Atlantic City. Together the two states, one a desert, the other green, on either side of the vast American hinterland are synonymous with gambling; leaders also in online sports betting and iGaming.

The riches, we are told, has provided hundreds of thousands of jobs, pumped billions of dollars into local economies and yielded significant sums to the tax take.

But now a controversial new report by forensic accountants National Economic Research Associates (NERA) has concluded that iGaming, if anything, is a “net negative” to the New Jersey economy.

Commissioned by The Garden State’s Campaign for Fairer Gambling, the report found, counter-intuitively, that the US$2.4 billion (£1.9bn) spent by people gambling online in New Jersey in 2022: “decreased [state] economic activity by about US$180 million (£142.87m).”

If anything, the high economic impact of combatting and treating problem gambling cancels out tax contributions made by the industry. And causes overall losses to the state.

Additionally, because iGaming employs fewer people than the traditional land-based industry, less money is reinvested in the New Jersey economy than expected.

NERA says that in 2022 iGaming paid some US$110 million (£87.31m) in NJ wages and generated US$22 million (£17.46m) in spending.

If the same expenditure was seen in another industry, like dining, the report projected it would lead to US$1 billion (£793.7m) in wages and US$200 million (£158.75m) in spending.

Problem Gamblers

New Jersey has a six percent rate of problem gamblers–over three times the national average–and so-called ‘Gambling Negatives’–encompassing healthcare, welfare, homelessness and criminal jurisprudence–outweigh the tax benefits, says the report.

And according to the NERA research, the much lauded boom in online US gambling–often compared to a latter day Gold Rush–may ultimately deliver little more than a will-o-the-wisp economic mirage.

“[iGaming] does not yield the types of positive knock-on economic outcomes that other discretionary industries do,” the report says.

NERA estimated that online casinos in New Jersey paid US$385 million (£305.6m) in taxes in 2022.

But the state, concurrently, faced US$350 million (£277.82m) of social costs–covering healthcare, social welfare, homelessness and criminal justice–from the negative impacts triggered by online gambling, said NERA.

The NERA conclusions run contrary to a 2019 survey, commissioned by leading US sportsbooks FanDuel and DraftKings, which argued that iGaming in New Jersey had generated US$2 billion (£1.58bn) in economic output, provided 6,500 jobs and paid US$400 million (£317.5m) in wages and US$260 million (£206.38m) in taxes between 2013 and 2018.

“America’s iGambling gold rush got out of hand quickly because the debate has been dominated by advocates for unfettered proliferation,” says Derek Webb, the founder of the Campaign for Fairer Gambling.

“The costs and benefits of legalizing online betting have not been sufficiently scrutinized,” claims Webb.

“Only years later does the public come to learn that the sector’s sunny forecasts were overly optimistic.”

Misleading

But one top level gambling industry contact in Atlantic City told iGamingFuture:

“NERA is providing an inaccurate assessment and false conclusions.

“[Their] 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.”

Perhaps the last word on the impact of gambling in New Jersey–good or bad–should rest with the bold economic data.

Last year the Garden State gaming market–across all three major verticals, land-based casinos, iCasinos and sports betting–smashed records with an all-time revenue high of US$5.78 billion (£4.58bn).

Total revenue was up 10.9 percent over 2022.

Retail remained to the fore, taking US$2.86 billion (£2.27bn) in revenue, up 2.2 percent year-on-year; iGaming stood at US$1.92 billion (£1.52bn), an increase of 15.7 percent, compared to the previous year, and sports betting surged 32 percent, with revenue of US$1.1 billion (£873.14m).

Which all goes to beg the final question, prompted by the Great American iGaming Gold Rush: Is “less”, more? Or is “more”, less?

New Jersey, for one, is offering pretty good odds on the result.

With Additional Reporting by Lauren Harrison