A new report claims that the success of online gambling in New Jersey has been largely cancelled out by the resulting social costs. [Image: Shutterstock.com]

Making some big claims

A new report claims that the benefits of New Jersey’s online gambling sector could be “roughly equal” to the resulting social costs. NERA Economic Consulting conducting the industry analysis, commissioned by the Campaign for Fairer Gambling.

generate hundreds of millions of dollars in tax revenue

New Jersey was the first major state to embrace online sports betting when the federal ban ended in May 2018. It also welcomed online casinos and poker sites, which now generate hundreds of millions of dollars in tax revenue annually.

NERA used a UK study to calculate that the industry’s social costs add up to $350m each year, compared to the $385m in net tax revenue that the iGaming sector contributed in 2022. It took into account money going towards healthcare, criminal justice, homelessness, and welfare.

Breaking down the numbers

The new report states that New Jersey’s online gambling sector hurts overall economic output, wages, and jobs. It claims that the $2.4bn expenditure by people in the state on online platforms in 2022 lowered economic activity by approximately $180m. NERA believes that spending the same money on other things like dining or shopping would have seen more funds go towards wages, which could then go back into the local economy.

Online gambling workers in New Jersey received about $110m in wages in 2022, which led to $22m in new expenditures. This compares to the $200m in new spending the group believes would have been generated if the $2.4bn went elsewhere and led to $1bn in wages.

questioned if lawmakers properly weigh the costs and benefits

The Campaign for Fairer Gambling Founder Derek Webb questioned if lawmakers properly weigh the costs and benefits of digital expansion, stating “America’s iGambling gold rush got out of hand quickly because the debate has been dominated by advocates for unfettered proliferation.” He believes that some states pushed through legislation “based on false assumptions” only to later realize that the estimates of the benefits were “overly optimistic.”

Not everyone is in agreement

The Campaign for Fairer Gambling also commissioned NERA to appraise a similar report that industry advocate group iDEA published. It concluded that iDEA’s study did not accurately take into account the opportunity cost of the gambling expenditure.

Online sports betting is currently available in 28 states and online casinos are up and running in six states.

iDEA Founder and General Counsel Jeff Ifrah has hit back and claimed that the NERA report inaccurately assesses the situation and presents false conclusions. He highlighted that people simply turn to illegal offshore sites when there is no legal alternative. These platforms don’t offer any economic benefits to New Jersey or any protection to the players.