Study claims benefits of regulated igaming in New Jersey were overstated

Report commissioned by the Campaign for Fairer Gambling suggests the economic boom from igaming taxes could have “roughly equal” social costs  

Campaigners have claimed that the economic surge brought about by online gambling in New Jersey is at the detriment of society in the state.

A report commissioned by the Campaign for Fairer Gambling and conducted by NERA Economic Consulting stated that economic output, jobs and wages were dealt a blow by the surge in online gambling in New Jersey and raised concerns about the industry’s claims that legalisation would provide a boom to states across the US.

The report found that $2.4bn was gambled online in New Jersey in 2022, which it believes “decreased New Jersey’s economic activity by about $180m.” This was an area where the campaigners said that the gambling industry wrongly presumed that gambling spend was additive and the money would not have been spent elsewhere.

The economists who worked on the report also warned that the cost of higher problem gambling rates could equate to the money earned via gambling taxes.

The report also said that if the money had been spent on another activity, such as shopping or eating out, the economists estimated that a lot more money would have been paid out in wages, which the employees would have spent on other areas of the economy.

NERA found that the online gambling industry paid around $110m in wages to New Jersey employees in 2022, which generated an estimated $22m in new spending across the state.

However, the economists believed that if another recreational activity had generated the same amount of spending, then around $1bn would have been paid out in wages, which would have generated $200m in new spending.

The report estimated that online casinos in the Garden State contributed $385m in net taxes in 2022, a rise of $50m compared to 2022. Regulated online casinos and poker went live in 2013 in New Jersey, while digital sports betting launched five years later.

Although the paper focused on the economic effects of igaming in the state, it also noted a link between gambling and negative social impact.

Using a UK-based study by the National Institute for Economic and Social Research (NIESR) on problem gambling, NERA applied the findings to New Jersey.

NIESR found that gambling addiction particularly drove social costs in welfare payments, homelessness and criminal justice. Using NIESR’s figures, the economists estimated that New Jersey’s $5.2bn gross gaming yield could lead to $740m in social costs, of which $350m could be associated with igaming.

NERA also called into question the Meister report, co-authored by Nathan Gaming economist Alan Meister and commissioned by iDevelopment and Economic Association (iDEA), which examined the igaming sector’s contribution to the New Jersey economy between 2013 and 2018.

The report commissioned by iDEA, whose members include DraftKings and FanDuel, aimed to highlight the benefits of legalising the online gambling sector and how it could boost state economies.

The report suggested that from 2013 to 2018 online gambling had, directly and indirectly, contributed $2bn to New Jersey’s economic output, created 6,552 jobs, $401m in employee wages and $259.3m in state and local government taxes across those five years.

However, the NERA economists found that online gambling had been detrimental to the state’s economy, and claimed the previous report did not take into account what other industries would generate from a similar level of spending. 

Following the report’s findings, Derek Webb, founder of the Campaign for Fairer Gambling, called on states to examine the effects problem gambling has and the impact of future igaming expansion.

Webb explained: “It is commendable that a review of gambling harm in respect of the military service members has been proposed in the federal National Defense Authorization Act.

“However, the overall national annual cost of problem gambling to the US economy has not been reviewed since a federal study in 1999, before the impact of igaming. It is imperative that there is federal consideration of the consequential harms of igaming expansion.”

“All state jurisdictions should proceed with caution and a balanced debate to avoid being duped by misleading projections. Igambling ultimately imposes costs on the whole US economy,” Webb added.

 

​EGR Intel

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