New Jersey study claims online gambling benefits were overstated

Responsible Gambling

The Campaign for Fairer Gambling (CFG), a leader in gambling reform, has unveiled the summary of a report that casts new doubt on the promised economic benefits of internet gambling (iGambling) in New Jersey and beyond.

In 2019, the iGambling sector painted a rosy picture of the Garden State’s windfalls in a report commissioned by the iDevelopment and Economic Association (iDEA), an entity that seeks to use legislative influence to drive the legalization of iGambling across the US.

CFG commissioned the globally respected National Economic Research Associates (NERA) to thoroughly examine the wide-ranging impacts of New Jersey’s iGambling proliferation and the veracity of the iDEA Meister Report since the U.S. Supreme Court struck down the Professional and Amateur Sports Protection Act in 2018.

A massive oversight in previous debates and a fundamental flaw of the iDEA Meister Report was the reality that money spent on online gambling is not of net economic benefit because it diverts spending from elsewhere in the productive economy. Stunningly, as shown in the following table, the iGambling sector has actually been a net-negative to New Jersey’s economy.

Compared to alternate forms of recreation, iGambling does not deliver major economic value, because: (a) iGaming is a high-margin, low-labor activity, meaning that money spent on iGaming does not support the wages of many employees; (b) a large proportion of the money spent on iGambling is reinvested in advertising aimed at customer acquisition, which is not economically impactful; and (c) while iGambling operators may pay higher taxes than other recreation providers due to specific gambling taxes, the revenues realized are offset by the high fiscal and social costs of problem gambling, inclusive of healthcare, welfare, homelessness, and law enforcement.

As iGaming results in a reduction in the state economy there is an overall reduction in total personal income in the state, meaning there are lower federal taxes from the state. Therefore, although state taxes have increased, they have done so at the expense of a decrease in federal taxes. With the added burden of the online gambling related socio-economic costs, federal authorities must consider this tax diversion aspect.

CFG founder and funder Derek Webb said, “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 iGambling. It is imperative that there is federal consideration of the consequential harms of iGambling expansion.”

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