All about Casinos in New Jersey

Background

Sweepstakes are contests in which participants can win a prize based on chance. Most states authorize businesses to run sweepstakes to promote a legitimate good or service. Often, businesses offer bonus sweepstakes entries to customers who make a purchase. Although offering a contest with elements of (i) prize, (ii) chance, and (iii) consideration typically meets the definition of illegal gambling in most states, sweepstakes are generally exempt from being classified as gambling when they offer a “no purchase necessary” option for entry.

In addition to sweepstakes, online “social casino” sites began offering “freemium” style games that mimic traditional casino games, such as slot machines and poker. Social casino games usually involve games of chance, which do not offer prizes of cash or property. They are free to play, but players can purchase virtual currency (often called “gold coins”) to enhance their entertainment experience. For those looking for more interactive experiences, live dealer casino reviews are becoming increasingly popular as they offer a more authentic, live-streamed casino experience.

The freemium gaming industry is now well-established in the United States. These games are generally not regulated by state gaming authorities because they do not involve gambling—there are no actual prizes. However, in recent years, social casino operators began adding a sweepstakes component to their platforms, leading to the rise of the “freemium-plus-sweepstakes” industry. This expansion has brought new types of games, such as social sportsbooks and social esports. As the industry grows, it has drawn increased attention from gaming regulators, civil litigation, media, and lawmakers.

New Jersey’s Legislation

In New Jersey, a recently introduced bill appears to attempt to incorporate “internet sweepstakes operators” into the state's regulated gaming industry. New Jersey has a comprehensive and well-regarded gaming regulatory framework, already covering land-based casinos, sports wagering, and online gaming operations under the New Jersey Casino Control Act, N.J.S.A. 5:12-1, and its regulations.

Key Provisions

In its current form, Bill A5196 includes several key provisions:

  • Definition of "Online Sweepstakes Casino":
    It defines an "online sweepstakes casino" as any platform available through a website or mobile application that:

    • Provides participants an opportunity to play authorized gambling games or offers an experience similar to gambling games, but without requiring an initial monetary investment from participants. The games are played primarily with free currency.

    • Awards participants random currency or promotional gaming credits, which can be wagered on games and redeemed for cash, prizes, or other valuable items. These platforms may also offer tokens, coins, chips, or credits that can be exchanged for cash, prizes, or other things of value.

  • Definition of "Free Currency":
    It defines "free currency" as tokens or coins, either physical or virtual, that are used to play games but cannot be redeemed for cash or other prizes by themselves. They may be purchased but have no intrinsic value apart from being used for specific games or in specific applications until combined with other promotional credits.

  • Casino Service Industry Enterprise:
    The bill revises the definition of a "Casino Service Industry Enterprise" to include online sweepstakes casino operators. This requires operators to partner with an existing casino licensee to offer services and for certain vendors serving online sweepstakes casinos to be licensed.

  • Licensing:
    Online sweepstakes casino operators would need to be licensed by the New Jersey Gaming Commission.

  • Internet Gross Revenue:
    All sums actually received by online sweepstakes casinos would be included in the calculation of “internet gross revenue.”

  • Audit Requirements:
    Online sweepstakes casinos would need to conduct and submit the results of an independent third-party audit to verify their financial standing and operational integrity before receiving a license. A biannual audit would be required once the license is awarded.

  • Collaboration with Law Enforcement:
    The New Jersey Division of Gaming Enforcement would be required to collaborate with federal, state, and local law enforcement agencies to investigate online sweepstakes casinos and other organizations that conduct internet gaming without meeting legal requirements.

All operators potentially impacted by Bill A5196 are encouraged to monitor its progress through the New Jersey Assembly, as well as the Duane Morris Gaming Industry Group.