Genova Burns’ 30th Anniversary Countdown of the Most Influential Cases, Events and Laws

#13 - Legalization of Casino Gaming in New Jersey

11.25.2019

By: Nicholas R. Amato

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In 1976, following the failure two years previously of a referendum to authorize state-operated casinos, legalized casino gaming was approved by the citizens of New Jersey as a unique tool of urban redevelopment for Atlantic City. Then, in 1977, the New Jersey Casino Control Act was signed into law. The Act provided for the gaming industry to support the rehabilitation and redevelopment of existing tourist and convention facilities in Atlantic City, and fostered the encouragement of new construction and the replacement of lost convention, tourist, entertainment and cultural centers in the city. 

The Act also provided the basis for years of local and state revenue that provided for maximum use of the natural resources available in Atlantic City and for the expansion of New Jersey's hospitality industry, and to that end, “the restoration of Atlantic City as the Playground of the World and the major hospitality center of the Eastern United States.”

“Atlantic City has become synonymous with casino gaming and the gambling industry in New Jersey, and this oceanfront resort city remains the focal point for active casino gambling in the state. While Atlantic City has its present-day challenges, the intent and motive of the casino Control Act delivered on is promises to restore the City as a mecca of gaming and entertainment,” said Nicholas R. Amato, Esq., Chair of the Casino & Gaming Law Practice Group at Genova Burns. “With the advent of digital technology and the approval of online gambling and sports betting helping to extend the reach of gambling across the Garden State, the basic foundation of casino gaming in New Jersey remains steadfast and a prime example for how to regulate the industry.”

HISTORICAL & REGULATORY SUMMARY:

Gambling has a deep and long legacy in New Jersey, with the state having a more lenient outlook and regulatory environment than many other states. Until they were outlawed in 1844, lotteries were commonplace in New Jersey. Proceeds from the lotteries helped pay for the military during the French and Indian War and American Revolution, and they helped finance the construction of Queen’s College (now Rutgers University) and the then College of New Jersey (now Princeton University).

Racetracks also dotted the New Jersey landscape until 1897 when New Jersey voters approved a referendum that amended the state constitution to ban all gambling. From 1894 to 1939, gambling was theoretically outlawed in New Jersey, but enforcement was not universal, and bookmaking, numbers games, and slot machines were common sites in all corners of the state. Churches and non-profit organizations openly held bingo games and Freehold Raceway continued to operate.

Racetrack gambling was “re-legalized” in 1939 and, in 1953, voters approved a referendum legalizing bingo games for non-profit organizations to have bingo and raffles. In 1959, amusement games were once again legalized after a previous 1957 court decision had declared them illegal gambling. In 1970, 81.5% of New Jersey voters supported a referendum creating the New Jersey Lottery, and in 1975, New Jersey initiated the Pick-It (later renamed the Pick-3), the first legal lottery in the country where players could pick their own numbers.

With this history, New Jersey looked to casino gambling as its next effort to support public projects. A referendum to allow state-operated casinos anywhere within New Jersey was soundly defeated in 1974, with less than 40% of the voters approving the idea. State-owned casinos would have directed all of the revenues they generated to the state treasury.

In 1976, legalized casino gaming was repackaged as an innovative way to fund the redevelopment of Atlantic City. Casinos would be permitted only in that municipality, and would be privately owned but subject to state regulatory oversight. In addition, casino gaming was intended to assist older New Jerseyans as well as those with disabilities, as the State’s share of any gaming tax or other revenues was dedicated to those purposes. With these changes, voters gave overwhelming approval to casino gaming.

The New Jersey Casino Control Act of 1977 provided the regulatory and operational basis for casino gambling in the Garden State. The Act further restricted casino licenses to major hotel and convention facilities as a way to assure that the existing nature and tone of the hospitality industry in New Jersey and in Atlantic City was preserved. The gaming industry, mostly based in Nevada, jumped at the chance to invest in East Coast property. Resorts, Bally’s Caesars, Golden Nugget, Harrah’s and Tropicana quickly opened casino hotels in Atlantic City under the regulatory control of the State.

Casino gaming operations in New Jersey are governed by two departments of the state government. The New Jersey Division of Gaming Enforcement (DGE) was established in 1977, under the Casino Control Act, to ensure the integrity of the industry. The DGE operates within the New Jersey Department of Law and Public Safety in the office of the New Jersey Attorney General. The Casino Control Commission, also founded in 1977 as the state's gaming control board outlined by the Act, is responsible for licensing the casinos in Atlantic City. The commission also issues licenses for casino key employees and hears appeals from decisions of the DGE.

The Act was “designed to engender and maintain public confidence and trust in the regulation of the licensed enterprises, to provide an effective method of rebuilding and redeveloping existing facilities and of encouraging new capital investment in Atlantic City, and to provide a meaningful and permanent contribution to the economic viability of the resort, convention, and tourist industry of New Jersey.” (Excerpted from the Casino Control Act, N.J.S.A. 5:12-1.)

Casino gaming can be deemed a success when evaluated against its proponents’ promises of job creation and investment in Atlantic City. A building boom ensued, with billions invested and over 10,000 permanent jobs created in the first five years of casino operations. However, areas of Atlantic City not zoned for casinos did not see the same boom, and many residents claimed that few of the newly-created jobs benefitted them. Social problems associated with gambling and criminal activity increased, and Atlantic City municipal officials sometimes succumbed to the temptation of opportunities for self -dealing. Regardless of how its overall results are characterized, the decisions made in 1976-78 have had a colossal impact on New Jersey and have forever altered Atlantic City.

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