New Jersey Raises Gaming Stakes

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New Jersey Raises Gaming Stakes
Richard ‘Skip’ Bronson at U.S. Digital Gaming’s Beverly Hills office in 2010.

For L.A. companies betting on online gambling, last week’s legalization of Internet gaming in New Jersey marked the biggest opportunity so far.

Within days of New Jersey Gov. Chris Christie’s signing of a bill authorizing the state’s casinos to launch online gambling operations, local companies were moving to secure business in a market that some experts project could be worth up to $1 billion annually.

Matthew Katz, chief executive of Cams LLC, a Miracle Mile technology company offering payment processing and customer ID services for online gambling websites, met with New Jersey regulators the day after the bill’s passage. His company has filed for a license to sell its services to future online gambling operators there.

“Absolutely we’re looking to pursue that marketplace,” he said. “The market is significantly larger based on the population and the nature of the games being offered.”

U.S. Digital Gaming, a Beverly Hills technology company that provides software for gaming websites, is negotiating with potential partners in New Jersey, said Chairman Richard “Skip” Bronson.

It has also struck a deal with an unnamed partner in Nevada, which legalized interstate online poker last month. He anticipates that other states will follow.

“Now that Nevada’s done it and New Jersey’s done it, there will be a domino effect,” he said. “It’s definitely going to accelerate the process of legalization.”

New Jersey’s actions also figure to be a big lift for Meruelo Group, a Downey investment and holding company owned by Alex Meruelo. Last month, it agreed to purchase the Trump Plaza Hotel and Casino in Atlantic City, N.J., for $20 million. It now has the option of launching an online gambling site accessible by anyone inside state lines. The company has a similar option for Reno, Nev.’s Grand Sierra Resort, which it bought in 2011.

Meruelo’s president, Xavier A. Gutierrez, said the legalization of online gambling in those states could benefit the company, but that Meruelo has not yet decided whether or how to get involved.

“Our purchases were irrespective of the online gaming opportunities, but they’re now enhanced by it without a doubt,” he said. “Certainly we’ll be looking at it.”


Placing bets

By some estimates, the online gambling market in the United States could generate as much as $12 billion a year, based on numbers in the United Kingdom, where online gaming is legalized and makes up 12 percent of the gambling market.

As a media and technology center in a state that is presumed to be the largest untapped online gambling market in the country, Los Angeles is home to several companies angling to get a piece of the action.

Bronson, a former casino executive at Mirage Resorts, started USDG in 2008 along with music and film producer Richard Baskin. The two ponied up a combined $3 million and reportedly raised another $3 million as of 2011 from investors including Herb Simon, a real estate developer and owner of pro basketball’s Indiana Pacers. USDG is actively lobbying to legalize online gambling in about 15 states.

Cams, which also has signed a contract with online poker operator Ultimate Gaming in Nevada, was formed in 2011 by Katz to sell technology to online gambling operators. Katz is also the founder and chief executive of a related entity, Verifi Inc., which offers similar technology to nongambling industries, such as foreign exchange trading and dating websites.

Other companies include Westchester television network TVG Network, operator of a website for horse race betting, which is legal in California. A TVGN spokesman declined to comment on whether it was seeking to partner with casinos in New Jersey.

More could be coming. Dennis M.P. Ehling, an attorney at Blank Rome LLP’s Century City office who specializes in online gaming laws, said he has consulted with several local technology companies in the last year that are looking at developing online gambling software.

“I certainly expect more people to start developing software,” he said.

State-by-state momentum seems to be building. New Jersey, which will allow casinos to operate gambling websites for any games currently offered by casinos there, represents the most populous state so far to authorize online gambling. In late 2011, the Justice Department issued an opinion that opened the door for online betting within state borders. Nevada legalized online poker only in 2011, and followed with a bill last month that allows online poker players in Nevada to bet against players in other states. Delaware approved in-state online gaming last year, and the belief is that more states will be tempted to follow as they seek ways to raise money without increasing taxes.

The big fish is California, which so far has resisted legalization attempts.

“California presents a significant growth opportunity for the industry,” Katz said. “Arguably, it is the largest market.”

Two bills to legalize online gambling are currently in the state Legislature, but have not gotten very far. One obstacle is that established gambling outlets including card clubs and American Indian casinos have been unable to agree on an online framework, Ehling said.

Still, they could be pushed by legalization in other states, he added.

“California is a ways away,” he said. “But as state-by-state legalization grows, I think the pressure on California not to be left behind will continue to grow.”

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