A Conversation with a New Jersey iGaming Insider

Last week, I was able to get some time to sit down and talk to Bill Pascrell III, one of the lobbyists with access to the New Jersey Online iGaming decision maker circle. Bill is a principal for the Princeton Public Affairs Group, the largest state lobby firm in the US, which also happens to be based in Trenton, New Jersey.  Bill has been part of the land-based casino industry for years. Around five years ago, he began to lobby for a New Jersey online bill, and currently has PokerStars as one of his marquee clients. He has worked hand in hand with the New Jersey regulators over the recent launch of New Jersey i-gaming, and has been outspoken on his views about the success of that launch.

FlushDraw (FD): Online gambling launched in NJ in Nov 2013. How do you think that launch went? What do you see as the biggest positives and negatives of the launch?

Bill Pascrell III (BP3): “Context is always important. I say three things when I talk about the success of where we’re at, and how the launch went. Number one, from a regulatory standpoint, I am amazed how successful New Jersey was, and it’s a credit to Governor Christie and his administration, and particularly Dave Rebuck and George Rover at the DGE because they had a very short period of time between the governor signing the bill at the end of February and the rollout date (which) was short of nine months, which is not a lot of time when you don’t have a lot of experience.”

Bill also talked about the hiring of a Consultant from Malta, Mario Gallea, who came to New Jersey, with his family, for around 80 days to assist in the rollout. It appears that Mario’s input was key to the success of the launch. Bill also praised the technology involved in the new market:

“They have a fantastic testing laboratory heading up by Eric Weiss, I think the geolocation, the age verification all the regulatory priorities have been well established and rolled out perfectly. I think the good news from this standpoint — (we’re) about to approach our eighth month’s conclusion at the end of July. I think it’s incredible that we haven’t had any cyber breaches, no age verification violations (that I’m aware of), no geolocation interruptions. You know it’s working. From a regulatory standpoint.”

Bill was less than happy about the customer-facing part of the industry in New Jersey:

MasterCard is currently only processing around 70% of customer-requested i-gaming transactions in New Jersey, and that leads all credit-card companies.

(BP3) “From an industry standpoint, I do not believe the industry was ready…. On the industry side, I am not using the Governor’s revenue projections of $1B and $160M in revenue as a barometer or measuring stick because I don’t think that’s fair. I don’t think that anybody in the industry recognizes that those numbers were really do-able. Their numbers were put out by a superb politician who was running for election, and we understand what happens sometimes, people get a little too ambitious, and that’s fine. But that should not be the stick to measure this industry. That being said, the content of the 12 sites that are up has been what I would call less than robust. They have been kind of paltry and the pedestrian nature of the rollout I think is reflective of that in addition to that we continue to have significant issues with player acquisition, because payment processing been struggling.

We know that MasterCard is doing the best out of the credit card companies involved in the space. They’re processing at an about 70+% success rate, but that means that there is around 25%, one out of every four, MasterCard users is being kicked out, and that’s frustrating. VISA is now approaching the 30s, and so they’re the counter of what MasterCard is, and I think they need to do a better job. That’s all part of the banking industry, I don’t blame the credit card companies, but the acquiring banks have not really embraced online gaming. There needs to be a better job, by the industry, to bring the banking community into the space because it’s a secure transaction, its a legal transaction, it’s a transaction that can be very profitable if done properly. And yet, the credit card companies, and particularly the banks haven’t embraced it. So that remains a real challenge.”

(FD): On that, is there any thought about making it a regulatory requirement, getting in touch with the financial regulatory authorities to actually try and tie the two ends of the chain up as it were?

(BP3): “It’s going to get better. Dave Rebuck and George Rover are working vociferously to do what they can on the regulatory side to work with the federal government. There is a federal dept called the OCC (Office of the Comptroller of Currency) and we’re working collaboratively to try and get the OCC to issue what I would call a “Comfort Letter” to the banking industry. I think that if they issue that letter banks will be much more inclined, particularly local banks in NJ. There are some banks that are looking at it. I’m not at liberty to share which banks are looking at it, but I think at the end of the day, it’s going to take somebody to stick their toe in the water and make some money, and then they’ll all follow like lemmings.”

(FD): With the imminent arrival an Amaya-owned PokerStars, what do you see happening to the current NJ market? Is there anything the current operators should be doing to remain competitive?

Pascrell expects an Amaya-owned PokerStars to be in the New Jersey i-gaming market before November 2014.

(BP3): “First and foremost I believe that Amaya/PokerStars licensing is not a question of if but a question of when… I think that we are ready to go full speed ahead to get PokerStars licensed under its new regime and that’s going to take a bit of time for the DGE to go through the suitability and those conversations are taking place. Now, once they get into the market, everybody has had eight months, once (Poker)Stars gets in lets say, nine to 12 months of an advantage.

I think the good news for New Jersey and the online industry in America is once PokerStars gets in, they will lift all boats, like … a rising tide lifts all boats? PokerStars will provide that rising tide because they’re the gold standard, and everybody else will have no other choice but to step up their games. Necessity is the mother’s milk of invention and I believe that (Poker)Stars’ arrival to the American shores, through New Jersey is going to be a huge transformational experience that everyone will benefit by because they will have to step up their game or get left in the dust.

I was told by a bunch of folks in the industry, that are in the space already, that when they learned that (Poker)Stars was not getting into the space, they cut their marketing budgets by 50%. Imagine when Stars comes into the space, they’re going to have to really step up their game….  A lot of the early stories about the slow, pedestrian crawl of New Jersey, Nevada and Delaware have really not been fair. It’s not a comprehensive story… some of the bigger players in the market have not got into the space yet. I think they’ll be getting into the space soon and once they do its going to be transformational and it’s creating a huge opportunity for many.”

(FD): What do you think PokerStars is going to bring into the market that it is missing currently apart from the brand and software?  More tangentially than that, away from the obvious, what do you think they’re going to bring in that’s going to change?

(BP3): Well, first of all, that’s a really great question, because I think, although you’ve qualified it, the brand and the software are two things. (They’re) so head and shoulders above what everybody else has, the software, the content that’s in the space now, it’s just not there. The other thing is, they know how to acquire customers like no other company does. Others in the space have had a tough time acquiring customers. 888 doing 80% rakebacks, it’s just bizarre, it’s byzantine.

(FD): You don’t think the affiliate regulations have caused any part of the issues there?

(BP3): No, I think the affiliate regulations in Jersey are going to be helpful to the industry and I think that now that the DGE is giving the affiliates an opportunity to run again into the space in a legitimate way, it’s going to help.

In Part 2, Pascrell discusses the US-wide i-gaming market.

At this point we moved away from discussing the New Jersey iGaming specifics, and moved onto talking about the US national i-gaming scene. I’ll be coming back and covering this part of our conversation in another article this week.

From what Pascrell was saying, the i-gaming market in New Jersey has been leaderless since its launch. Most of the companies have been waiting for PokerStars to grow the market and increase the player pools, which will benefit everybody. The fact that the companies currently in the New Jersey market appear to have reduced their marketing budgets so dramatically was a shock to me. I have been vocal about the poor marketing in the state, but I had no idea the original plan had effectively been cut in half.

With PokerStars expected by many to join the New Jersey market before the next WSOP main event champion is crowned, we will see if it is a case of letting a fox into the hen house, or if they are going to lead the charge towards a sustainable market. I know which one I’m expecting, but we’ll have to wait and see what actually happens.