New Jersey's Bill S-12 Redesigns the Regulatory System for the Gaming Industry

In a boost to New Jersey's casino and tourism industries, the state has enacted three new laws, and a fourth bill is pending before New Jersey Gov. Chris Christie. Links to additional Alerts summarizing the other pieces of legislation follow this piece.

On February 1, 2011, New Jersey Gov. Chris Christie signed into law Bill S-12. This legislation fundamentally redesigns the state's regulatory system over casinos and persons doing business with the gaming industry and substantially amends the state's Casino Control Act (the "Act"). The bill also significantly alters the authority of the Casino Control Commission ("Commission") and the Division of Gaming Enforcement ("Division").

The Alert below summarizes how S-12 affects the responsibilities of the Commission and Division, as well as its applicability to casino licensees, equipment manufacturers, investors, lenders and other vendors who conduct business within New Jersey's gaming industry.

General Changes

Shift of authority from Commission to Division. (Revised sections 63, 70 and 76.) The primary authority to promulgate regulations governing the industry in New Jersey has been shifted from the Commission to the Division. The Commission's authority to make regulations will be limited to regulations governing hearings that are to be conducted before it. On all other matters, the authority to make and enforce regulations will be placed in the Division. Moreover, the Division will have the authority to initiate and decide any actions against licensees or registrants, and impose sanctions on them for violation of the Act. The Division may outsource background checks to a private party, if that party has been awarded a contract under public bidding laws.

Division's authority to summarily modify regulations. (Revised section 69.) After enactment of S-12, the Division will have a 90-day window in which it can summarily revise existing regulations or adopt new regulations for a 270-day period. During the 270-day time frame, the Division will determine whether such rules or revisions should be adopted on a permanent basis.

Changes to Casino Licensing

Leases concerning casino-hotels. (Revised section 82(b)(5) and (6).) A lease agreement for a casino-hotel or the land under it will no longer need to be for a term in excess of 30 years or concern 100 percent of the casino-hotel or related land. Similarly, a lease agreement that provides for a percentage share of gaming revenue or casino profits does not have to concern a "significant portion" of the casino-hotel or related land.

Undue economic concentration. (Revised section 82(e).) The criteria that were previously established by the Commission, by regulation, to determine whether the issuance of a casino license would result in undue economic concentration—thereby requiring denial of a license—have now been incorporated into the language of the statute. The Commission may define additional criteria by regulation.

Presumption of financial stability. (Revised section 84(a).) An applicant for a casino license will be presumed to meet the financial stability requirement for licensure if it establishes by clear and convincing evidence each of the following standards:

Assurance of financial integrity of casino operations by maintaining a bankroll adequate to pay winning wagers when due. This may be established by showing that the casino's bankroll is at least equal to the average daily minimum...

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