By Steve Norton
CEO, Norton Management

I admire Carl Icahn and his involvement in Atlantic City and Las Vegas casino gaming. He thinks like the investor he is. He saved Tropicana and would have saved the Taj Mahal if the Union was more interested in its membership's jobs instead of trying to look powerful in asking for unreasonable contractual terms. They rolled the dice with the wrong billionaire.

Atlantic City and New Jersey have made some unfortunate mistakes after our monopoly was compromised by the Pennsylvania slot casino in 2006. Not only did we lose Eastern PA and Philadelphia as major markets, these slot and later full casinos, were closer to North and Central New Jersey residents, then Atlantic City.

Our short sighted solution was to approve online gaming, rather than allow a slot casino at Meadowlands, and offering to pay a 55% tax (like PA) which could have been shared with: 25% going to Atlantic City, possibly to pay casino real estate taxes and subsidize air service to cities like Atlanta; 25% to senior and disabled programs that have lost some $2 billion watching their $400 million annual revenues in 2006 drop to under $200 million, before two new casinos opened last year. The other 5% would subsidize racing purses.

A Meadowlands slot casino would not have replaced all of our $3 billion in win lost to casinos in PA, slots at Aqueduct and Yonkers and new casino gaming in Maryland. But I projected that a Meadowlands slot casino would have produced at least $800 million in slot win plus another probable $400 million if tables were approved, at a more realistic 20% tax rate.

But recently, I am much more concerned about adding sports betting to NJ online gaming sites and allowing operating casinos and race tracks to have multiple operators, including many from the United Kingdom, where the 98% reduction in FOBT maximum bets, from 100 pounds to 2 pounds, has had an enormous impact on these operators.

Sports betting was supposed to be a major draw for Atlantic City, but it has been turned into a small profit center where the 5 to 6% hold on sports bets made, pays a tax of 14.5% online or 8% if placed live in Atlantic City. But the tax for NJ is likely less than 1% of amounts bet (5 to 6% hold at a 14.5% tax).

But if the convenience of betting at home, on a computer or smartphone, has NJ residents shifting some of their lottery play to sports betting's hundreds of in-game and proposition bets on most sporting events, then the state of NJ is trading 40% on most lottery bets, for 1% on each sports bet made. This could be a disaster for deserving NJ lottery programs.

But, to be competitive with illegal overseas sites and local bookmakers, sports betting needs to be available, at least within a 30-minute drive to meaningful populations. In my view, these parlors would offer a much superior viewing experience with large scale video screens, betting kiosks, along with booths, where a group of friends could watch (with sound) their favorite game, while also being able to partake in meals and drinks, and possibly poker or a limited number of video gaming terminals that would be an attraction when no sporting events were scheduled. The state would get better tax revenues from food, beverage, and slots, then sports betting and Atlantic City casinos would earn a profit helping to offset their loss of live customers. And I'm not proposing 30,000 video gaming terminals that exist at any Illinois business, that can get a liquor license in an approving community while paying a lower tax rate than the 10 IL riverboat, which made substantial investments in economically challenged IL towns.

The other big problem with online gambling and sports betting is the likely increase in problem gambling and the likelihood that minors will be able to use a parent’s credit card or bank info and bet illegally. A situation that was recently discovered in the United Kingdom, where 30% of minors interviewed had bet illegally online and even at betting parlors where the oversight was non-existent. In the United States, and especially in NJ, we have a Casino Control Commission and a Division of Gaming Enforcement, watching diligently over our industry.

Atlantic City's greatest need today is commercial air service from several southern cities, especially Atlanta, the world's busiest airport serving a metropolitan area of approximately 6 million residents, that currently offers 90 flights a day just to Las Vegas' McCarran Airport, 6 or 7 of which are nonstop.

Maybe, we can convince Mr. Icahn to invest in the airline industry!