New Jersey Internet gambling revenue estimates overblown: Fitch

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Online gambling alone won't save struggling Atlantic City casinos, and the revenues it generates could fall far short of projections by Gov. Chris Christie, Fitch Ratings said on Tuesday.

Fitch estimates that casinos would generate up to $300 million in revenues from online gambling next year, ramping up to as much as $750 million within several years.

Those estimates are well below Christie's projected $1.2 billion over the next year, Fitch said.

(Watch: Caseagainst online gambling)

Gambling in NJ: 'Great' for the state?
Gambling in NJ: 'Great' for the state?

New Jersey became the third and most populous U.S. state to launch Internet gaming when state regulators approved 13 websites run by six Atlantic City casino operators to go live to the public at midnight on Monday.

Casino revenues have dropped from more than $5 billion in 2006 to about $2.8 billion now, due mostly to competition from neighboring states.

(Read more: Risky business: Caesars exec bets on online gaming)

That has been bad news for the city, which collects less in taxes when casinos make less money. The city's coffers have also been strained as casinos have challenged—and won—big tax appeals, with the city having to borrow to pay them off.

"Although some market participants will benefit, New Jersey online gambling is not going to be the savior of the [Atlantic City] casino market," Fitch analysts in a note. "In some ways, it will be detrimental because it has kept brick and mortar supply in the market when the level of demand dictates that some supply should be removed."

(Read more: Why New York casinos could crush Atlantic City)