Pennsylvania is one of the most likely candidates to become the fourth state in the US to offer legal online poker or casino games.
Read on for the latest news and analysis of the developing situation for regulated online gambling in PA. Scroll below for a synopsis of the status quo and background on efforts to bring legal gambling sites to Pennsylvania.
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One of Pennsylvania's leading casino operators makes it clear that setting the online tax rate too high will end regulated online gambling before it starts.
Rumblings of support for exorbitant tax rates with the potential to doom online gambling in Pennsylvania aren't only coming out of the Senate.
A floated proposal to put regulated online gambling in Pennsylvania under the state lottery risks tax revenue, consumer protection, and threatens casinos.
Pennsylvania is considering a number of gambling provisions as it tries to find immediate revenue, but only online gambling meets all the requirements.
Pennsylvania politicians face failing their constituents if they ignore international evidence and press on with a 54 percent tax rate for online gambling.
Pennsylvania has taken multiple looks at online gambling, and gaming reform in general, during the 2017 session.
Gaming reform remains a contentious issue in the state, with legislators divided on what reforms to legalize and how to implement them.
Among the most hot topic debates are:
In the coming weeks and months, Pennsylvania lawmakers are expected to debate these issues, and (hopefully) reach some sort of consensus on gaming reform and the pressing local share tax issue.
There are currently 12 land-based casinos in Pennsylvania. Only one — Sands Bethlehem — will almost definitely abstain from online gambling. Or at least it will, unless it is acquired by MGM Resorts.
The rest are likely to either be enthusiastic or reluctant participants in the industry. Some, such as Mount Airy Casino, Parx Casino, and Valley Forge have already forged online gambling partnerships.
Combine these fees with the proposed $2 million fee charged to significant vendors, and it’s easy to see the industry filling the $100 million earmarked by Gov. Tom Wolf for gaming reform in FY 2016/17. Internal projections have the final estimated upfront licensing fees at $126 million.
But the real question is: Once they collect fees, how much tax revenue will the industry generate on a recurring basis?
The best means of answering that question is to look at the performance of the regulated NJ online gambling market.
In its first full year (2014), the NJ industry generated nearly $123 million in gross gaming revenue. Using this figure as a baseline, and accounting for PA’s larger population, we arrive at an estimate of $176 million. At a 20 percent tax rate, that’s $35.2 million in first-year tax revenue.
In reality, that figure stands to be much higher. Improvements in geolocation technology, payment processing, and other areas will provide Pennsylvania operators with luxuries that weren’t available in NJ at launch.
Accounting for this, it wouldn’t surprise if Pennsylvania’s first year was nearly as strong as NJ’s third (2016).
NJ generated nearly $197 million in online gambling revenue for 2016. If PA enjoys nearly as much success in its first year, online gambling revenue will top $230 million, rising to $364 million by year five.
Of course all efforts may be for naught if lawmakers insist on a 54 percent tax rate for slots, which could kill the industry before it finds its footing.
Pennsylvania has a booming land-based casino economy, but rising competition from neighboring states threatens to put a dent in the industry’s margins. The state is trying to remain competitive.
Any online poker bill that makes its way to the Governor’s desk is likely include online casino games and other reforms. Although the presence of multiple reforms and the recent tax rate debate complicates the equation, there’s still a fair chance Pennsylvania players will be playing on legal online poker sites within the next 12 – 18 months.
Presumably, yes. All bills to date have included online casino.
It’s worth noting that online casino is a much bigger revenue generator in NJ than online poker games. It accounts for over 85 percent of annual industry revenue.
Under the provisions of all proposed legislation, land-based casinos would operate online poker and casino sites. License holders would have to pay a fee between $8 – 10 million, and significant vendors a $2 million fee.
The possibility is there. Certainly, New Jersey would likely be interested in forging an interstate online poker network with Pennsylvania. PA is roughly 1.5 times the size of its east coast neighbor, and will presumably make use of some of the same operators.
You won’t have to hold residence in Pennsylvania to play at the state’s regulated sites. However you will have to be physically located within its borders.
For a time, it looked like Pennsylvania was a slam dunk to legalize online gambling in 2016. Those hopes were dashed when the Senate failed to reach a consensus before the last scheduled session day.
After a strong but ultimately fruitless push in 2015, the latest legislative effort started off with more of a whimper than a bang. It wasn’t until late May that the wheels began turning. That’s when the House of Representatives considered two gaming reform amendments. This amendments, if passed, would become part of a separate gaming bill, HB 1925.
The first, A7622, packaged online poker/casino and other reforms alongside the inclusion of video gaming terminals (VGTs) at non-casino locations. The other, A7622, was a mirror of Rep. John Payne‘s omnibus gaming reform bill (HB 649) from the year prior, and did not include VGTs.
Confusion ruled the day, and both amendments were soundly defeated. (Although the margin of defeat for A7622 was significantly smaller.)
Momentum shifted to the side of online gambling proponents in late June. That’s when a new, multifaceted gaming reform bill that linked online gambling, daily fantasy sports, and other gaming reforms emerged in the House.
An amendment to allow VGTs nearly derailed the bill, failing by a vote of 118-79. But a last-minute amendment by Rep. Rosita Youngblood (the aptly titled Youngblood Amendment) calling for the exclusion of VGTs, turned the tide. The amendment ultimately passed 115-80.
In the week that followed, HB 2150 saw a whirlwind of activity. This culminated in the bill clearing a vote in the House.
In July, Governor Tom Wolf allowed a $1.3 billion revenue package that earmarked $100 million for gaming reform, to become law. All indications pointed to licensing fees from online gambling operators would be counted on to fill the gap.
Unfortunately, the Senate signaled that it would not be addressing online gambling legislation until the fall. In the interim, the legislature raised taxes on casino table games, while online gambling advocates spoke up about the need to pass legislation sooner rather than later.
Online gambling first appeared on the legislature’s radar in April 2013, when State Rep. Tina Davis introduced HB 1235. The bill would permit both online poker and casino within the commonwealth. It also set operator licensing fees at $5 million, and called for a 28 percent tax rate on gross gaming revenue.
By June of this year, a general lack of interest among lawmakers resulted in the House Committee on Gaming Oversight chair Tina Pickett recommending the bill be stalled until 2015. But it wouldn’t take nearly that long for the ball to begin rolling again.
In December 2013, the Senate took a mammoth step forward when it passed SR 273. The resolution tasked Econsult Solutions with conducting a study that would measure the economic impact of online gambling.
The results were published in May 2014, and were cause for optimism. Econsult estimated that online gambling would yield $68 million in first year tax revenue, and $110 million annually going forward. It also concluded that online gambling would have a complementary impact on land-based casino revenue.
Granted, the revenue estimates are always taken with a massive grain of salt, as they presumed a blended 20 percent tax rate on online poker and 60 percent on slots.
In either case, the results proved favorable enough for State Sen. Edwin Erickson to introduce a new online gambling bill (SB 1386) in June 2014. There was little action on that particular bill, but it set the stage for what would prove a very active 2015 session.
Rep. John Payne introduced HB 649 in February 2015. Payne viewed online gambling as part of the solution to the state’s “projected $2 billion budget shortfall.” He backed his beliefs by championing online gambling legislation efforts for the next two years.
In the spring of 2015, two competing bills emerged in the House. One, HB 920, was from Tina Davis, a near replica of her 2013 bill. The other, Nick Miccarelli‘s HB 695, was an online poker only bill. Of the three, Payne’s became the most likely candidate for serious consideration.
Ahead of the June 30 budget deadline, there was the introduction of a fourth bill — this one from the State Sen. Kim Ward. SB 900 was significant in that it marked the Senate’s official entry into the conversation. Unfortunately, SB 900 was radically different than HB 649. It called for a 54 percent tax rate, a $10 million operator licensing fee, in-person registration, and the exclusion of Category 3 casinos.
Suffice it to say, the rigid nature of SB 900 would make it so license holders would have trouble operating profitably.
The Senate held two hearings on online gambling in June 2015. After that little was heard on the topic until the fall. In October, Pennsylvania was still in the midst of a budget stalemate. When Gov. Tom Wolf’s tax plan saw defeat in the House, he became willing to discuss new revenue sources, online gambling among them.
The following month, the GO committee passed HB 649 by a margin of 18-8. This marked the first time an online gambling bill passed a vote in Pennsylvania. But by then, an omnibus package was attached to the bill. It called for slot machines at non-casino venues and airports, Category 3 casino expansion, and a report on daily fantasy sports, among other reforms.
It’s believed that the controversial elements of the bill, namely allowing video gaming terminals at non-casino locations, was one of the reasons efforts stalled in 2015.
Pennsylvania is currently home to 12 land-based casinos. Together they create the second-largest gambling economy in the United States. Hard to believe that just over a decade ago the industry was non-existent.
The ball got rolling in 2004, when lawmakers authorized 61,000 slot machines at existing horse tracks, resorts and slot parlors. Concurrently, the state set up the Pennsylvania Gaming Control Board. The Board would issue up to 14 licenses, and provide regulatory oversight for the nascent industry.
On December 20, 2006, six licenses for existing horse racing venues and five more for standalone casino were awarded. Of the 11 licensed operators, 10 opened or expanded their facilities by 2010. And by 2011, two Category 3 casinos — Valley Force Casino Resort and Lady Luck Casino Nemacolin — had also flipped over the open sign.
The industry took a monumental step forward in early 2010, with the legalization of table games — including poker — at slots casinos. By July 2010, top earners Sands Bethlehem, Parx Casino, and Harrah’s Chester (later rebranded as Harrah’s Philadelphia) had all instituted table games.
It was then that land-based casino revenue really began to take off, growing from $1.62 billion in 2008, to $2.49 billion in 2010, and $3.16 billion in 2012.