A Second Bill Outlines A Radically Different Path Forward For Pennsylvania Online Gambling

Last week State Representative John Payne introduced HB 649, a bill that would legalize online gambling in the Keystone State.

This week it was State Representative Nick Miccarelli’s turn with HB 695, a reintroduction of an online gambling bill he first floated last year (as HB 2297), that seeks to legalize online poker in Pennsylvania.

Get more information on HB 695 and  sign up for bill alerts at PALegis.

All of this is occurring as the Pennsylvania House Gaming Oversight Committee prepares for a hearing on Internet gambling on April 16th.

Similar, yet very different, approaches to online gambling in PA

On its surface Miccarelli’s bill (HB 695) looks similar to Payne’s:

• Both would make iGaming licenses available exclusively to current gaming licensees in the state.
• Both charge $5 million for the initial licensing fee, and a 14% tax on gross gaming revenue.
• Both bills also seek to crackdown on offshore and illegal online gaming sites.

That’s where the similarities end.

Miccarelli goes poker-only

As noted above, Miccarelli’s bill will be poker-only. Payne’s was originally believed to be poker-only, until it was recently amended to correct the definitions, which turned it into a comprehensive online gambling bill.

“Poker is unlike banking games in many respects that make it best for the introduction of interactive gaming, Miccarelli stated in his memorandum on the bill.

“Poker operators are not participants in the games and are indifferent as to the outcome.”

Bad actors back on the table

Another notable difference between the two bills is that unlike Payne’s bill, Miccarelli’s will includes strict bad actor / tainted asset language, which seems to be designed to prohibit PokerStars from applying for or receiving a license.

HB 695 is clear on so-called bad actors:

The board may not issue a license to or otherwise find suitable any prospective licensee or significant vendor, or key interactive gaming employee of a licensee or significant vender, who has:

 (i) accepted or made available wagers on interactive games using the Internet from persons located in the United States after December 31, 2006, unless licensed by a Federal or State authority to engage in such activity; or

(ii) facilitated or otherwise provided services with respect to wagers or interactive games using the Internet involving persons located in the United States for a person described in subparagraph (i), if such activities or services would cause such person to be considered a significant vendor if those activities or services were provided with respect to interactive games pursuant to this chapter, and if such person acted with knowledge of the fact that such wagers or interactive games involved persons located in the United States.

Additionally, HB 695 apparently removes any chance that Amaya’s purchase of PokerStars would scrub them from the Bad Actor list.

The bill prohibits “Purchased or acquired, directly or indirectly, in whole or in significant part, a third party described in paragraph (1) or will use that third party or a covered asset in connection with interactive gaming.”

HB 695 considers the following to be potentially “tainted assets”:

 (1) any trademark, trade name, service mark or similar intellectual property

(2) any database or customer list of individuals residing in the United States… with or through an Internet website or operator not licensed by a Federal or State authority…;

(3) any derivative of a database or customer list described in paragraph (2);

(4) software, including any derivative, update or customization of such software, or hardware relating to the management, administration, development, testing or control of the Internet website, the interactive games or wagers offered through the website or the operator.

Payne’s bill will be the better fit for most

The two bills present two very different paths for online gambling expansion in Pennsylvania, but Payne’s bill will likely appeal to more lawmakers and find more support among iGaming advocates.

Miccarelli’s bill will likely struggle to gain traction for two reasons:

• By excluding online casino games HB 695 eliminates some 75% of potential revenue.
• Opposition to PokerStars has waned over the past six months, with California tribes and Caesars Entertainment softening their stance on bad actor clauses.

Payne’s bill currently has 20 cosponsors (interestingly, Representative Miccarelli was one of the cosponsors) while Miccarelli’s bill has just four cosponsors.

This gap is not based on Payne’s bill being introduced ahead of Miccarelli’s; Payne began seeking out cosponsors on February 13th, while Miccarelli sent a cosponsor memorandum out a week earlier, on February 6th.

It’s all about the revenue

New Jersey’s online gambling industry produced $123 million in Gross Gaming Revenue in 2014, but only $29 million of that amount was generated at the online poker tables.

If Pennsylvania produced similar numbers in Year 1, the difference in the state’s take (14%) would be:

• Payne’s comprehensive iGaming bill: $17.2 million
• Miccarelli’s poker-only bill: $4 million

If, as Miccarelli states, the purpose of the bill is to help reduce property taxes in the state, $4 million isn’t going to be enough of a lure for lawmakers to take a controversial vote on expanding gambling.

Winds of change

As important as the revenue numbers are, Miccarelli’s bill has a more serious problem, as it is effectively running into the wind.

By excluding Amaya/PokerStars HB 695 not only loses the potential lobbying dollars of PokerStars, but it will also lose the support of Caesars Entertainment, who has partnered with PokerStars in an effort to advance online gambling in the U.S., and in doing so withdrawn their previous calls for Bad Actor/Tainted Asset clauses.

Image credit: Grisha Bruev / Shutterstock.com.