PA Lawmakers Make Strong Call For Regulating Online Gambling

Key Pennsylvania Lawmakers: “It Makes No Sense To Leave Online Gaming Unregulated”

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A strong op-ed out of Pennsylvania today signals positive momentum for regulation, as two key members of the Gaming Oversight Committee in the House called for the state to pass an online gambling bill.

The piece, posted on PennLive.com, is signed by Rep. John Payne and Rep. Nick Kotik.

In an interesting narrative tactic (one that could quickly become a trope in the Mid-Atlantic if successful), Payne and Kotik frame the issue as analogous to Pennsylvania’s decision to authorize land-based casinos:

When Pennsylvania approved casino-style gambling in 2004, the state took advantage of a known, available revenue stream that was being lost to outside entities.

At the time, Pennsylvanians were crossing state lines for New Jersey casinos, and hundreds of millions of dollars in potential taxes and revenue were lost each year.

Something similar can be said about online gaming: it’s happening here in our state, but because it is not regulated Pennsylvania loses out on millions of dollars in tax revenue that instead goes into the pockets of offshore illegal gambling websites.

Read more here.

The op-ed leans heavily on recent polling commissioned by Caesars that shows broad support for regulation – assuming critical consumer protection measures are part of the process.

Economic upside, bi-partisan support and the belief that an online product helps to support the land-based product (a view recently hammered home by Penn National) are other points stressed by Payne and Kotik.

“It makes no sense to leave online gaming unregulated, and sit idly while the state loses out on this income and players are unprotected,” the two conclude.

Read our in-depth analysis of the market potential for regulated online gambling in Pennsylvania.

Payne and Kotik’s online gambling bill

Payne and Kotik are co-sponsors of HB649, broadly considered to be the primary legislative tool for achieving regulation in Pennsylvania.

Full text of bill is available here; read the co-sponsorship memoranda here and sign up for alerts on HB649 here.

Other details of the bill:

  • Minimum age: 21.
  • Eligible players: Must be able to be located within borders of state.
  • Tax rate: 14% of “daily gross interactive gaming revenue, which shall be payable to the department on a weekly basis and shall be based upon gross interactive gaming revenue for the previous week.”
  • Bad actors: No explicit bad actor clause constructed around UIGEA or similar cutoff date.
  • License fee: $5m for operators, $1m for “significant vendors.”
  • Eligible licensees: Current gaming license holders.
  • Interstate player pooling: The bill anticipates such arrangements via the definition of  “Interactive gaming agreement” – “A negotiated agreement between the Commonwealth and one or more of the states or territories of the United States in which interactive gaming is legally authorized that permits persons located in the other jurisdictions to place wagers on interactive games with licensees in this Commonwealth or to permit persons located in this Commonwealth to place wagers on interactive games with licensees in the other jurisdictions, or both.”
  • Affiliates: Will need a “significant vendor” license to receive rev share or utilizes certain customer lists to promote regulated online gambling in Pennsylvania.

While Pennsylvania’s casino operators are less divided that, say, California’s, there’s far from universal consensus on the issue of regulation.

Obviously, Sheldon Adelson’s Sands Bethlehem opposes regulation. And while the remainder of casinos have generally signaled support for regulation, a number of issues are still capable of fostering division:

  • Tax rate.
  • Number of skins.
  • Who can operate consumer-facing brands.

It’s also important to remember that online could easily become something of a bargaining chip in the larger negotiations over concessions on the land-based side that the casino industry is seeking from lawmakers.

Bill could prove useful during budget debate

Payne’s bill comes as Pennsylvania lawmakers approach the annual challenge of making the state’s budgetary numbers conform to fiscal reality.

While online gambling wouldn’t produce any revenue – at least not any material revenue – from operations in the year to come, lawmakers could find a viable revenue well to draw from in upfront license fees.

Such fees could net the state upwards of $50mm, although some (if not all) of that amount would effectively be a prepayment on taxes due in future years.

Steve Ruddock offered a lengthier take on how the process could come together in a recent article here.

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Chris Grove
- Chris is the publisher of OnlinePokerReport.com. Grove also serves as a consultant to various stakeholders in the regulated market for online gambling in the United States.