Pennsylvania Takes Critical Steps Toward Online Gambling Regulation With New Bill, Hearing

Pennsylvania took a major step toward regulation of online poker and casino games today with the formal introduction of SB 900.

The bill, sponsored by Senator Kim Ward and co-sponsored by Sen. Robert Tomlinson, Sen. Elder Vogel and Sen. Joseph Scarnati, effectively marks the entrance of the Pennsylvania Senate into the debate.

Ward and her co-sponsors are all credible, powerful voices on the issue of gaming in Pennsylvania and their buy-in is absolutely necessary if any effort to regulate online gambling is to bear fruit.

Track the bill here, full text here.

The effort in the Senate joins an ongoing attempt from Rep. John Payne in the House. Payne, the chairman of the House Gaming Oversight Committee, is advancing HB 649.

Payne has been a vocal proponent of regulation.

Payne’s bill addresses online alone, while Ward’s effort is a broader package of casino reforms that includes online regulation.

SB 900’s approach to online gambling

SB 900 addresses online gambling under Chapter 13B (Internet Gaming).

Some of the critical components are outlined below. The sections requiring in-person registration and detailing tax rate are certain to be the most controversial elements:

• Internet gaming permits (IGP) are limited to entities that hold a table games certificate and a slot machine license (Category 1 or 2).
• The PA Gaming Control Board has broad latitude to determine what games are acceptable to offer online.
• The Board has the ability to issue temporary regulations for online gambling, an ability that could accelerate launch.
• The Board has 120 days from bill taking effect to publish initial regulations.
• The Board also has a maximum of 120 days to rule on IGP applications.
• IGP permit fee is $10mm and is valid for 5 years. Renewal fee is $1mm. These appear to be fees and not tax prepayments.
• Game servers must be “maintained only within the physical location of a permittee’s facility.”
• Platform / software providers must acquire a separate license from the board.
• The bill does not appear to have any so-called “bad actor” provision.
• The bill does require in-person registration ((13)(a)(2): “Except as provided under paragraph (4), an individual must apply to establish an Internet gaming account at the premises of a permittee’s facility and must hold an active players club membership.”
• The exception to the in-person registration requirement: “The board shall promulgate regulations for an individual who resides at least 20 linear miles from a facility to allow the individual to become an account holder using the Internet website of a licensed gaming entity.”
• Tax rate is 54% on gross Internet gaming revenue.

Track the bill here, full text here.

Senate hearing tomorrow will help define debate

We’ll get a sense of the industry’s reaction to (and consensus on) Ward’s bill tomorrow at a hearing in front of the Senate Community, Economic and Recreational Development Committee.

That hearing is scheduled for 9am EST. You can view the agenda here and watch via live stream here.

Budget likely vehicle for regulation

While a number of bills regarding online gambling regulation are currently floating around Harrisburg, the general consensus remains that the budget process will ultimately serve as the path forward for regulation.

The deadline for Pennsylvania lawmakers to reach an accord on the state’s budget is the end of June, although there are procedural steps that could extend that deadline into July.

While online gambling regulation would do little in terms of generating tax revenue for the upcoming fiscal year, the licensing fees from regulated online gambling would be received within the year.

Those fees could total over $100mm for the state in bullish scenarios and closer to $50mm in bearish scenarios.

For an in-depth look at the broader revenue potential for regulated online gambling in pennsylvania, see this comprehensive report from OPR’s Robert DellaFave.