Penn National: Out-Of-State Operators Should Not Offer Branded Skins

Online Gambling Branding Dispute Complicates An Already Complex Situation In Pennsylvania

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Fasten your seat belts, ladies and gentlemen. This is going to be a bumpy ride.

In an interview with Gambling Compliance (paywall), Penn National Senior Vice President of Government Relations Eric Schippers voiced an idea that has been floated around in Pennsylvania for quite some time: that the state “should not allow out-of-state online operators to offer branded skins through partnerships with local casinos.”

According to Schippers, overseas online operators are the ones pushing for licensees to have the option to host multiple skins. Schippers told Gambling Compliance, these skins “will only seek to derive as much revenue as possible and have no incentive to drive business back to brick-and-mortar casinos, as the [state’s] existing gaming companies will do.”

Limiting skins to land-based casino brands is not an illegitimate argument, but Schippers entered the realm of hyperbole and anti-online gambling fear-mongering when he claimed that allowing non-Pennsylvania based online gambling brands would result in the cannibalization of “thousands of jobs” at Pennsylvania casinos.

Schippers’ comments were made as the state’s legislature considers legalizing online gambling, and simultaneously tries to fix tax language in the state’s Gaming Act of 2004 that the state’s Supreme Court recently found unconstitutional.

These two issues could be joined together.

Pushback was swift

Schippers’ claims were rebuffed in the same Gambling Compliance column.

Thomas Winter, the senior vice president of online gambling for Golden Nugget told Gambling Compliance his company’s experience with Betfair — which operates a New Jersey online gambling site under the Golden Nugget’s licence — runs counter to Penn National’s claims.

Winter characterized Golden Nugget’s relationship with Betfair as being “very positive for Golden Nugget.”

Amaya, which owns PokerStars, also pushed back against these claims.

“Pennsylvania consumers and taxpayers will pay the price of flawed protectionist measures proposed by special interests who refuse to acknowledge the progress and opportunity that technology is bringing to every industry,” said Amaya’s Vice President of Corporate Communications Eric Hollreiser.

Hollreiser went on to say:

“Across the globe and across the Delaware River, casinos are embracing digital innovators like PokerStars to reach new audiences and drive customers from digital to bricks-and-mortar storefronts.  The evidence is clear. Casinos are benefiting from operation in the state, including our partner Resorts Casino Hotel. 

“Pennsylvania has real budget struggles; online gaming, led by experienced operators like PokerStars, can raise revenue, fund education and create jobs without raising taxes. It would be a shame and loss for Pennsylvania not to see these benefits.”

During a September 2015 hearing in front of New York Senate Racing, Gaming and Wagering Committee, Borgata (which operates Borgata, partypoker and Pala branded skins under its New Jersey license) submitted testimony stating online gambling had “no measurable impact on land-based operations” and “cross-over play and non-gaming revenue increase from new, online customers.”

In New Jersey, there is no evidence non-local online gambling brands cannibalize local brands, nor are they detrimental to land-based casinos.

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A possible compromise?

Gambling Compliance spoke to Harrisburg lobbying sources last week, who suggested that “the legislature may attempt to strike a balance between the two bills by allowing each casino to operate up to three branded skins.”

The two bills referred to are HB 2150, which was passed by the House in June and allows for numerous branded skins, and Senate Bill 900, which restricts branding to the “licensed gaming entity.”

Legislative staffers currently working on online gambling declined further comment.

In the scenario where casinos are limited to three brands apiece, it places a tight cap on the number of out-of-state operators that can offer branded skins, without shutting them out completely.

In New Jersey, land-based casinos can operate up to five online brands, although most have limited their reach to three.

A case of good news and bad news

Penn National’s position certainly complicates things, but on the bright side, it also signifies that the bill is under serious consideration.

There tends to be a flurry of late activity when bills of this type are being considered, as stakeholders try to shape the legislation to their advantage. If the bill was not on the legislature’s radar, it’s doubtful Penn National would have proposed limiting skins at this time.

I suspect this will not be the last proposed change Pennsylvania considers.

It will be important to keep an eye on the following:

  1. Will any of these proposals be adopted?
  2. Will these proposals muddy the waters and cause the bill to stall in the legislature?
  3. Can the changes turn current supporters into opponents?

As for Penn National, its online gambling partner is still a mystery. But considering its position on this issue, it’s highly unlikely to be one of the B2B/B2C companies like PokerStars, 888, and partypoker.

More likely, Penn National will look to one of the B2B companies in the space, such as IGT, Scientific Games, NYX, or GAN.

- Steve covers nearly every angle of online poker in his job as a full-time freelance poker writer. His primary focus for OPR is the developing legal and legislative picture for regulated US online poker and gambling.
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