The Bottom Line: Online Gambling Would Generate New Revenue For PA

PA Online Gambling Would Not Be The ‘Zero-Sum Game’ That Gov. Wolf Fears

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Pennsylvania lawmakers talked extensively — for more than four hours — about online gambling on Tuesday in a joint committee hearing involving both the House and Senate.

That hearing brought to the forefront some of the sticking points in iGaming legalization that are of concern — namely, the proposed tax rate for online gambling and the fear that it would cannibalize land-based gaming revenue.

Gov. Tom Wolf echoed some of those concerns, albeit in a more generic way, in an interview on Tuesday.

What Wolf said about PA gambling

Wolf is counting on new revenue from gambling. That much is clear from his proposed budget.

What he doesn’t want to have happen? Create changes to gambling law that don’t help the state’s bottom line in the midst of a budget crisis.

Here is what he told PennLive:

Wolf said his only principle is making sure the state isn’t locked into a “zero-sum game,” where revenue from new games is offset by losses in existing streams.

“If all we’re doing is shifting revenue from one form of gambling… to another form of gambling and the state comes out of this flurry of activity with no new revenue that’s not acceptable. Why do it?” the governor said.

“I’m open to conversations about what evidence people have as to how any particular alternative form of gambling is not going to violate my guiding principle…. There are a lot of opinions out there.”

What exactly is Wolf talking about?

Playing a shell game with gambling revenue is the concern here from Wolf. Just moving the revenue from one bucket to another would be bad for the state, and even worse for existing gaming facilities.

Is online gambling one of the things he is talking about here? Probably not.

He is counting on more than $250 million in new revenue from gambling over the course of the current and succeeding fiscal years. There’s almost no way to arrive at that figure without online gambling.

Wolf is aware of the issue of online gambling and has not expressed such concerns.

Of course, there were some very loud voices saying online gambling would create the kind of dynamic in yesterday’s legislative hearing. That includes the CEO of Parx Casino in Philadelphia and lawmakers from Parx’s district and that of Sands Bethlehem, another casino opposed to iGaming.

Sands’ opposition is well-known; its owner Sheldon Adelson has long been opposed to online gambling legalization.

Why is Parx throwing online gambling under the bus?

The opposition from Parx is new, however, as the casino is now staunchly opposed to online gambling.

CEO Anthony Ricci went on the record saying online gambling would hurt land-based casinos in PA. Of course, 10 of the state’s other 12 casinos vehemently disagree with this estimation.

The reasons for Parx going from neutral to against iGaming are not known.

However, Parx has a vested interest in the status quo. It leads all casinos in the state in terms of revenue.

And a legal battle over a fourth casino in the Philadelphia area — this one in the stadium district — is likely coming to a close sooner rather than later. Parx’s parent company has interest in that yet-to-be-built casino.

While Parx may not actually think that online gambling would cannibalize revenue, iGaming regulation would muddy the waters for a casino that already likes its position in the existing casino market.

It is very possible Wolf is talking about VGTs

Wolf might be talking about another possible “expansion”: video gaming terminals in private establishments around the state, such as clubs and taverns.

Casinos stand pretty much in lockstep against VGTs. They argue the legalization of VGTs would give their patrons a reason not to visit their facilities.

This would be an example of the type of “money moving” that Wolf could be talking about. Money leaving the casinos and moving to VGTs would not be a net gain to the state.

Online gambling in PA is not going to cannibalize revenue

Despite yesterday’s protestations, it’s not really in the realm of possibility that online gambling would hurt land-based casinos. In fact, there’s far more evidence that the exact opposite would occur.

Caesars provided testimony to that effect yesterday.

Analysis from our own Robert DellaFave says the industry would generate more than $400 million for the state over five years. That runs along the lines of testimony from the Innovation Group.

The Innovation Group also undertook an analysis of the prospective PA online gambling market that was even more bullish. (You can download it here.)

It also showed the trend for New Jersey with iGaming, and if it had not legalized it:

Innovation also agreed in its testimony that concerns over cannibalization are unfounded:

Overall, more survey participants stated their spend and frequency to land based casinos would increase with the ability to play online than those who said they would spend and visit less.

The bottom line: Online gambling would make money for PA.

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- Dustin Gouker has been a sports journalist for more than 15 years, working as a reporter, editor and designer -- including stops at The Washington Post and the D.C. Examiner. He has played poker recreationally for his entire adult life and has written about poker since 2008.
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