Parsing Parx Casino's Resistance To Legalizing Online Gambling In Pennsylvania

Is Parx Casino Opposed To Online Gambling In Pennsylvania Or Is It Trying To Negotiate A Better Deal?

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Completely expected.

That was the reaction by online poker and online gambling supporters when Sands Bethlehem Casino expressed its opposition to Pennsylvania’s efforts to legalize online gambling.

What wasn’t expected were the reservations of Parx Casino and the increasingly strong opposition it has shown toward legalizing and regulating online gambling.

Parx’s opposition to PA online gambling: Same, but different

Parx references some of the same talking points as Las Vegas Sands. We can surmise that PA Sen. Robert Tomlinson, whose district includes Parx, was speaking for the casino when he circulated an anti-online gambling letter last November.

However, for the most part, Parx is focusing on the economics of online gambling and is abstaining from the moral objections Sands Chairman Sheldon Adelson harbors toward iGaming.

Parx’s most recent comments were its staunchest to date

At a hearing on March 7, Parx CEO Anthony Ricci relayed the company’s current position on online gambling to a joint committee comprising the Pennsylvania House Gaming Oversight Committee and the Senate Community, Economic & Recreational Development Committee (CERD).

The comments left little doubt about Parx’s position. But neither the verbal nor the written testimony from Parx brought up the potential for underage access or technological and regulatory concerns.

Instead, cannibalization was Ricci’s main concern. He stated the following:

“I find it impossible to assume that a brick-and-mortar casino paying 59 percent in taxes will not lose significant business to an online operator paying 15 percent in an open, unprotected market.”

It is clear that the net effect of these proposals [VGTs and online gambling] will be a reduction in gaming taxes for the Commonwealth, along with thousands of jobs and hundreds of millions of investment dollars by the brick and mortar operators.”

These comments seem pretty clear-cut. But Parx’s previous remarks and actions raise questions about how steadfast its opposition to online gambling really is.

Parx has an online gaming partner

The most obvious reason to question Parx’s opposition is the partnership with GAN that dates back to 2014.

GAN is already providing Parx with its social casino. In a press release from March 2015, GAN stated the partnership extends to real-money online gambling should Pennsylvania legalize the activity.

GAN’s statement read in part:

 “Throughout the multi-year term of the agreement, Parx Casino will rely exclusively on GameAccount Network’s Internet gaming system, deployed on-property in Pennsylvania, for all forms of real money Internet gaming (including poker, for the avoidance of doubt) in the event the State of Pennsylvania enacts legislation to regulate real money Internet gaming.”

Additionally, GAN applauded the Pennsylvania Legislature when HB 2150 passed the House in June 2016.

“This approval is a significant step in support of continued regulation of Internet gaming in America,” said GameAccount Network CEO Dermot Smurfit in a press announcement. “We are delighted to welcome yesterday’s approval of HB 2150 by The House of Representatives in Pennsylvania, long-anticipated to become America’s fourth state to regulate Internet casino gaming.”

Statements indicate Parx will be a reluctant participant

Though Parx has a partner that is excited about online gambling, the casino’s comments at hearings have been on the dour side.

Parx Chairman Bob Green made his first public comments about online gambling during an informal May 2014 hearing in front of the Pennsylvania House Democratic Policy Committee.

In his remarks, Green appeared skeptical of online gambling. But he indicated that if the state did legalize it, Parx would take part, both as an operator and in shaping the bill.

At a more formal June 2014 hearing in front of CERD, Green seemed more averse to online gambling. At that time he called for caution and a slow pace.

In a 2014 summary column, I wrote, “Don’t expect any type of early support from Green, but he will almost certainly play a role offering input and suggestions as legislation is crafted. Green will make sure Parx’s interests are reflected in any online gambling legislation that passes in PA.”

And this still seems to be the case. Green is OK with online gambling as long as it benefits Parx as much as, or likely more than, the state’s other casinos.

In effect, Parx wants online gambling legalization done on its terms or not at all.

Parx shifts more positive in 2015 with a caveat

In 2015, Green testified at yet another Pennsylvania online gambling hearing. Unlike during his previous testimony, he seemed more open to the idea of online gambling.

“We are not opposed to Internet [gaming]” Green told the committee, adding that “there must be safeguards.”

Around this same time, Parx offered a first look at what “its terms” might be. The casino started floating the idea of restricting online gambling to in-person registrations, which would disproportionately benefit Parx due to its location in a densely populated area of the state.

The idea of in-person registrations was eventually scrapped, but it helped put Parx’s subsequent “ideas” (like its calls for a high tax rate) in better context.

The Parx perspective

Parx is the top revenue-generating casino in Pennsylvania, and its only rival is Sands Bethlehem. Based on the experiences of New Jersey operators, that could change with online gambling.

In New Jersey, the land-based market leader by a country mile is Borgata. But Golden Nugget is leading the way when it comes to online revenue, generating $5 million a month.

Golden Nugget has shown that a small casino can compete with a big casino in the online arena. It seems as if Parx would like to eliminate this possibility in Pennsylvania. The best way to do that is to create a market that favors big brands or one with little upside due to high tax rates.

But both these ideas are non-starters, and both are capable of derailing online gambling before it even begins.

Skins likely to be next issue du jour

There is another issue Parx could use to rein in online gambling without crippling the industry: limiting skins, or how many online gambling brands a license holder can offer.

Penn National first broached the idea of limiting skins last year. This seems like a policy Parx would quickly latch onto once it abandons the idea of imposing an impossible-to-overcome tax rate.

By limiting skins, a casino would have to make do in the market on the strength of its own brand. By contrast, in New Jersey each casino has a sub-brand or brands. These help generate revenue and spread out advertising spend.

Borgata sub-brands

Golden Nugget sub-brands

  • Betfair
  • SugarHouse

Tropicana sub-brands

Resorts sub-brands

Caesars sub-brands

Once the reasons why a high tax rate would crush the industry are properly explained, I wouldn’t be surprised to see the conversation turn to the number of skins a licensee can offer.

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- 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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