The Foundation For Pennsylvania Gaming Revenue Looks Shaky As Lawmakers Consider Online Gambling

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We have an increasing amount of evidence that the Pennsylvania gaming industry is done growing, short of some sort of change.

What kind of change the legislature makes in its ongoing talks regarding a comprehensive gambling package — which could include online gambling — will help pave the road to the future of existing casinos.

What’s going on in PA casinos

At best, the industry, as currently situated, appears to have plateaued. At worst, it’s set for some of contraction.

There’s this fact that PA casinos are faced with: We now have six straight months of declining slot revenue.

That has been offset, to some extent, by table games. But the dropping year-over-year numbers for slots have to be concerning as the start of a larger trend.

There are a lot of variables at play in Pennsylvania, including, but not limited to:

  • The possibility of new casinos/gaming licenses in the commonwealth coming to fruition.
  • Increased regional competition in New York, Maryland and New Jersey.
  • Continued concerns over how to rectify the local share tax struck down by the state’s Supreme Court.

The biggest variable, however, is what the state legislature does to change its gambling laws in the short term.

The possible solutions for PA gaming

There are several plans for generating more revenue from gaming in the state. (By way of backstory, the state promised an additional $100 million to the current fiscal year’s budget from gambling. Gov. Tom Wolf included that money, plus another $150 million for FY 2017-2018.)

While generating new money is one thing, the gambling package’s impact on current casinos and revenue is another. Wolf has gone on record several times to say that any gambling expansion must mean new revenue, not move it from one place to another.

There are currently two potential methods on the table to attempt to generate more revenue: video gaming terminals (VGTs) in private establishments, and online gambling.

There is a debate going on in the state legislature about how much either of those things would accomplish Wolf’s mandate.

PA online gambling

Despite the protestations of the state’s two biggest casinos — Sands Bethlehem and Parx — the evidence all points to the idea that online gambling helps land-based casinos, and does not cannibalize existing revenue.

Legalization of PA online poker and casinos would result in new revenue for casinos and the states. Beyond that, most casinos agree that iGaming actually attracts new customers, and gets them and lapsed customers back in the doors of the land-based casinos.

VGTs in PA

Meanwhile, a proposal that would allow for VGTs around the state would have a less certain impact on the current casinos in PA. A similar proposal died last year, but has returned in 2017.

There is more worry from both casinos and government officials how VGTs might impact casinos.

There are already tens of thousands of VGTs operating in the state illegally, according to estimates. So the rationale is the law is just bringing these into the light and taxing them.

Still the possible expansion of VGTs raises the possibility of further erosion of slot revenue at casinos.

What will PA do?

While there has been a lot of talk in Pennsylvania about gaming — and three different bills put forward — the rubber has not yet met the road. There remains a chance that the state legalizes both VGTs and iGaming.

But what we do know is this: Adding online gambling or VGTs does not happen in a vacuum. And lawmakers should consider all the variables carefully before moving forward, including what these forms of gaming mean for the casinos already in operation.

- 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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