PA Online Gambling Closer Than It's Ever Been

Online Gambling Stays In The Picture As Pennsylvania’s Expansion Package Comes Into Focus

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With a Monday deadline looming, Pennsylvania lawmakers appear to be closing in on an agreement over a gambling expansion package that would help to close the state’s multi-billion-dollar budget gap.

“Satellite” casinos swapped in for VGTs

According to a report from PennLive, the controversial issue of video gaming terminals (VGTs) is officially off the table.

To fill the revenue hole that the absence of VGTs creates, lawmakers are considering a more focused form of expansion: So-called “satellite” casinos.

While no official proposals have been released, satellite casinos would likely be:

  • Capped at game limits far below the state’s main casinos.
  • Located a significant distance from the primary markets for existing casinos.
  • Operated by current land-based license holders.

Per PennLive, the current plan is to authorize up to 10 satellites, with license fees running from $7.5mm to $10mm.

Can casinos get on the same page?

One risk of introducing a new concept at this stage in the game: It may prove difficult to craft an approach that gets a sufficient amount of casino stakeholders on board.

A key issue will revolve around location – identifying locations that are both viable but also not a threat to existing operators.

Lawmakers have apparently floated the idea of a 25 mile buffer zone, a concept that was immediately rejected by Penn National.

“Given the size of the expansion under consideration and the fact that more than 50 percent of our customers come from beyond a 25-mile radius, this could have a devastating impact on our business,” Eric Schippers, senior vice president for public affairs, told PennLive.

Tax rates for online land in the middle

Sources close to the situation cautioned that nearly everything remains in flux.

But the emerging consensus around the issue of tax rates for online appears to be in the range of 24 percent to 26 percent for slots, and 16 percent to 20 percent for table games and poker.

That’s a fair bit steeper than New Jersey’s 17.5 percent rate, but also a significant drop from the proposed 54 percent rate long championed by powerful interests in the Pennsylvania Senate.

Rates in those ranges would provide the industry with a challenging, but not insurmountable, hurdle to profitability.

Read more about the revenue and tax potential for regulated online gambling in Pennsylvania.

Unresolved issues remain

Where we still haven’t heard firm word is on two other key issues that are understood to be in play:

  • License fee: We’ve seen a variety of proposals ranging from $5mm for casino only plus another $5mm for poker, to $8mm for both, to $10mm for both (with no option to purchase ala carte).
  • Number of skins: The ability of licensees to operate multiple brands under a single license, including brands owned by other companies, has been critical to the success of NJ’s online casino market. But the issue has been a contentious one in Pennsylvania, where several operators would like to curtail the ability of out-of-state brands to compete.

The timeline from here

Deadlines in Pennsylvania are generally treated more figuratively than literally by lawmakers.

With that caveat in place, lawmakers are (at least in concept) facing a Monday deadline to deliver a revenue package to pay for a recently-passed budget.

Per the Associated Press, lawmakers will be heading to work Sunday for public sessions and private negotiations.

What else will be authorized?

Without a published bill, it’s impossible to say for sure. But other elements currently included in the expansion package are understood to be:

- Chris is the publisher of Grove also serves as a consultant to various stakeholders in the regulated market for online gambling in the United States.
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