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Pennsylvania is one step away from becoming the fourth state in the US with legal online poker and gambling.
The House actually took up the bill on Wednesday night, but procedure prevented it from coming up for a vote immediately.
The bill still must be signed by Gov. Tom Wolf to become law.
The bill would legalize online slot machines, online table games and online poker. Here’s the part of the bill that deals with “interactive gaming.”
PA Bill - Online Gambling Section
What else does the bill do? A lot:
Here’s the fiscal note on the bill.
The bill would allow for the state’s 12 existing casino licensees to acquire licenses to operate all forms of online gambling — poker, slots and table games — at a pricetag of $10 million.
After 90 days, licensees can pay $4 million for each of those licenses separately. After all that — if there are still licenses left — PA can license entities outside of existing casinos.
Tax rates on gaming revenue come in at:
Seeing as the bill got the approval of both the House and the Senate, conventional wisdom says Wolf will not upset the apple cart of funding the budget by vetoing this bill.
Wolf has long said he wanted recurring revenue out of any package, and out of gaming in particular. This is one of the few moving parts that does that, as much of the budget shortfall is being covered borrowing against the state’s tobacco settlement.
In short, it would be difficult to believe Wolf doesn’t approve the bill.
How long do we have to wait? Once it’s transmitted to the governor, he has ten days to sign or veto it. He could also do nothing and the bill would become law by his inaction.
The tax rate for different segments of online gambling is one part of the bill that will cause consternation in the implementation, should it become law.
Online table games and online poker are taxed at what appears to be a reasonable rate of 16 percent. But online slot machines will be taxed at 54 percent. That is by far the highest rate for online gambling anywhere in the world.
Why such a high rate? That’s the same rate at which land-based slots are taxed in the commonwealth.
Sources tell Online Poker Report that is because the bill would not have had enough support in the Senate at a tax rate that did not match that of land-based casinos.
This, of course, is a silly approach to a wholly different form of gaming that likely can’t withstand such a high tax rate. Some operators in the state may minimize their online slot offerings — or not offer them at all — because of that rate.
Operators can pay $10 million for a license to operate all forms of online gambling, or that can get licenses for slots, table games and poker piecemeal. How operators respond to that licensing structure is an issue that will be interesting to track.
Of course, this could end up having an effect on the bottom line of what PA is expecting revenue-wise from the gaming bill. If operators can’t make money with operating online slots, that’s going to end up affecting how much the state makes in tax receipts.
In that scenario, the high tax rate ends up being self defeating, and actually could create less revenue than a lower tax rate might.
Penn National, which operates Hollywood Casino, apparently is not very pleased with the bill.
The Reading Eagle reported that the company would consider suing to stop the bill:
D. Eric Schippers, vice president of public affairs, called the 470-page gambling bill that was part of a package to fund the budget an “ill-conceived plan that has been rushed through” and would particularly harm the company’s Hollywood Casino in Dauphin County near Harrisburg.
“We’re considering our legal options because this would have a uniquely punitive effect on our casino, more so than any other casino in the state,” Schippers said.
Mostly, PN appears to take issue with the satellite casinos that it says would impact it more than other casinos around the state. It would be a willing participant in online gambling.
In its earnings call on Thursday morning, Penn National and Schippers were a little less bombastic about the bill. The call was literally going on as the bill was being debated on the House floor.
Schippers said the bill has some “significant flaws,” including the 54 percent tax rate for slots, in the call. PN did not indicate it would definitely take the legal action suggested above.
“We’re going to have to weigh all our options, and we’re going to have to dissect the 970 pages and go from there,” Schippers said.