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The Pennsylvania legislature passed the bill in what could best be described as a harried fashion, despite being several years in the making. As such, even though the bill is hundreds of pages, there is a stunning lack of detail when it comes to certain components of the legislation.
One specific area that lacks clarity is the number of skins (customer-facing branded websites) online gambling operators will be allowed to offer. That decision is being left up to the Pennsylvania Gaming Control Board.
Chatter coming out of the Keystone State indicates the PGCB is considering limiting the number of skins to one per licensee.
According to a source involved in the drafting of earlier versions of the law, the intention was to follow New Jersey’s lead by not restricting skins.
Limiting skins would be a mistake, a mistake that would be amplified by the egregious online slot tax rate with which the legislature handicapped the industry.
With the combination of these two factors Pennsylvania’s online gambling industry will almost certainly underperform.
Limiting skins is nothing more than a limit on competition and innovation. Other than as a protectionist measure, there isn’t a legitimate argument for limiting skins.
Limiting online gambling websites puts the state’s smaller casinos at a disadvantage that could only justify the eight-figure licensing fee and high tax rates if they could offset the cost by licensing skins.
Even if they can justify the up-front licensing cost, smaller casinos will find themselves at a significant disadvantage when it comes to marketing.
In effect, limiting skins would pick winners and losers in the Pennsylvania market, virtually handing the market to the state’s largest land-based casino operators.
The market for New Jersey online casinos makes the case for not limiting skins.
The state’s law limits each licensee to five brands, but there isn’t a restriction on skins, and that model is working extremely well. So why would Pennsylvania even entertain the idea of doing anything differently?
New Jersey currently has five online gambling licensees with 17 skins:
More importantly, time and time again, whenever new brands have launched, they’ve expanded the overall market. Online casinos in the state now generate in excess of $20 million in revenue each month.
Bottom line: The New Jersey online gambling industry has right-sized itself to the market without the state limiting the number of skins.
By allowing skins, Pennsylvania’s online gambling market would be hyper-competitive, and competition benefits consumers.
More operators means more libraries of content and more reasons for companies to continue to add new games and innovate.
Competition in New Jersey has led to:
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It’s not only good for competition and the consumer, multiple skins will also maximize revenue for the state.
By fostering competition, each new operator will expand the market and create incremental revenue.
There will also be additional licensing fees, in-state jobs created and marketing dollars spent in local markets.
The bottom line is this: There is no benefit to significantly limiting the number of online gambling skins in PA.