There are a total of 39 online gambling licenses available for different segments of the online poker and casino industry in the state. Conventional wisdom says not all of these will be snagged up for a variety of reasons.
That leaves a variety of questions:
Short of being privy to the decision-making inside the state’s 13 casinos, these are difficult questions to answer, and they come down to a “best guess.” Still, we know a lot about what PA online casinos are planning.
If we’re placing a sports-betting “over-under” on how many applications there will for online gambling licenses, we would make the “under” on 38.5 a prohibitive favorite.
First, let’s explain how the licenses work. At the start of the application process, any current casino licensee in the state can apply for the ability to offer online gambling. And for the first 90 days, casinos can only apply for “full” licenses, in which casinos can offer all three types of online gambling available in the state — slots, table games and poker. Each is treated differently, in terms of licensure and in how the state taxes revenue from each.
These full licenses cost $10 million, and there are in practice, 13 of them available. It seems unlikely all 13 will be gobbled up. Some may balk at the cost to offer online slots, which are taxed at a rate of 54 percent of revenue. Others may have no interest in poker, which has been an underwhelming product in a ring-fenced New Jersey market after five years.
After that initial period, casinos can pick which of those three types of games they want to offer — “a la carte” — at a cost of $4 million each. Some quick math: If you’re planning on offering all three types of games, then the full license is a no-brainer, as it comes at a savings of $2 million over the piecemeal licenses.
If a casino has no desire to run online poker now or in the future, for example, it may just skip the online poker license and get the other two. If you think you can’t profit on slot machines at the high tax rate, then you might skip that and just get the table games license. You can also get a license now and run things like slots at break-even or a loss and hope that tax rate is revisited in the future.
Despite the problems with the licensing procedure and the tax framework, there is still a very good chance that a lot of the aforementioned licenses are claimed.
Some casinos might choose to play defense, claiming the licenses so someone else can’t have them. They might also look at the licenses as an investment in the future. They may be a bad investment now or in the short-term, but that could change in the future.
For instance, the market for online poker isn’t the best right now. But New Jersey is on the cusp of sharing player pools with Nevada and Delaware, giving us real multistate poker for the first time. Add in PA and perhaps a few more states, and suddenly the market for online poker starts looking more appealing.
Still, there is no way all 13 casino licensees will try to get into online poker. Quite simply, even in a rosy future, there is not a need for 13 different poker networks, nor would that be sustainable. The right number is probably more like less than half of that. There are three major networks in New Jersey (four, if you count the very small Pala Poker).
There are also pretty good odds at least someone passes on online slots, and just tries to do table games, although it’s perhaps equally likely that all of these get snatched up.
Again, this is a guessing game, but here are some candidates (not an exhaustive list):
The gaming law opens up online gambling beyond PA casinos if they don’t grab all the licenses.
After 120 days, if any licenses are available, “qualified gaming entities” can submit an application for the remaining licenses at a cost of $4 million per category.
That’s obviously a pretty vague phrase. It implies that you have to be licensed in some other jurisdiction, certainly. But the swath of companies it encompasses is pretty wide.
But if you’re not a PA casino, and you want a foothold in the state for expanded online gambling, you’ll probably be willing to stomach the tax rates and the licensing fee to get in. The potential list is pretty long, but the front-runners are companies that are already involved in the New Jersey market.
Of course how many licenses will be available — and how they might be handed out — will be a mystery for awhile. But it’s just one more moving part in the puzzle in the future of PA online casinos.