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Pennsylvania casinos gobbled up 28 of the 39 available interactive gaming permits during two exclusive application periods. For the state, the 11 remaining on the table represent tens of millions of dollars in unrealized revenue.
With several land-based licensees eschewing a digital presence, the PA Gaming Control Board made the unclaimed permits available to qualified gaming entities (QGEs) without a presence in the state.
The appetite works in the opposite direction, too.
As their home state inches toward the launch of sports betting and online gambling, several Pennsylvania casinos have begun targeting the neighboring market. The goal is to increase presence and reach, and to strategically position oneself should a national wave of legalization materialize.
As David Schwartz, director of the UNLV Center for Gaming Research, told the Associated Press:
“Regional diversification is a sound strategy, particularly in the online arena. In this market, convenience is a major factor, so the ability to gamble at home rather than traveling across state lines is a major factor. In that case, licensure in multiple jurisdictions makes a great deal of sense.”
That holds especially true when those jurisdictions are connected by bridge.
Pennsylvania casinos targeting the NJ market have a test case to learn from: SugarHouse Casino.
Owners Rush Street Interactive launched their SugarHouse online casino platform in 2016 under Golden Nugget’s license. More recently, SugarHouse Sportsbook launched among the earliest NJ online sports betting platforms, working in partnership with Monmouth Park.
Based on its results, the company made a good decision.
According to Eilers & Krejcik Gaming estimates, SugarHouse holds an eight-percent share of the booming NJ online casino market. That’s second-best among the non-native brands — behind only Betfair Casino — and ahead of Caesars Online Casino and Harrah’s Online Casino.
Considering the proximity of its brick-and-mortar casino to NJ, it shouldn’t be too surprising. Still, the cross-border success of SugarHouse has other PA casinos taking note.
Churchill Downs, for example, recently confirmed plans to launch NJ online gambling this year. And as noted above, at least two Atlantic City casinos have designs on entering the PA market in the coming months.
Operators in either state have two real paths across the border. But Pennsylvania casinos interested in New Jersey have it pretty easy compared to those looking back across the Delaware River in the other direction.
Following regulatory approval, online gambling licensees can enter into partnerships with outside entities, following the lead of SugarHouse-Golden Nugget.
Pennsylvania, however, has saddled these sub-brands — or “skins” — with a number of restrictions. They must prominently identify the main license holder on their website and advertising, as well as operate as a subdomain of the licensee’s URL.
Suffice it to say, these restrictions are less than ideal. Add in the burdensome cost of doing business in the Commonwealth, and it’s easy to see why NJ casinos aren’t lining up to become online skins of their PA counterparts.
Pennsylvania’s hefty up-front fees and high tax rate even scared some of its own casinos away from online gambling.
Those leftovers created a second path to market, though, allowing New Jersey casinos to apply for standalone online gambling permits under the QGE provision. That’s something PA casinos cannot do in NJ.
It’s a costly path, of course. Permits for online slots, online table games and online poker cost $4 million apiece, and tax rates range from 16 to 54 percent. But there are some branding and logistical perks that come with the price tag.
Applying for an online gambling as a QGE provides substantially more control for an out-of-state operator than it would have as a skin.