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The Pennsylvania Gaming Control Board (PGCB) met on Wednesday. One of the items on the agenda was a consent agreement with MGM Resorts International.
Although it wasn’t a licensing hearing, it is at least a step in that direction. It looks as if the regulator is almost ready to issue licenses to the two out-of-state Qualified Gaming Entities (QGEs) who have applied for them: MGM and Golden Nugget. That is what will allow both companies to offer an online casino in Pennsylvania.
Asked about this during the meeting, Chief Enforcement Counsel Cyrus Pitre stated that he anticipates that licensing for MGM will go forward “in the very near future, hopefully by the next board meeting.”
Meanwhile, MGM has announced a second round of investment for Roar Digital, the subsidiary it created with GVC Holdings to manage its online gaming and sports betting operations. This additional capital will help fuel what should be a rapid expansion into new states over the next year or so.
The reason for MGM’s inclusion in this week’s meeting was a relatively minor problem. However, it was one that the regulator had a legal obligation to address before being able to consider MGM’s application.
The issue relates to an unnamed former PGCB employee who was hired by MGM. Pennsylvania law states that no company can apply for a license while employing someone who was involved with licensing-related work at the PGCB within the previous two years. MGM had accidentally hired the person in question prior to that two-year period expiring.
It was an easy enough issue to fix. MGM agreed to pay $87,500 in fines and administrative fees, and to provide better training for its hiring staff to avoid a repeat occurrence. With that now taken care of, the PGCB can move forward with issuing MGM the necessary licenses, assuming it pays the fine promptly.
There was no mention of Golden Nugget, which applied shortly after MGM. Unless it has legal issues of its own, however, it seems likely that if MGM receives its license soon, so will Golden Nugget.
Pennsylvania’s online gaming law allowed for up to 13 licenses in each of three categories: table games, slots and poker. That’s the same as the number of eligible brick-and-mortar operators in the state, including Cordish Gaming, whose casinos are still under construction.
The licenses are expensive, however, at $4 million apiece or $10 million for the trio, so they didn’t sell out. After the local casinos had their chance to apply, a total of 11 licenses were left unclaimed. There were three each for table games and slots, plus five for poker.
In October 2018, the PGCB began taking applications for the remaining licenses from the so-called QGEs. This term is, in effect, a fancy way of saying “land-based companies operating in good standing in other states.”
Anticipating a rush, the PGCB limited applications for these to a two-week window. It also established a lottery system in case there were more applicants than licenses.
This proved unnecessary, however; only Golden Nugget and MGM stepped forward, requesting a total of five licenses between them. Golden Nugget opted for table games and slots only, while MGM shelled out the additional $2 million for the package deal, including poker.
Aside from Cordish, these QGEs represent the only applicants that have yet to launch their products. Cordish has said its Live! Online Casino is coming this fall, even before its brick-and-mortar properties finally open.
Once MGM and Golden Nugget follow suit, the stage in Pennsylvania will be fully set. Any further entries into the market will have to be in the form of additional skins joining an existing license unless the PGCB elects to reopen applications.
MGM is a well-known brand in the live casino space. There are six casinos bearing its name in the US and three abroad. It also owns several more that operate under other names.
The company launched its BetMGM Casino and sports betting online brand last year to begin competing in the newly legal online sports betting space. Prior to that, MGM’s online operations had been focused on its online casino in New Jersey. That launched in 2017, following the company’s acquisition of the Borgata Casino the year prior. It initially used the now-defunct playMGM brand.
Like playMGM before it, BetMGM operates in partnership with online gambling giant GVC Holdings. GVC also operated the Borgata’s online poker and casino products prior to it being purchased. Along with the change in branding, MGM created a new company, Roar Digital, as a joint investment with GVC. The two thereby extended their relationship to include all of MGM’s sports betting and iGaming operations in other states as well.
Despite its recognizable name, it has been a bit slower to expand online than some of its rivals. The need to purchase the Borgata made it a late entry in New Jersey. Even so, it now claims to hold an 18% market share in that state. Its lack of a Pennsylvania property has similarly been a thorn in its side.
Fortunately, the situation should be different when online casinos in Michigan go live along with sports betting. That was originally scheduled for early 2021, though it now looks like it could be as soon as this fall. As the owner of the MGM Grand Detroit, one of the city’s three commercial casinos, it should be among the first, rather than the last, operators to launch in that state.
Likewise, there’s no reason to expect a delay in West Virginia, which also anticipates its first online casinos early next year. Its online sportsbook launched there in January in partnership with The Greenbrier. Having that toehold should make a subsequent online casino launch much easier.
Factoring in MGM’s retail presence and online sportsbooks, it currently operates in seven states. It expects to add four more before the year is out and has market access agreements lined up for eight on top of that. In total, then, its future plans extend to 19 states, which between them contain about half the US population.
Rapid expansion, therefore, looks like it’s in the cards for MGM in the near future. To that end, it also announced this week a new round of funding for Roar Digital. MGM and GVC initially invested a combined $200 million in the company. To this, their shareholders have now agreed to add an additional $250 million. It’s been aggressive in quickly pushing into new markets, including being one of the early entrants with an online Colorado sportsbook.
So far, Roar has spent only $80 million of its initial funds. With this second round, then, it will have $370 million of investment capital on hand to make a splash when the time comes to launch in Pennsylvania and elsewhere.