Pennsylvania goes all in on online gambling

Pennsylvania will soon become the 4th US state to legalize online gambling and only the 3rd alongside, New Jersey and Delaware where residents will be able to play online casino games from locally licensed operators.

Early last week H271 was passed by the Pennsylvania House and Governor Tom Wolf wasted no time in signing the bill into law. It’ll allow local and foreign operators to market online casino and poker games to residents of Pennsylvania state.

The regulator is expected to move quickly to get things up and running sooner rather than later. There’s obviously a degree of fiscal urgency here so there shouldn’t be too many delays. Pennsylvania will also have the advantage of having watched and learned from New Jersey and Delware’s i-gaming experiments and being able to borrow what has worked, and avoid the pitfalls (in theory anyway).

Applying this advantage, the bill allows for interstate play (particularly important for a bigger pool of poker players), subject of course to agreement from partnering states. Apparently discussions are already well underway New Jersey’s regulator to this end.

The licensing structure is interesting. Instead of licenses to offer all forms of sanctioned games, ‘Interactive Gaming Certificates‘ will be issued by game category…

• 12 certificates for online poker;
• 12 certificates for table games; and
• 12 certificates for slots.

Operators can apply to purchase 1, 2, or all 3 of these, at the hefty fee of $4 million a pop. This is discounted for local land based casino license holders who can buy all 3 for $10 million if they move fast (offer expires after 90 days).

Depending on take-up, and mix of applicants (local versus non-local…as mentioned above outsiders are welcome to apply), somewhere from $100 to (a maximum of) $144 million will be raised up front. This is much more than New Jersey, Delaware or Nevada took in up-front license fees. They all expected to rake in big gaming revenue taxes but the reality fell well short of expectations. Pennsylvania don’t want to fall into this trap.

A trap they may still fall into is over-taxing. They will be levying taxes on GGR (gross gaming revenue) at the rates of 16% for poker, 16% for table games and 54% slots. The last rate is considered by analysts to be too high, and likely to suppress operator marketing spend, the ability to compete with ‘black market’ operators and therefore overall revenue/tax take.

This has been the experience in Delaware (29.4%, 29.4%, 43.5%), while the lower rates in New Jersey (17.5% across the board) have seen strong revenue growth (after a slow start).

We might see more US based live dealers doing their thing in the not too distant future!