PA Gaming Review: High Taxes, Wire Act Case Challenge Future Of Online Gambling

Written By Kevin Shelly on January 15, 2020 - Last Updated on April 21, 2022
Taxes and Wire Act case threaten online gambling future

The NFL wagering lull is upon us, but there’s still news on the sports betting front in Pennsylvania.

High tax rates are crimping online casino expansion, but PA online sportsbooks remain a hot ticket.

Oh, and that pesky Wire Act is still kicking around.

Wind Creek finds a sports betting partner in Betfred

Bethlehem-based Wind Creek is poised to enter the PA sports betting market after getting a conditional approval to partner with Betfred, a privately owned retail bookmaker with 1,600 locations in the United Kingdom.

Gamblers should appreciate the role of luck in the company’s founding. Apparently, a successful bet on England to win the 1966 World Cup helped staked the company.

The British company has partnered with SCCG Management in Las Vegas to represent them in US markets.

The Pennsylvania Gaming Control Board (PGCB) still needs a final sign-off, and Wind Creek, which had operated as Sands Bethlehem, will also need to secure a sports betting license. After that, it could move to add a retail sportsbook, potentially an online one. Online casino and online poker may also be in the cards, though no concrete plans have been disclosed.

A Wind Creek sportsbook launch would mean 13 retail operators in the state. It could also become the ninth online sportsbook if that step follows.

Online gambling tax rates high in PA, compared with some others

The tax rates for online gambling are literally and figuratively all over the map in the US. PAOnlineCasino did a deep and charted out the rates for online casinos and online sportsbook jurisdictions across the country.

Nine states, including PA and NJ, have online sports betting. The lowest tax rates among the online sportsbook jurisdictions are Nevada and Iowa, with 6.75%.

The highest, Rhode Island and Delaware, use a “revenue sharing” model and include a cut for the state vendor. Their rates stand at 83% and 62.5%, respectively.

PA’s online sportsbook market has proven appealing to operators despite its hefty 36% tax rate on revenue. The growing popularity of sports betting, along with a large population, are major reasons PA’s sports betting market continues to grow.

Just three states have online casinos — Delaware, Pennsylvania, and New Jersey — with regulated online betting on slotspoker, and table games.

Tax rates for online casino operations run from as low as 15% in New Jersey to 62.5% in Delaware. PA online casinos have varying tax rates depending on the vertical. PA’s rates are 54% for online slots, but 16% for online poker and online table games.

Wire Act still winding its way through court

The Office of Legislative Counsel (OLC) opinion from the Department of Justice, which sought to expand the scope of the Wire Act to cover all forms of gambling, was denied in June. But the case is far from over.

The DOJ appealed that New Hampshire District Court ruling and has now submitted an appeal brief to the First Circuit court. Another brief from Sheldon Adelson-backed groups have chimed in as well as the process drags on.

The New Hampshire Lottery has until Feb. 26 to submit its brief in response.

No matter what the First Circuit finds, there is a high likelihood that a Supreme Court petition will follow. The fact that the DOJ’s arguments focus largely on the legality of New Hampshire taking them to court, rather than on the merits of the Wire Act opinion itself, could be a good sign for online gambling proponents.

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Kevin Shelly

Kevin C. Shelly is an award-winning career journalist who has spent most of his career in South Jersey. He's the former assistant city editor of The Press of Atlantic City, where he covered the casino industry and Atlantic City government as a reporter. He was also an investigative, narrative enterprise, and features reporter for Gannett’s Courier-Post.

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