Oct. 30, 2017, was a day to celebrate for Pennsylvania. The new gambling expansion law meant Pennsylvania casino fans would soon have access to just about every form of regulated gambling.
After a long legislative road, Pennsylvania Gov. Tom Wolf signed the massive gambling expansion bill into law on Oct. 30, 2017. The bill greenlit an avalanche of new gaming, including online lottery, casino, and poker, Keno, VGTs, and mini-casinos. It also set up the potential for PA sports betting should the federal law change.
With so many different verticals, the potential for what the industry could bring in was high. However, there were elements of the law that had people concerned about revenue and other issues from the jump.
The tax rates, which came in at 54% for online slots, 34% for sports betting, and 16% for table games were some of the highest in the nation. Many thought they were prohibitively high and could stunt the industry before it started. Ditto the large licensing fees.
The credit agency Moodys even went on record with a credit downgrade on the state post gambling expansion.
Not even a week passed before the new gambling expansion law started bringing in money for the state. Valley Forge Casino was the first one to write a check. The property happily paid the state $1 million to eliminate its $10 amenity fee required as a Category 3 casino.
The next check for the state was much bigger. Because the gambling expansion law changed what is required to own a casino, the lawsuit keeping the Philadelphia Stadium Casino project from moving forward was dropped. With litigation out of the way, the project wrote a $75 million check to obtain a Category 2 slot license. Later, it would spend another $50 million on a table games license as well.
Mini-casinos were one of the first elements of gambling expansion to begin the application and regulation process. The short window for municipalities to opt out of hosting a mini-casino had many people angry. It would also come back to bite regulators later on down the road.
However, it was nothing but positivity after the bidding process began in January of 2018. The first license went for an astonishing $50 million. Hollywood Casino was the big bidder, but they were also one of the most vocal opponents of legalizing mini-casinos in the first place. In fact, they filed a lawsuit challenging mini-casino law just days after placing the bid.
The defining theme of the first few months of gambling expansion was paperwork. Each new vertical came with its own set of regulations, applications, and approvals. At the end of January, the application process for obtaining a video gambling terminal (VGT) license opened up. To date, none of these truck stop gambling machines have launched. The application process is still pending.
In early February, online gambling applications started appearing on the PA Gaming Control Board (PGCB) website. However, these were only for suppliers and manufacturers. Casinos did not begin applying to offer interactive gaming until April.
As the Pennsylvania Gaming Control Board (PGCB) tried to put together temporary regulations for PA online casinos, the PA casinos started to in-fight. Parx lobbied hard for a single-skin market. Given that they are the market leaders, it makes sense they wanted to limit their exposure to competing brands.
After that, 888 countered with the argument in favor of skins. In the end, PGCB sided with 888 and went with an unlimited skin plan. There were still plenty of other pieces of the puzzle that merited questioning though. The biggest question of all? Could these sky-high tax rates really work?
Pennsylvania’s gambling expansion law turned a regional industry into a national hotbed for casinos and gambling companies. So, it was only natural that there was a sudden interest in buying Pennsylvania casinos.
The first to sell was not surprising. Sands Bethlehem’s owner, Sands Corp, is run by the strongest anti-online gambling advocate in the country, Sheldon Adelson. after a near-miss sale to MGM, Sands reaped $1.3 billion for the casino from the Poarch Band of Creek Indians.
Once sports betting became an option, even more sales happened, including Churchill Downs’ acquisition of Presque Isle Downs and Boyd Gaming purchasing Valley Forge Casino.
The first product of gambling expansion to officially launch was the Pennsylvania Lottery’s monitor game Keno. A couple of weeks later, a second monitor game, Xpress Sports, debuted as well.
Regulated fantasy sports followed soon after the monitor games. While these smaller games got up and running, the application period for interactive gaming finally opened up. Interested casinos had a little over two months to decide if they wanted to pursue online casinos and online poker.
When lawmakers threw in the section of the gambling expansion bill about PA sports betting, it was purely theoretical. All it did was say if the federal Professional and Amateur Sports Protection Act (PASPA) fell, sports betting would be legal in the Keystone State.
On May 14, that happened. The Supreme Court ruled in favor of New Jersey in the years-long case challenging the federal ban on sports betting. Pennsylvania was one of several states that suddenly had legal regulated sports betting. Unfortunately, it would be one of the last states to actually launch it.
May was a busy month for all forms of gambling in Pennsylvania. But none made as much progress as the Pennsylvania Lottery. After the monitor games rollout, it followed up with the launch of online lottery instant games.
While the lottery continued to roll out product after product, PA Gaming Control Board continued to roll out more and more paperwork. With sports betting in play, PGCB quickly debuted temp regs for Pennsylvania sports betting. as well as applications for casinos seeking to offer sports betting. Unlike, interactive petitions, there was no deadline for interested sportsbooks to apply.
With no deadline, there was minimal interest at first. This again raised questions about the fees and taxes involved and if they were just too high to be worth the effort.
After the SCOTUS decision opened up the potential for sports betting in every state, stakes were high for gambling companies and gambling opponents. There was a national conversation between gaming companies and the sports leagues that trickled down to the state level in Pennsylvania.
There was a turf war at the state level too. The heavy hitters of the land-based casinos tried to block DFS companies from coming in. And, once again, the subject of skins was contentious. However, this time, PGCB sided with the casinos seeking to limit each casino to one.
After weeks with no action, the first PA interactive gaming application came in from Parx just two days before the deadline. When the application period closed on July 15, nine casinos paid $10 million for an all-in-one license to offer online slots, online table games, and online poker.
Other properties applied for piecemeal licenses, mostly omitting online poker. Others rescinded their poker application after the fact. And then there was Rivers Casino, which withdrew its application altogether. In the end, casinos claimed 27 of the 39 available licenses. When the process opened to entities outside PA, MGM Resorts and Golden Nugget NJ applied for five of the remaining licenses.
Six months after the auctions for mini-casino licenses began, Pennsylvania Gaming Control Board (PGCB) finally got its first set of plans. Each of the five licensees requested extensions to turn in plans, buying themselves an extra 90 days.
The first to actually get something in was surprisingly the casino that is not even built yet. Stadium Casino submitted plans to put a casino in Westmoreland Mall. This was the first of a couple of different mall locations and only the beginning of the arduous search for five suitable satellite casino locations.
It took almost three months for a casino to make a play for PA sports betting. While properties could have pushed to be up and running early in football season, casinos instead sat back. They were likely waiting to see if the $10 million fee and 34% tax rate would stand.
They did, so eventually, Hollywood Casino conceded the inevitable and turned in the first application for a sports betting license. The group partnered with William Hill to offer sports betting, but it would still be several months before the central PA casino accepted a bet.
Since there was no licensing process to slow it down, online lottery got up and running fairly quickly. Meanwhile, casinos were mired in paperwork to get online.
Needless to say, the resentment started brewing quickly. First, all 13 casino licensees sent a letter to Gov. Tom Wolf voicing concerns that the instant games bore too strong a resemblance to online slots. “In virtually every way imaginable, Lottery’s iLottery program mimics a casino operation,” the letter stated.
Tensions grew higher when PA Lottery unveiled its virtual sports product, Xpress Sports, which mimics real-life sports betting.
Nothing changed, so casinos upped the ante. Seven casinos filed a lawsuit against the state seeking to stop online lottery operations. As of now, the case is still open.
After Penn and Parx presented their sports betting plans to the PGCB, the group conditionally approved the two casinos for retail sportsbook launch. The conditions amounted to a couple of dozen fixes and, most notably, PGCB approval for their sports betting partners.
Both casinos thought they could launch in November. Penn met that goal, while Parx didn’t go live until January.
Meanwhile, the sports betting applicants jumped to four. However, as the two Rush Street properties dove into betting, Rivers Casino tapped out of an online casino. PGCB’s Susan Hensel focused on the bright side at G2E though, saying the high tax rates and fees were working since they had four applicants.
With only 10 casinos pursuing all three interactive licenses, eight pursuing online poker, and three skipping online altogether, there were plenty of PA online gaming licenses to spare.
So, when PGCB opened up the application process to qualified outside gambling entities (QGE) from other gambling jurisdictions, there were plenty of licenses to spare. Only two casinos applied for them though. MGM Resorts sought all three interactive gaming licenses. Golden Nugget NJ applied for online slots and table games. To date, PGCB approved them as QGEs. However, PGCB has not approved their interactive license applications yet.
Over a year after the gambling expansion law passed, there was still no retail or online sportsbook in Pennsylvania. When Hollywood Casino was ready to start offering sports betting, yet another problem arose. The casino still needed some employees to turn in fingerprints for gaming licenses.
Thankfully, the hiccup didn’t push back launch too far. The property began testing on Nov. 15, then launched full operations on Nov. 17. The PA sports betting market was officially underway, 384 days after gambling expansion passed and 188 days after the SCOTUS decision.
While PA sports betting struggled along with one sportsbook, PA Lottery kept firing on all cylinders. A December report from the Lottery indicated that expansion games like Keno and online lottery. had brought $150 million in sales thru the first seven months of action. From that, the Lottery generated around $23 million in revenue. By comparison, the first month of sports betting (albeit with one book opened only two weeks) generated $1.4 million in handle and $508,000 in revenue.
The size of the PA retail sports betting market tripled on Dec. 13 when SugarHouse Sportsbook and Rivers Sportsbook launched simultaneously. Unlike Hollywood, whose central location near Harrisburg worked to its disadvantage, these were the first two sportsbooks to open in major cities. With the rabid fanbase of the Pittsburgh betting scene and the Philadelphia sports market, bettors were ready to dive into the tail end of NFL action.
Meanwhile, Parx tried to get up and running before the end of the year. It couldn’t satisfy all the PGCB conditions though. As a result, it did not launch until January. When it opened Jan. 8 along with its off-track betting parlor, South Philadelphia Turf Club, the total sportsbooks jumped to five, three of which were in Philadelphia.
In seven months of operation, PA Lottery’s gambling expansion products fared well. So well, in fact, that they generated what PlayPennsylvania estimates is roughly $23 million in state profit by December.
Keno came out strong out of the gate, but Xpress Sports had less success. However, online lottery did well enough to garner the negative attention of PA casinos.
As the new lottery games continued to perform though, it became clear there was a common enemy between PA Lottery and PA casinos: illegal games of skill. These bar games are taking big chunks out of PA Lottery revenue. Estimates indicate scratch offs lost $25 million to the machines. Keno fares even worse. By its one-year anniversary in May 2019, it had taken in just one-third of projected profits.
Parx joined the sportsbook business just in time to get in on the last of the Philadelphia Eagles betting action. It also launched a second location at the same time. Parx’s off-track betting parlor, South Philadelphia Turf Club, has the most enviable location for a sportsbook in the city. It is located in the parking lot for the home venue of every major sports team.
That brought the total sportsbooks to four, three of which were located in the same metropolitan area. It also meant that all the Kambi-powered books were the first to market. Parx also brought the debut of a feature that helped Kambi separate themselves from the rest. The casino offered a Betslip Builder. The tool allowed bettors to look up odds in advance, put together a bet, and get a QR code to scan when they arrive at the betting counter.
Philadelphia got its fifth sportsbook in late January. Harrah’s Philadelphia opened up The Book in time for some Super Bowl betting. Unfortunately for PA sportsbooks, they befell the same fate of other sports betting markets in the US and failed to make much on the big game at all.
Not long after Harrah’s launched, sportsbooks started keeping an eye on a push to move sports betting tax revenue from the General Fund to income tax relief. As the sportsbooks struggled with only retail sportsbook operations, the last glimmer of hope that the steep 34% tax rate might be reduced was threatened by this measure. After all, once people get income tax relief, they are not exactly keen to give it up to help the big casinos.
When PGCB officials met with state lawmakers to discuss the new budget, money was not the headline to come out of discussions. Instead, casino fans everywhere were disappointed to hear it would be June or July before any online gambling launched in PA. Executive Director O’Toole explained that the Wire Act opinion slowed progress down. Parx CEO Anthony Ricci echoed the sentiment, citing server location as a problem tripping up several casinos’ interactive gaming plans. It would six more weeks before a more optimistic timeline for launch hit the news cycle.
For months, we knew Mohegan Sun Pocono and Mount Airy planned to be involved in PA sports betting. However, it took both casinos a full 10 months to get around to applying. Once the two properties do get PGCB approval, they will need to launch a retail sportsbook before regulators will greenlight online betting.
Mount Airy will work with The Stars Group to expand the BetStars brand from NJ into PA. Mohegan, meanwhile, will work with Kindred, which is best known for the European betting brand Unibet.
The two sides in the Wire Act debate met in a New Hampshire district court on April 11 to plead their cases to a judge. Despite a last-ditch effort by the DOJ to say they did not mean to include the lottery in its newest opinion, the judge still seemed to side with NH Lottery that the threat of prosecution was more than credible. He ordered the DOJ to turn in a thorough explanation of how the new opinion impacted state lotteries within two weeks.
Instead, the DOJ turned in a motion to dismiss, claiming that it has not decided on whether or not lotteries are exempt, but that the state had no legal standing to intervene. The move was seen largely as a smoke and mirrors attempt to avoid answering the question of if lotteries are impacted. The judge will rule on the motion in the coming weeks.
Years of waiting finally came to a halt at the April PGCB meeting. Executive Director O’Toole announced that online casinos would roll out en masse on July 15. That gave the 10 casinos planning to offer interactive roughly 3 months to get things in order. Not all will be ready by that date but expect at least a half-dozen quality options on the go-live day.
Sports betting apps did not get such a concrete date, but the PGCB did hint live testing on the first app was 2-3 weeks away. That timeline pits the first full week of May as the most likely time for PA bettors to finally place a bet online.
Just when it seemed like things were picking up in PA, the Department of Justice threw a wrench into the entire American gambling industry. The DOJ’s revised Wire Act opinion not only walked back the 2011 one, but it also opened up the possibility to prosecute just about every form of gambling, including state lottery.
The PA Lottery panicked, as did the NH Lottery, who sued the DOJ in a pending case. The state also took action. First, the state AG co-wrote a letter to the Trump administration. Then PA tried to be added as a plaintiff in the New Hampshire case. Elsewhere, the PGCB tried to play it cool at first. Later though, PGCB Executive Director Kevin O’Toole demanded an action plan from each casino on how they planned to be in compliance with the new opinion.