Online Gambling Debate In Pennsylvania Could Drag On For Months

Posted on January 16, 2017

[toc]The Pennsylvania State Legislature will get back to business on Jan. 23, and gaming will be one of the first orders of business. Just don’t expect the legislature to act on it until the spring.

The legislature is somewhat under the gun to find a solution to the local tax share issue dropped in its lap last September by the Pennsylvania Supreme Court. (The court gave the legislature 90 days to come up with a solution.)

At this point, the timing of the disbursements (which are made quarterly) means the legislature will have until at least April 15, and perhaps even longer, if its request for an extension is granted by the court.

And since online gambling — along with several other gaming reforms — is being tied to the local share fix, the legislature is likely going to decide online gambling’s fate at the same time it passes a solution that reinstates the tax payments to local communities.

PA Senate Minority Leader gets the ball rolling

The House passed a bill that would take care of all of these issues last session, but the Senate wanted to separate the local share tax from other gaming reforms being considered by the state. This, despite the state counting on the revenue from online gambling and the other proposals to help fund the budget.

However, it appears the Senate will take a more comprehensive approach in 2017.

Senate Minority Leader Jay Costa has already introduced the framework of a gambling reform bill that includes a solution to the local host tax share issue, the legalization of online gambling and daily fantasy sports, and a couple other gaming reforms.

According to Gambling Compliance, Costa expects his proposal to be discussed in the coming weeks. If it becomes the vehicle for legislation, he anticipates it will be acted on in April or May, following what will almost certainly be a robust debate over the specifics of the bill in both chambers.

One of the most likely changes would be to the tax rate Costa’s bill is calling for, a hefty 25 percent.

As Gambling Compliance’s Chris Krafcik reported, the 25 percent is more of a jumping-off point than a hard number, which is good news for Pennsylvania casinos interested in online gambling.

However, Senate Republicans (Republicans outnumber Democrats in the Senate 34 to 16) will likely offer their own proposal for fixing the local share tax and coming up with the $100 million in revenue for the budget.

And with pockets of opposition still present, the Senate Republican version may or may not include online gambling.

What happens when the ball shifts back to the House’s court?

If the Senate passes a bill sans online gambling, expect the House to amend the bill. That’s what occurred last October when the Senate sent over a temporary fix bill that would have kept the local share tax in place until a permanent solution could be enacted.

In October, the House not only made the Senate’s local share tax proposal permanent, it also added online gambling, daily fantasy sports, and a few additional reforms to the bill. The Senate didn’t act on the bill passed by the House.

As keen as it was to pass online gambling in 2016, the 2017 version of the House is not without its own possible issues.

A large group of representatives are in favor of authorizing video gaming terminals (VGTs) in Pennsylvania bars and social clubs. The VGT issue nearly derailed the gaming reform package in the House last summer, and with legislative turnover, it’s not clear how such an amendment (which is still thought to be a poison pill in the Senate) would fare this time around.

If a gaming reform bill is brought to the House floor, expect VGTs to make a return appearance and for supporters to be even more vocal.

Leadership change in the House

A second roadblock the House will face in legalizing online gambling is its own change in leadership.

Like the Senate CERD Committee — where State Senator Kim Ward was replaced as chair by Mario Scavello — the House Gaming Oversight Committee also has a new chair, Representative Scott Petri.

Petri is taking over for Representative John Payne, who retired in 2016. Payne was a strong supporter of gaming reforms and the driving force behind Pennsylvania’s online gambling efforts.

Petri has more of a mixed record on gaming, having voted for table game expansion in 2009, but against both gaming reform bills last year. It’s unclear if Petri’s nay votes were over online gambling or some other aspect of the bill.

Potential federal gambling ban could stall efforts

As if this wasn’t enough, the federal landscape has grown far murkier after attorney general nominee Jeff Sessions‘ comments to the Senate Judiciary Committee last week.

At the hearing, Sessions responded to a question from Senator Lindsey Graham by saying he would revisit the 2011 Department of Justice Office of Legal Counsel opinion that green-lighted states to legalize online gaming within their borders.

Pennsylvania lawmakers who oppose online gambling will likely point to the uncertain federal outlook, and lawmakers who are on the fence may opt for the “wait and see” approach.

Bottom line

Essentially, Pennsylvania is right back where it was last summer, with the notable addition of the local tax share problem and an uncertain federal landscape added to the mix.

  • The framework for a gaming reform bill is in place;
  • The state is counting on the revenue from online gambling and other reforms to help fund the budget;
  • The House will have a contentious debate over authorizing VGTs in bars; and
  • It’s unclear where the Senate stands on the issue of online gambling.
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Steve Ruddock

Steve Ruddock has been a well-known writer and analyst in the world of regulated US online gambling. He contributes to a number of online publications focused on online poker and online casino, including OnlinePokerReport.com, PlayNJ.com, and many others.

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