Pennsylvania Legislature has passed online casino, poker and dfs

Pennsylvania House And Senate Both Pass Gaming Expansion Package

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PA senate online gaming gambling
Pennsylvania is finally on its way to becoming the fourth US state with legal online gambling.

The PA Senate passed a bill to legalize online poker, online casino games, daily fantasy sports, and sports betting on Wednesday evening.

The bill, H 271, was sent to the House, also on Wednesday night. After two hours of debate on Wednesday and around two hours more on Thursday, the House passed the bill on Thursday morning.

What the amended PA gaming bill includes

After months of back and forth on tax rates, license fees, VGTs, mini casinos, and other details, the bill the Senate passed permits:

  • Online poker
  • Online casino games (table games and slots)
  • Daily fantasy sports
  • Legal sports betting if federal ban falls (online and land-based)
  • Tablet gaming in certain areas at authorized airports
  • Video gambling terminals (VGTs) at qualified truck stops
  • 10 mini casinos
  • Alterations to Category 3 casinos (removes membership fee, permits more slots – requires one-time fee)
  • Online lottery sales

 

Tax rates and licensing fees

Tax rates and license fees have been major bones of contention for months.

After a 54 percent tax rate on slots was floated earlier this year, more recently the figure settled into a more-reasonable mid-twenties range. By comparison, the effective tax rate in New Jersey on online slots is 17.5 percent.

The amended version of H 271 returns to that steep 54 percent number. PA would tax the products as follows:

  • Online table games and poker: 14% + 2% local share = 16%
  • Online slots: 52% + 2% local share = 54%
  • Sports betting: 34% + 2% local share = 36%
  • Daily fantasy sports: 15%

Distinct licenses for each product

H 271 establishes three separate licenses – one for online slots, one for house-banked games, and a third for online poker and other peer-to-peer online games.

Operators would be required to purchase a license for each vertical they intend to offer. For $10 million, a license that includes all three can be purchased by existing PA casino operators, but this must be done within the first 90 days of license availability. Separately, each license carries a $4 million price tag.

At the 120-day mark, companies from outside of Pennsylvania will be permitted to apply for licensure. The cost is also $4 million per license.

The pitfalls of high taxation

In the months that the PA Legislature has been debating online gambling regulation, industry experts have decried the lofty 54-percent tax rate on slots, and for good reason. At that rate, operators will have little left over for marketing, customer acquisition, promotions, and other business-building tools. This could hamper the growth of the industry and thus depress the amount of tax revenue the state is able to generate.

PA already taxes its land-based slots more heavily than any other state in the nation, and only recently have PA casinos managed to break a lengthy slide in slots revenue.

What’s next?

H 271 now heads to Gov. Tom Wolf. We predict that Wolf will sign the bill, as there is immense pressure to fund the budget and the governor has shown little opposition to gambling expansion in the past.

Wolf now has 10 days to sign the bill. If he does not sign it within 10 days, it will automatically become law.

Staff

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