[toc]Just days after a large gambling expansion bill passed in both the Senate and the House, it is now law. Gov. Tom Wolf signed the bill Monday morning. His signature officially makes Pennsylvania the fourth state to offer legal and regulated online gambling.
The scope of this gambling expansion package is huge. It goes far beyond just online poker and online casinos. With so many elements to cover, we put together a resource to answer all of your questions.
A white paper on what Pennsylvania gains from new law
The white paper is called “Pennsylvania Moves to Regulate Online Gambling.” Chris Grove wrote the piece, which is is a joint effort between PlayPennsylvania and Online Poker Report.
Grove is a gambling industry analyst with extensive experience in regulate online gambling markets. He puts that expertise to use looking at a few key points about the new law:
- How much money it should net the state, both in the short and long term
- Exactly what is now legal in the Keystone State
- Trouble areas of the legislation
- Forecasting what the market will look like in PA
- Looking ahead to possible interstate compacts
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High tax rates and scope of bill make forecasting difficult
The white paper makes several predictions. All are based on the bill and experiences in more mature online gambling states, like New Jersey. However, Grove does concede these numbers are just conjecture, not set in stone.
“Pennsylvania’s unique structure makes it difficult to forecast revenues with precision, but the successes in other states suggest that online gambling will be a significant and reliable revenue driver for years to come.”
“Pennsylvania’s high tax rate will force operators to cut back on marketing and promotion, and could dissuade some consumers from leaving black market sites. It is certainly possible that lawmakers will need to revisit the tax rate in order to ensure a market that works best for both the commonwealth and the casino industry that has contributed billions to Pennsylvania’s coffers.”
One element of the bill that worries many insiders is the incredibly high tax rate. At 54 percent, it is basically the highest slot tax in the country, live or online. In fact, the tax rates average out to be over twice the rate New Jersey currently uses.
Within our work, we propose a different tax rate of 20 percent. The five-year projections show that, if things go well in Pennsylvania, after five years the industry will generate around $300 million annually.
It may sound counterintuitive, but a 20 percent rate would theoretically lead to the industry hitting the $300 million benchmark right around Year 3. By Year 5, the industry would probably be worth over $400 million. See the chart below:
Law is not perfect, but analysis does show this will bring money to PA
Once you check out the rest of our research, you’ll see that this gambling package does have its flaws. Nonetheless, it will brings hundreds of millions of dollars to the state, including $120 million in up front licensing fees.
Now, with the new laws in place, we can only wait and see how much changes in the meantime. We wll continue to keep everyone updated, but in the meantime, this resource is a great starting place to understand what to expect in Pennsylvania going forward.
