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Just Before Buying A Mini Casino, Penn National Sues Over Mini Casinos

Scales of justice

Penn National Gaming’s grumblings over mini-casino proximity and partiality to some casinos over others became an official stance Jan. 2 when Penn National sued Pennsylvania.

The PA casino operator, owner of Hollywood Casino, filed a 57-page lawsuit in federal court, claiming that the addition of 10 mini-casinos would result in “significant and unique” damage to its casino, U.S. News & World Report reported.

The lawsuit stated:

“There was no rational basis for this arbitrary and inequitable treatment of (Penn National), which violated (its) constitutional rights in multiple ways.”

Unlike other casinos, Penn National could be at a significant disadvantage with the 25-mile range of protection. This distance between a casino and a mini-casino could detract Penn National’s gamblers entirely, who the operator said travel farther than 25 miles to play at the casino.

Casinos in more populated areas have buffer zones that overlap and thus provide a wider range for their protection.

The law violates Penn National’s rights?

Penn National asserts in the lawsuit that the bill violates right to equal protection and due process, while also benefiting a particular person or entity.

To review: Penn National sued Democratic Gov. Tom Wolf and the Pennsylvania Gaming Control Board for these reasons:

  1. The federal courts should block the new Category 4 casino provisions because they treat existing operators unfairly and use “unconstitutional” language
  2. The mini-casinos place Penn National in a worse spot than the other existing PA casinos
  3. The law provides special treatment to Mount Airy Casino by excluding new casinos within the three surrounding counties. Mount Airy does provide a cut of revenue to these counties, but all casinos are required to share a portion of revenue with the local/host governments.

While the law was passed to fill part of the state’s large budget deficit, naysayers suggested that there was more than meets the eye. They also hold that some casinos benefit more from deals that were too good to pass up.

Penn National potentially in for a revenue dip

According to Penn Live, Penn National projected that if the mini-casinos were developed, Hollywood Casino could face a 14 percent decrease in revenue (from $245 million in 2016 to $210 million). Penn National argues that this change is roughly 6.5 times greater than the other existing casinos in PA.

Moreover, Penn National contended that these 10 new mini-casinos could effectively result in about $34 million in yearly revenue losses, reported Law360.

Pennsylvania remains No. 2 in the state for commercial casino gross revenues, behind Nevada. PA also dominated with $1.4 billion in tax revenue from gambling, more than any other state.

Penn National, Sands aren’t going to wait for their turn

Two additional lawsuits, one from Las Vegas Sands, and another from Penn National, focus on other portions of the gambling law, and were earlier in the game.

According to Online Poker Report, Penn National explored lawsuit options back in December for disparate tax treatment, making Hollywood Casino pay to fund to subsidize the marketing expenses of smaller casinos.

In the law, all casinos will pay a 54 percent tax rate for online slots as for machines in land-based casinos. Evidence indicated that marketing expenses and operating costs of online gambling make this rate infeasible.

“We know the tax rate on slot machines doesn’t make sense and will continue to be an advocate for a lower tax rate, but we haven’t ruled anything in or out,” Penn National Vice President Eric Schippers said.

Alternatively, Sands Casino Resort Bethlehem filed a similar suit on the grounds the taxation scheme of the new law was unfair, per the Morning Call. According to the Sands legal team, the expansion laws unfairly tax the bigger casinos to help support smaller, struggling properties like Presque Isle Downs and Mount Airy.

Penn National wants into the mini-casino game anyway

Since then, Penn National conversely secured the rights to a casino – potentially the first new mini-casino of 10 – near Pennsylvania’s southern border for $50.1 million.

“We have bid in a way that we think maximizes the opportunity to play defense with one eye towards offense,” Shippers said to CBS Local Philly.

This bid for the first mini-casino license gives operators up to 750 slot machines. The minimum bid sits at $7.5 million. A separate certificate for 30 table games rounds out at $2.5 million.

Katie Callahan

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Katie Callahan is a freelance journalist, blogger and copywriter who covers everything from poker, business, education and politics to construction, startups and cybersecurity.