Pennsylvania Now Has Even More Reason To Believe Online Gambling Will Be A Boon

Written By Robert DellaFave on April 17, 2017 - Last Updated on October 17, 2022
Pennsylvania gambling online revenue

[toc]If Pennsylvania legislators have any lingering doubt that online gambling will generate significant and recurrent tax revenue for the state, the recent performance of the New Jersey online gambling market should alleviate those fears.

That’s because NJ online casinos continue to grow unabated. The industry sets new records on a near monthly basis, and is playing a key role in the revitalization of the state’s land-based casino industry.

New Jersey online casinos wrap up best quarter to date

In the first quarter of 2017, New Jersey’s 14 online casinos and three online poker networks combined to generate $59.3 million in gross gaming revenue.

The sites paid approximately $8.9 million in tax revenue to the state.

The market capped off the quarter with its strongest month to date, generating a record-breaking $21.75 million in March. It was the first time that the industry broke the $20 million barrier.

Revenue is up 32.1 percent over Q1 2016, and a blistering 68.7 percent over the same quarter in 2015. Given this, it’s fairly safe to say that after three-and-a-half years, the New Jersey market still hasn’t come close to reaching full maturity.

Very conservatively assuming that the industry does not grow at all throughout the following three quarters, it will still have generated nearly $240 million in gross gaming revenue and $36 million in tax revenue for 2017.

More realistically, it will follow a somewhat tempered version of last year’s growth trajectory. This will result in annual revenue of $260-$270 million.

Normalizing this figure for Pennsylvania yields a result of $350-$363 million, which is in tune with our fifth year projections for the prospective PA online gambling industry. It’s also a good $20-$30 million above what we estimate for Year Four (NJ is currently in Y4).

Atlantic City rebound continues

With each passing month, it’s becoming harder and harder for PA legislators to argue that online gambling will cannibalize its brick and mortar casino industry.

In New Jersey, the vertical continues to have a complementary impact on land-based revenue. For March, Atlantic City casinos generated $200.1 million in gross gaming revenue, up 6.74 percent over the same month in 2016.

This, despite the closure of Trump Taj Mahal last October. Factor in online gambling, and Atlantic City revenue is up 9.31 percent year-over-year, to $221.9 million.

Pennsylvania’s land-based casino is beginning to struggle. Before long, it may be desperately in need of an infusion. If New Jersey market trends are any indicator, online gambling may be just what the doctor ordered.

The path to $375 million

In a recent interview with Online Poker Report, Pennsylvania Rep. George Dunbar indicated that the House has “sent over a budget bill that includes $375 million from gambling expansions” for fiscal 2017/18. Fiscal 2017/18 begins on July 1.

Dunbar is also the sponsor of an omnibus gaming reform bill, HB 392.

Included among these expansions are the regulation of daily fantasy sports, tablet gaming at airports, and the legalization of online gambling.

At first glance, $375 million comes off as an overly optimistic projection. This seems especially true given that DFS and airport gaming aren’t tremendous money-makers in states where they are taxed.

But upon close examination, there’s reason to suspect that $375 million is at least a possibility.

According to our internal projection, Pennsylvania stands to generate $126 million from upfront online gambling license fees alone.

We also see online gambling generating $46 million in tax revenue (assuming a 20 percent tax rate) during its first 12 months. Find our full projections for PA online gambling revenue here.

If online gambling legislation passes soon and sites get up and running in a hurry, then $172 million — nearly half of the budgetary figure — can realistically be accounted for by online gambling.

Maybe, just maybe, even that estimate is too low. Given what we’re seeing in New Jersey, it may be that the budgetary allowance is correct. Perhaps we have erred on the side of caution.

In either case, there’s little denying the merits of online gambling. Regulating it will provide both an immediate infusion of revenue and a viable long-term source of recurrent tax dollars.

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Robert DellaFave

In addition to being an ardent poker player, Robert DellaFave works as a contributor to and editor of several online publications dedicated to regulated US online gambling, including the legal PA online casino and poker markets. Based in New Jersey, Robert also works as a game developer.

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