Pennsylvania Gambling Expansion Revenue
The new Pennsylvania gambling expansion law passed largely because the state desperately needed a new source of tax revenue. One of the biggest sources of that revenue will be the upfront licensing fees for all the new types of gambling.
Even with the potential for big returns, the first state budget after expansion only expected $100 million from online gambling. That is a figure Pennsylvania surpassed after the first mini-casino auction.
Thanks to other elements of the new law, it is already raking in money. How much so far?
Last updated: June 19, 2019
How does that number break down? Let’s look at how much each category brought in:
Sports betting revenue starts rolling in
The first month of sports betting revenue was not exactly awe-inspiring. With only one property open for less than two weeks, the first month of total revenue came to just over $500,000. Of that, $173,000 went back to the state and $10,000 or so to local communities.
The second month featured three sportsbooks and the revenue jumped by 400 percent.
Here is a look at the tax revenue from sports betting so far:
November 2018: $183,238.77
December 2018: $722,356.00
January 2019: $938,597.00
February 2019: $700,853.95
March 2019: $1,986,962
April 2019: $1,519,733
May 2019: $1,030,267
Sports betting up to nine applicants
In August 2018 Pennsylvania finally got its first official sports betting applicant. Penn National filed its petition, breaking the weeks of inactivity that had many worrying that nobody would bite.
Later in the month, Parx Casino filed its petition as well, bringing the official tally to two. A month later, Harrah’s Philadelphia applied as well. SugarHouse joined the pack just a couple of days later along with its sister property, Rivers Casino.
After a long period without any new applicants, both Mohegan Sun Pocono and Mount Airy submitted applications on March 29.
Interactive gaming petitions generate $94 million so far
The 90-day window for PA casinos to apply for $10 million comprehensive interactive gaming petitions opened in mid-May. For the first 85 days, there was no news — a panic set in that there might be few or no applicants.
In the end, though, a majority of the 13 casinos ponied up the fee, which allows them to offer online peer-to-peer games like poker, online slots, and online table games. The seven casinos who filed for petitions and received approval are:
- Mount Airy
- Sands Bethlehem
- Hollywood Casino
- Valley Forge
- Harrah’s Philadelphia
- Sugarhouse Casino
Once the all-in-one license application period ended, PA casinos could still purchase a la ca carte licenses for each of the three categories. Presque Isle Downs owner Churchill Downs spent $8 million applying for online poker and online slots. In an unusual move, Mohegan Sun Pocono paid a $2 million premium to apply for all three licenses for $12 million.
On Oct. 4, Rivers surprisingly rescinded its interactive application. Rush Street Gaming owns both Rivers and SugarHouse, so presumably, Rivers will support that interactive offering instead of launching a separate one. That opens up three more licenses, bringing the total to 10.
On Oct. 31, Stadium Casino rescinded its peer-to-peer application but retained its online slots and table games licenses so that it will pay $8 million in licensing fees.
A third casino rescinded its peer-to-peer application Nov. 28. Mohegan Sun Pocono informed PGCB that it would not seek to offer online poker either, so it too will pay $8 million.
The Meadows and Lady Luck Nemacolin opted not to apply for any interactive gaming licenses. The Meadows is owned by Penn National, who already applied for a comprehensive license. Lady Luck Nemacolin is managed by Churchill Downs now, and will likely defer to Presque Isle on the online gaming front.
Where does that leave these leftover licenses? Well, the law states the next step is to open up the applications to entities outside of Pennsylvania. The two applicants in that category are MGM Resorts and Golden Nugget Atlantic City.
Mini-casino auction profits
|Parent Casino||Bid Amount||Location||Additional table games license?|
|Hollywood Casino||$50,100,000||Yoe in York County||N/A|
|Stadium Casino LLC||$40,100,005||Derry in Westmoreland County||N/A|
|Mount Airy Casino||$21,888,888.88||New Castle in Lawrence County||N/A|
|Parx Casino||$8,111,000||South Newton in Cumberland County||N/A|
|Hollywood Casino||$7,500,003||West Cocalico Township in Lancaster County||N/A|
Lottery expansion nears $25 million in revenue
PA Lottery was part of the gambling expansion bill as well. The laws allowed for the introduction of three new elements of lottery offerings. Those are:
Keno rolled out May 1, 2018, followed by online lottery games on May 22. Xpress Sports, the virtual sports element, went live in August.
The PA Lottery only releases revenue annually, which makes determining revenue difficult. PlayPennsylvania did obtain sales figures for the first six months of online lottery operation. Here are the numbers:
- Online lottery: $130,736,825
- Keno: $23,863,194
- Xpress Sports: $870,989
Revenue numbers were not available, so we did some calculations to come up with the best estimate possible. Using the return-to-player (RTP) rate of each game, we reverse engineered the following numbers in revenue as projections:
- Online lottery: $19,610,523.75
- Keno: $3,579,479.10
- Virtual sports: $87,098.00
Daily fantasy sports revenue
While daily fantasy sports (DFS) was not explicitly illegal in Pennsylvania, the 2017 gambling expansion regulated the industry. With that regulation comes taxation and licensing fees.
Ten fantasy sports operators needed to each pay a $50,000 licensing fee. Their revenue is taxed at a rate of 15 percent. Here is a look at each month’s tax revenue from DFS as well as the total amount of tax revenue to date:
- May 2018: $199,755.94
- June 2018: $152,679.34
- July 2018: $131,727.75
- August 2018: $141,543.03
- September 2018: $320,057.10
- October 2018: $435,429.45
- November 2018: $486,174.15
- December 2018: $429,075.51
- January 2019: $317,475
- February 2019: $244,376.75
- March 2019: $245,226.70
Law generates $51 million for PA in a matter of hours
In 2017, the state received two payments in the days immediately following the passage of the law. One was a $1 million payment from Valley Forge Casino to remove the amenity fee requirement on the Category 3 property. The other was a $50 million payment by Stadium Casino LLC for its Category 2 casino license. The group is in the process of building a casino in the Stadium Park area of Philadelphia.
In June of 2018, the Stadium Casino project paid the state an additional $24,750,000 for the right to offer table games at the property when it opens, bringing the total licensing brought in from the group to $74.75 million.
Other sources of revenue from the law include:
When it comes to the mini-casino licenses, the auctions are generating significantly more revenue than expected. The bare minimum of $7.5 million per mid meant the process would net at least $75 million. That was the worst case scenario.
Well, the process exceeded that number on just the second mini-casino auction. Here is a look at how much each mini-casino cost its host property:
On Oct. 31, Valley Forge also took advantage of another change in the law. For $2.5 million, the resort casinos could up the number of slot machines on property. After a year of gaming revenue growth, the casino decided it was time to expand.
After nearly a year and a half of the law being in effect, Lady Luck Nemacolin elected to pay the $1 million to eliminate its $10 Category 3 amenity fee, leaving the state with no more casinos charging for entry.