A change in federal law allows Pennsylvania to follow through on plans to offer sports betting.
In a landmark decision issued Monday, the US Supreme Court erased an outdated prohibition that had stood since 1992. The majority of the nine-member court ruled that states should be permitted to legalize and regulate sports betting at their own discretion. Nevada’s monopoly on single-game wagering will be consigned to history alongside the defunct federal ban.
Pennsylvania is among the small group of states that got a jump on the ruling, legalizing the activity as part of last year’s gambling expansion package. The decision from SCOTUS essentially activates that part of the law.
The process of getting PA sports betting off the ground can now begin, but a timeline for placing the first legal bet is hard to pin down.
Next steps for PA sports betting
The law directs the PA Gaming Control Board to establish regulations now that federal hurdles are out of the way. The first step, then, is putting the details down on paper. The 2017 legislation provides a good start, but there are some gaps for the board to fill in.
The PGCB issued this statement following the ruling:
The Gaming Expansion legislation, Act 42 of 2017, did specifically authorize Sports Wagering by the Commonwealth’s land-based casinos when a Federal court decision was reached that permits a state to regulate sports wagering. The Board is reviewing the court opinion in its entirety to properly understand the full opinion.
The Pennsylvania legislature saw Sports Wagering as a key element of overall gaming expansion, and took the initiative prior to this decision to authorize Sports Wagering which does provide some guidelines on implementation. The next step for Pennsylvania would be for our staff to draft appropriate regulations and seek approval of those regulations by the Board. At this time, we cannot provide a timetable on the completion and approval of these regulations or the launch of Sports betting in Pennsylvania.
Once it finalizes regulations, the board can begin accepting applications from operators. Each of the initial applicants will be existing casino licensees, so the vetting process shouldn’t be too cumbersome.
Neighboring states are pressing their own timelines, which could help drive regulatory progress in Pennsylvania. New Jersey, for instance, is prepared to roll out sports betting within weeks, and West Virginia should launch before the NFL season this fall.
What will PA sports betting look like?
PA sports betting licenses are available to all 12 casinos and racinos. Once approved, licensees will be permitted to offer bets both in-person and through mobile and internet platforms.
Although there are 12 available sports betting licenses, a couple will probably go unclaimed. The costs associated with operations may inhibit the industry to an extent.
For starters, the barrier to entry is very high in Pennsylvania. Operators will pay $10 million for a sports betting license, an untenably steep price for smaller properties.
Even for the largest ones, tax rates will make it hard to turn a profit on sports betting. State and local governments will take 36 percent of revenue, which is higher than nearly every other proposal. Nevada, for example, imposes a tax rate of 6.75 percent on its existing market. In addition, an excise tax gives the federal government 0.25 percent of all wagers, won or lost.
After covering expenses, PA bookmakers can expect to do barely better than break-even.
Direct revenue is not the primary reason to offer sports betting, though. Casinos view it as a guest amenity, a tool to help get and keep people in the building. To that end, a sportsbook is as appealing as any amenity a property can offer.
This is especially true for the casinos in the state’s two big sports cities.
Rivers Casino has a monopoly on the local Pittsburgh market, and it will almost certainly pursue a license. The same can be said for the three Philadelphia properties — SugarHouse, Parx and Harrah’s Philadelphia. The planned Stadium Casino property is also a candidate to join the local party in time.
Expect to see Hollywood Casino, The Meadows and Presque Isle on the list of licensees, as well. Their parent companies are pressing particularly hard in the space these days.
Basics of SCOTUS ruling
The case in question was Murphy vs. NCAA, or the “New Jersey sports betting case.” In short, it centered around the state’s right to regulate the activity underneath a federal ban.
NJ’s efforts to create a sports betting industry date back to 2009, when a state senator announced plans to challenge the ban.
Congress had conceived the Professional and Amateur Sports Protection Act (PASPA) as a way to stem the tide of illegal sports betting in the early 1990s. Instead, its passage fostered a thriving gray market with tens of billions of dollars changing hands under the table.
Voters approved NJ sports betting by referendum in 2011, but the sports leagues challenged the enabling law that followed. Citing PASPA, the NCAA, NBA, NFL, NHL, and MLB brought suit against the state. District and Circuit courts ruled against the state on several occasions before Gov. Chris Christie successfully appealed to the Supreme Court.
The state racked up almost $10 million in legal fees during the years-long battle, but it got the desired result. The court’s ruling granted victory for both NJ and other states in the form of a PASPA repeal.