After the deadline for applications for interactive gaming licenses passed, the Pennsylvania Gaming Control Board (PGCB) still had seven licenses available.
The PGCB meeting on September 12 resolved to award the outstanding licenses via a random draw process and that any Qualified Gaming Entity (QGE) could enter.
The broad definition of what a QGE creates the fascinating possibility that the remaining licenses could go to other US-based casino groups or even to foreign-based online gaming operators.
The key regulatory requirements to be classified as a QGE are:
“(1) It is licensed in good standing in another gaming jurisdiction.
(2) The licensing standards of that other gaming jurisdiction are comprehensive and thorough and provide similar safeguards as those required by this Commonwealth.
(3) The petitioner has the business experience and expertise to operate an interactive gaming system.”
Poker, online casino and table games licenses are available
The online gaming licenses remaining consist of:
- 3 for online poker
- 2 for online slots
- 2 for online table games
The random draw process will work on the basis that the first name drawn will receive all the licenses it asks for, then the second draw will receive all the licenses it has asked for and so on until all seven have been allocated.
This process makes it more attractive for outside companies to participate. While one poker license might not justify the $4 million cost, adding in a casino games license for another $4 million may make the opportunity viable.
Who is likely to apply? We can group possible applicants into four categories:
- The home team
- US casinos
- Foreign operators
- Surprise outsiders
The home team
It is still possible that current PGCB licensees in Pennsylvania could apply. However, this seems unlikely given the corporate intermeshing of ownership that exists.
The Meadows Racetrack & Casino and Lady Luck Casino are the only casinos that did not apply for online gambling licenses.
Penn National oversees The Meadows. The company already applied for a full suite of online licenses through Hollywood Casino. It doesn’t make sense for Penn to put up another $4 million per license just to co-brand online gaming through the Meadows brand.
The situation is different for sports betting. Those regulations only allow one online sports betting operation per casino. However, the sports betting licenses are a separate issue and not involved in the random draw.
Churchill Downs is about to take over managerial control of Lady Luck Casino. Churchill Downs also owns Presque Isle Casino. Presque Isle already has applications in two of the three interactive categories. It didn’t apply for online poker. This is why there are three poker licenses still unclaimed.
Like Penn National and The Meadows, there doesn’t seem to be any point in the parent company paying for more licenses.
US operators
Here, is the most likely place to produce license applications.
The Stars Group
The Stars Group has a deal with Mount Airy casino which is also in a relationship with 888. The division of responsibilities between Mt Airy and its partners may mean that either one or both of them might want a separate license.
PGCB regulations demand that online gambling sites display the partner casino’s brand. That is a requirement that a stand-alone interactive license holder won’t worry about.
This may be attractive to both 888 and PokerStars, both of which have established brands and US operations.
PokerStars is active in the New Jersey regulated market and 888 is in all three of the current state-regulated markets, New Jersey, Nevada, and Delaware, although it only uses the 888 brand in New Jersey.
MGM
MGM recently struck deals with both GVC, owners of partypoker and partycasino, and separately with Boyd Gaming.
The same PGCB meeting authorizing the sale of the remaining gaming licenses also authorized Boyd Gaming’s takeover of Valley Forge Casino.
Valley Forge sports betting and interactive gaming should therefore be part of the mix of businesses operated by the joint venture between MGM and GVC.
MGM doesn’t have a casino in Pennsylvania. However, it could still enter the state separately via an online-only operation. This is probably a long shot. It would give MGM a foothold in five contiguous states though.
Kindred
Kindred crosses the boundary between US and foreign operators because it partnered with Hard Rock Atlantic City to offer online sports betting in New Jersey.
The CEO, Henrik Tjärnström , told investors during the company’s Q2 2018 earnings call that the company sees US sports betting as an attractive opportunity. Resultingly, it is unlikely that the company will be satisfied with staying in New Jersey despite the Unibet brand being new to the US market.
“Our working hypothesis right now is when sports becomes available, we would see it as a big benefit if we could go with the Unibet brand, albeit we fully appreciate that it’s unknown in the US market, but it has worked well in Europe and we believe it could work well in the US as well.”
A Pennsylvania interactive gaming license would give the group the opportunity to expand its Unibet brand without the complication of negotiating a separate deal with a US casino group.
Foreign operators with US ambitions
During GVC’s last earnings presentation, the company produced a useful graphic of the largest online gaming operators. Some are now familiar names in the US, but others are unknown.
Bet365
Second biggest is Bet365. Until recently, it was the largest online sports betting operator in Europe.
Bet365 is a private company run by Denise Coates. She is one of the richest women in the UK with a fortune estimated at $4.6 billion. She founded the company from scratch and built it into one of the most respected iGaming companies in the world.
Saliently, Bet365 was the only major internet gaming company not to leave the UK when new gambling laws passed in 2005.
That decision cost the company a fortune in extra UK taxe. Itt will impress the PGCB for its evidence of a genuine commitment to compliance though.
Nothing public has been said by Bet365 about any US ambitions, but it would be strange for an entrepreneur as clever as Denise Coates to ignore what is happening on the other side of the Atlantic.
Betsson, Playtech
Although much smaller than Bet365, Betsson is a public company, and it too could be looking at the US market.
Again the company has a strong record of regulatory compliance. It is worth noting the company’ss focus has always been on the Nordic market and may feel that further European expansion fits better with its corporate strategy.
Playtech/SNAItech is much more a B2B player and unlikely to seek a PGCB license.
Surprise outsiders?
Winamax
One possibility that isn’t on the GVC slide is Winamax.
Winamax is a French operator, primarily focused on online poker. It is one of the only poker operators to beat PokerStars in terms of market share—at least in the French regulated market.
Winamax actually entered the US market back in October 2012 with a free-play online poker app.
“Because real money poker is currently not authorized in the United States, we have put together a play money offer designed to encourage real poker play and offer an experience as close to the real thing as possible.”
Since then much has changed. Winamax now has a different CEO. Additionally, the company expanded to Italy and Spain. The company may feel that the PGCB license opportunity is worth a shot.
The big argument against is that the company wouldn’t be able to add in its sports betting product, so revenues would be limited. Perhaps any US ambitions it has will need to be satisfied elsewhere.
Far-fetched gaming company options
There are other global gaming companies that could have an interest, but it is unlikely that most of them would meet the standard set out by the PGCB.
Huge online poker networks such as IDN poker would fail because they accept US players while being unlicensed.
The GG network is big in Asia, but its regulatory background may also prove to be a block.
The reality is that a wave of industry consolidation has reduced the potential number of applicants.
License costs and high gaming taxes such as the 54 percent levied on online slots make it virtually impossible for anyone other than the biggest online gaming companies to take the risk of competing in the market.
No date has yet been set for the random draw, but when it does happen the results may be an eye-opener.
