PA Supreme Court Strikes Down A Part of 2017 Gambling Expansion Law

Posted on April 29, 2019

Don’t worry, your online casinos and PA sports betting apps are safe. However, one element of the expansive 2017 Pennsylvania gambling expansion law is no longer intact.

Amidst the long list of gaming authorized by the bill was a provision to create a state-run fund to help the casino marketplace. The fund took .5% of slot tax revenue from each property and put it in the Casino Marketing and Capital Development Account.

Then the state would dole the funds back out to the poorest-performing casinos for things like marketing spends and property improvements.

Sands Bethlehem immediately realized that this law did not work in its favor. The casino sued the state, charging that the most successful casinos are effectively forced to give money to their lesser-performing competitors.

Court sides with Sands, $21 million in refunds coming

The suit made its way to the Pennsylvania Supreme Court. Last week, the state’s highest court sided with Sands that this fund was not fair and violated state and federal constitutional law. The Morning Call reported some of Chief Justice Thomas Saylor’s written opinion:

“Act 42 establishes a system specifically designed so that the taxpayers who pay the least into the CMDC Account are the most likely to receive a mandatory distribution from that account (and the less they pay, the more they receive), and vice versa.”

What happens to the casino money now?

The court siding with Sands is not entirely surprising. In December, the courts directed the state to freeze collecting funds for the account and not release any disbursements.

Now, the $21 million in the account will get refunded back to the casinos that paid into the fund.

One of three lawsuits related to gambling expansion

Since the gambling expansion law passed in late October 2017, there have been three different lawsuits related to elements of the bill.

Hollywood Casino’s parent company Penn National sued over the state’s mini-casino plan. Penn contended the law unfairly protected some casinos, like Mount Airy, but not others. Hollywood Casino’s central location made it particularly susceptible to competition.

Eventually, Hollywood dropped its suit but did have to secure two different mini-casino licenses to protect its turf.

The other lawsuit is still pending. Several PA casino companies got together to sue the state’s Department of Revenue over the PA online lottery.

The casino companies believe the Pennsylvania iLottery instant win games bear too strong a resemblance to slot machine play. As such, they claim the operation is illegal since the lottery lacks proper interactive gaming licensing.

There has been little movement on the case, but it is still active at time of writing.

Sands Bethlehem also challenged $10 million host fee law

Now that the casino is changing hands over the Wind Creek, perhaps the new Wind Creek Resort Casino will develop a less litigious reputation.

While it was Mount Airy who filed the suit in 2016, Sands Bethlehem played a major role in the legal debate over host fees.

Essentially, each casino needed to pay either 2% of their slots revenue or $10 million, whichever was great, back to the community hosting the casino.

In the entire time of the fee’s existence, no casino ever earned enough to pay more than the $10 million.

Mount Airy sued, pointing out that $10 million of its slot revenue represents a higher percentage than other, bigger casinos, like Parx and Sands.

The court agreed and struck down the fee. Many casinos voluntarily agreed to keep paying the fee. Sands, however, very vocally said they had no intention to do so.

So, another thing to keep an eye on once Wind Creek takes over is whether or not it will establish a less contentious relationship with the city of Bethlehem.

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Jessica Welman

Jessica Welman is the managing editor of PlayPennsylvania. A longtime poker media presence, Jess has worked as a tournament reporter for the World Poker Tour, co-hosted a podcast for Poker Road, and served as the managing editor for WSOP.com.

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