Happy Two Years, PA Online Casinos: Recounting Slow Start and Rocket Ride to No. 2 US Market

Posted By Kevin Shelly on August 2, 2021

Initiating online gambling in Pennsylvania stalled on the legislative launching pad for four years. But in their first two years live, PA online casinos have made up for the lost time.

Getting there wasn’t easy.

Seven pieces of proposed legislation allowing for internet wagering were duds failing to ignite. The first proposal was floated in 2013, the year neighboring New Jersey vaulted ahead of PA and approval online wagering. In many ways, the two states are a shared and overlapping market, so the headstart for smaller Jersey meant a huge competitive advantage.

The eighth PA legislative proposal, House Bill 271, allowing for internet gambling in PA, passed in 2017 by a vote of 109-72. In that bill, online was limited to licensed casinos and their partnered online providers/operators. As with many legislative sausage-making maneuvers in the Commonwealth, approval was spurred on by a budget deficit crisis.

The bill became part of Act 42 of 2017. While the act widely changed the state’s gaming regulations in diverse areas, our focus here is solely on online gambling, specifically online casino games with a brief mention of online poker.

Online law to expand gambling in PA signed in 2017

The legislation became law on October 30, 2017. Gov. Tom Wolf‘s signature made PA the fourth state after Nevada, New Jersey, and Delaware to allow online wagering.

Lawyer Anthony Holtzman in the publication Online Gaming Lawyer, summarized the projected impact at the time:

“Act 42 is a massive, complex, and historic gambling expansion statute, one that places Pennsylvania into a small group of states that have authorized an online wagering program and gives it the broadest program among those states.

“As Pennsylvania strives to close its $2.2 billion budget deficit, it estimates that Act 42 will generate more than $200 million in tax-and-fee revenue during the 2017-2018 fiscal year.”

But bureaucracy then took over. It took until July 2019 for the first games to launch, though the licensing fees began rolling in sooner.

Online gambling launched July 2019

Testing online gaming began July 15, 2019. Full operating approval from the Pennsylvania Gaming Control Board (PGCB) was granted on July 17 to Parx Online Casino, July 18 to Hollywood Casino at Penn National,  and July 19 to PlaySugarHouse at Rivers Casino Philadelphia. Game options were limited.

The two-week results through the end of July were modest but promising.

There was $812,306 in revenue for the three online casinos. The PGCB reported more than $49.2 million was wagered on interactive slots and table games. Total gross revenue in July for all online slots at the three PA casinos was $517,712. Table games brought in $294,594.

Because it was meant to shore up PA’s budget, the law carried a staggering 54% tax rate on slots and 16% on table games.

July’s slot-revenue tax totaled $279,565, while table games produced $47,135 in taxes. That meant a total of $326,700 in Pennsylvania’s pocket.

But then came the wait

SugarHouse Casino, which has since changed its physical casino’s name to Rivers, quickly jumped out with more than 50% of the online market due to it immediately being available to bettors via iPhones and other Apple devices.

August better than quadrupled revenue month-over-month.

And while revenue built nicely for the three online pioneers, there was also the big wait, a hesitancy to join in. Taxes were high, there was a big unknown, and the worry was online would cannibalize the retail market.

Nothing new came online until November. That’s the month Mount Airy Casino Resort offered PokerStars Casino (now Stars Casino), and Mohegan Sun Pocono anted up with Unibet.

Gross online revenue in December was over $10.6 million.

And still just five online options by the end of 2019.

Rocket ride followed, with COVID fueling the growth of PA online casinos

And then it was like a rocket ride.

Dustin Gouker, a seasoned sports betting analyst who oversees PlayPennsylvania.com and a host of related sites in North America, breaks it down:

“Pennsylvania online casinos grew faster in its first two years than most of us imagined. We saw a relatively slow burn in New Jersey in the years after it launched its online casino industry, but PA grew much more quickly.

“Pennsylvania had some advantages, including operators benefiting from the years of experience and learnings from NJ. We also saw sports betting alongside casino; the cross-sell from one product to the other helped online casino reach a critical mass of players in short order. There were also multiple launches in a relatively short time, giving players a lot of choice and a competitive market that drove growth.

“We also believe the pandemic helped adoption of online casino in the US markets where it is legal and regulated. Casinos in PA and elsewhere were shut down or limited in what patrons could do for months, leading people to find online options in increasing numbers. This trend is much like what other online industries experienced when a physical experience was either impossible or subideal.

“PA online casinos still have room for growth, although questions still linger on whether the high tax rates on online casino products could stunt reinvestment in the space.”

By the numbers

While slow to begin, the revenue results for iGaming’s first two years in PA are staggering.

From July 2019 through June 2021, PA online casino and poker has generated:

  • $1.4 billion in gross gaming revenue, including $1.1 billion in FY 2020-21.
  • $1.1 billion in taxable revenue, including $897.2 million in FY 2020-21.
  • $469.9 million in state and local taxes, including $372.7 million in FY 2020-21.
  • $40.0 billion in online casino wagering, including $31.9 billion in FY 2020-21.
PA online casino revenue and taxes first 2 years
PA iGaming Revenue and Taxes, July 2019 – June 2021

PA online gaming revenue and market share over first two years

Here’s a look at the gross gaming revenue trajectory for online casinos and poker in PA. The following chart also shows the shifting tide of market share over time.

PA casino revenue and market share first 2 years
PA Casinos Revenue & Market Share First 2 Years

As is clear in the chart, the top operators and their accompanying brands dominate market share in PA. Since mid-2020, Penn National, Rivers Philadelphia, Valley Forge, and Mount Airy have made up around or more than 75% of the state’s iGaming revenue. The dominance of Penn National, followed by Rivers, spiked in Dec. 2020 and has carried into 2021. Valley Forge remains a clear No. 3 with Mt. Airy firmly in fourth.

In terms of overall revenue, the rapid increase from March to April 2020 marks the pandemic-induced spark for online gambling. With launches ongoing and the debut of live dealer games in October, the market only continued to strengthen. Of the final seven months of fiscal year 2020/21, revenue surpassed $100 million in five of them.

Online casino slots and games chronologically per PGCB

The PA online casino start dates and their partnered casinos are as follows:

2019

  • Parx Casino: Parx Online Casino – July 17
  • Hollywood Casino at Penn National Race Course: Hollywood Online Casino –  July 18
  • Rivers Philadelphia Casino: PlaySugarHouse – July 19
  • Mount Airy Casino Resort: PokerStars Casino – November 6
  • Mohegan Sun Pocono: Unibet –November 15

2020

  • Valley Forge Casino: FanDuel – January 24
  • Rivers Philadelphia Casino: BetRivers – January 30
  • Harrah’s Philadelphia: Caesars – April 23
  • The Meadows: DraftKings – April 30
  • Wind Creek Casino Bethlehem: Wind Creek Casino – July 24
  • Live! Casino Philadelphia: PlayLive – August 14
  • Hollywood Casino Morgantown: BetMGM – December 4

2021

  • Rivers Philadelphia Casino: Borgata – February 24
  • Valley Forge Casino: Stardust – April 19
  • Presque Isle Downs and Casino: TwinSpires – April 20 (rebranded from BetAmerica, which launched in Jan. 2020)
  • Hollywood Casino: Barstool – May 3
  • Live! Casino Philadelphia: Betway – July 1

It is quite a list.

Analysis predicted fear of online gaming by the casino industry

Why the slow start?

Consultants Spectrum Gaming Group had predicted as much back in 2002 with several key predictions:

  • The brick-and-mortar gaming industry will abandon its rejection of internet gaming and ultimately accept, adopt and embrace it.
  • Land-based casinos aligned with online game providers will alter the face of internet gaming and render nearly all past and present revenue projections obsolete.
  • People are hard-wired to enjoy games of chance with reasonable risks, regardless of the decade in which they were born.
  • People are also hard-wired to enjoy social settings and to seek entertainment experiences with other adults.

They teased out the predictions 15 years later in a 2017 white paper:

  • Land-based casino operators, as projected, are moving along the continuum from rejection to acceptance to embrace, and are presently in the early stages of a full embrace.
  • Public policy can be best advanced by ensuring, to whatever degree is practical and politically possible, that land-based casinos be the primary operators and/or beneficiaries of online gaming.
  • Online gambling will help capture a different demographic than the traditional land-based casino customer base, including a new cohort of younger adults who can be effectively encouraged to visit land-based casinos.
  • Online gaming will, for the most part, not cannibalize land-based spending. Evidence indicates that existing land-based customers who also wager online will ultimately increase their land-based spend.
  • Online gaming in the US should not simply be seen as a new revenue stream, but as a marketing tool reaching new demographics in a way that would increase both online and land-based revenue.

Spectrum’s managing partner breaks it down

Spectrum leader Michael Pollock said fear of the unknown and worry about cannibalization slowed acceptance of online gaming within the industry.

He compared it to how baseball once saw radio as a threat, and then TV, and finally the internet, but the reality was each new technology simply added to the appeal of the game, much as with gambling’s hesitant learning curve.

Reality has instead proven there is a “natural symbiosis” between online and traditional retail wagering.

With their sheer size, online has provided a far larger database for brick-and-mortar casinos to mine.

“No one had accurately predicted the natural trajectory and what it was for iGaming,” said Pollock.

For a more in-depth look at the growth of online casino gambling in PA since launch, check out our PlayUSA News video below.

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Kevin Shelly

Kevin C. Shelly is an award-winning career journalist who has spent most of his career in South Jersey. He's the former assistant city editor of The Press of Atlantic City, where he covered the casino industry and Atlantic City government as a reporter. He was also an investigative, narrative enterprise, and features reporter for Gannett’s Courier-Post.

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