Pennsylvania has joined the ranks of US states such as Nevada, New Jersey, and Delaware, passing their own online gambling bill. The bill has been in the works for some time now. About a week ago, it finally overcame all the administrative hurdles. On October 30th, Governor Tom Wolf signed the bill, making it into law.
New Revenue Stream
For Pennsylvania, the gambling bill was of extreme importance. Last year, state officials were counting with $200 million revenue if the bill was passed. Now that online gambling is finally a reality, this will be a huge boost for the state’s budget.
The bill, dubbed H 271, passed the House on October 26th. The next day, the Senate gave its go-ahead as well. The governor’s signature was the only remaining piece of the puzzle. This was a formality, however, as it was clear Pennsylvania is finally ready to have regulated online gambling.
Wolf gave his approval a week later, and now the stage is set and the works are underway.
The bill, which is now law, regulates several aspects of online gaming. Apart from online casinos, there is also online poker and daily fantasy sports. The bill also contains provisions for sports betting. This part will kick in if and when the sports betting ban is lifted. This depends on the outcome of the case brought before the Supreme Court by the state of New Jersey.
During the first three months, currently existing 12 casinos in the state will be able to obtain required licenses. There are three types of licenses, each costing $4 million. However, state casinos can apply for a package-deal to get all three for the price of $10,000,000. These licenses cover:
- Online poker
- Table games
After this initial period, the licensing process will open to out-of-state casinos. If there are still licenses left, these casinos will be able to apply at the price of $4 million per license.
One thing that worries operator in the new law is the matter of taxation. Lawmakers decided to use the layered system, with different activities being taxed at different rates:
- Online slots: 54% tax
- Table games & online poker: 16%
- Sports betting (if applicable) 36%
While rates for table games and poker are quite reasonable, operators are unhappy with provisions pertaining to slots. At 54%, this is by far the highest taxation rate anywhere. Many believe this isn’t sustainable and could deter casinos from applying for slot licenses.
If we take an average taxation rate on all online gambling in PA it comes out at 39%. This is more than double compared to New Jersey, for example, where all online gambling is taxed at 17.5%. Furthermore, licenses are much more expensive than in the Garden State where operators pay $400,000.
When all numbers are taken into account, it seems almost impossible for the operators to turn profit. High taxation rates and expensive licenses might prove deadly for the industry and kill it before it even starts to grow.
Time will tell, but it seems lawmakers were just a bit too greedy here. Of course, if things don’t pan out, it is possible these stipulations will be revised at a later date to create more favorable market conditions.