Senators stray from New Jersey iGaming model
Several new proposals in the state Senate are complicating debate in the Pennsylvania legislature to draft an omnibus gaming bill that would legalize online gaming and implement gaming expansion measures including slots at airports and other new gaming.
A new push to include slot machines at bars and taverns in the package is further muddying the waters in the gaming debate.
Operators and gaming proponents in the state House have already lambasted a proposal in the Senate to tax online gaming revenues at the same rate as land-based gaming. Adding to the criticism is a new proposal from state Senator Joe Scarnati, president pro tempore of the Senate, to place operation of online gaming under the purview of the Pennsylvania Lottery, rather than the successful New Jersey model of having land-based casinos operate iGaming sites.
Critics of Scarnati’s proposal point out that placing iGaming in the lottery’s jurisdiction would create new competition for land-based casinos, while New Jersey has proven that linking online gaming to land-based casinos helps both—driving fans of the land-based casinos to the iGaming sites, keeping land-based customers engaged with the brand off-site and bringing new customers to the land-based casinos.
Penn National Gaming, which operates Hollywood Casino at Penn National Race Course near Harrisburg, is one of the operators that has come out against the state Senate proposals. In an interview with CDC Gaming Reports, Eric Schippers, senior vice president of public affairs for Penn National, said the result of taxing iGaming at the same rate as land-based gaming would be that no casino would apply for an iGaming license.
“The key question around iGaming right now is focusing on the tax rate that would be applied,” Schippers said. “We are trying to knock down some sort of silly notion that you could have tax parity between iGaming and the slot machines and that it could be a successful industry. We’re trying to convince them that if they do this, no one will sign up for it. We’re spending a lot of time trying to educate legislators on that business.”
State Rep. Scott Petri, chairman of the House Gaming Oversight Committee, is one of several members of that chamber also said to be pushing the tax-parity argument in the gaming debate.
Land-based casinos in Pennsylvania pay a rate of 54 percent for slot machines and 16 percent for table games. The House bill passed last year set the iGaming tax rate at 14 percent.
Under the latest proposal in the state Senate, separate licenses would be required for online poker and online casino games, along with separate license fees—$5 million each. Online poker would be taxed at 16 percent, but online casino games would be taxed at 54 percent, the land-based rate for slot machine revenues.
Schippers also said Penn National is opposed to other proposals being floated by lawmakers that would compete with the current casinos, including video gaming terminals in bars and taverns and slot machines at satellite facilities owned by the casinos.
The House is debating a measure that would add up to 35,000 video gaming terminals, or VGTs, to bars, taverns, bowling alleys and other liquor-licensed establishments, as well as social clubs and fraternal organizations.
Proponents say the measure would simply replace gray-area machines already operating in bars, which are unregulated and provide no revenue to the state. “People have turned a blind eye to the fact that there’s illegal video gaming already going on in Pennsylvania,” Rep. Mike Sturla told the PennLive website. “How do we legalize this activity and make it beneficial to everyone involved?”
State police estimate there are 15,000 illegal gaming machines currently operating statewide.
The Pennsylvania State Police Bureau of Liquor Control Enforcement told the Associated Press it conducted inspections recently in 48 bars and clubs around western Pennsylvania, resulting in the seizure of 215 illegal gambling devices and over $177,000 cash. In 2016, the agency seized 706 illegal video gambling devices and over $167,000 from illegal gambling activities.
The House gaming Oversight Committee held a public hearing last week on VGTs, which proponents say would earn the state $100 million in the first year and $500 million annually once fully implemented. “Instead of turning a blind eye to an illegal industry that’s going on in the state of Pennsylvania,” said Rep. Mike Sturla at the hearing, “this really does clean it up for everyone, and lets everyone play on a level playing field.”
Casinos have remained vehemently opposed to VLTs as a potential drag on their revenues. “This is a bad bet,” Parx Casino Chairman Bob Green told Yogonet. “You shouldn’t do this, because it could end up providing lest revenue.”
At last week’s hearing, the bill’s main sponsor, Rep. Mark Mustio of Allegheny County, answered operator complaints that VGTs would cannibalize their business by saying, “Some have said over the years that we’re partners with the casinos. You know, I personally disagree with that. In my opinion, we’re partners with our constituents.”
Meanwhile, Pennsylvania lawmakers are preparing legislation that would prepare the state for legalized sports betting.
The Gaming Oversight Committee cleared a bill last week that would allow casinos to offer patrons betting on sports games, pending repeal of the federal Professional and Amateur Sports Protection Act of 1992 (PASPA). The New Jersey case challenging PASPA is currently before the U.S. Supreme Court.
The Pennsylvania bill would apply to professional and collegiate sports events. It would cover parlays, pools and straight bets.
“I believe we must be ready to act should the federal ban be lifted,” said Rep. Robert Matzie, the bill sponsor, in an interview with PennLive.
The Pennsylvania debate on expanded gaming gained urgency after another bad month of tax collections deepened the state’s budget deficit to more than $1 billion for the current fiscal year, which ends in July. Governor Tom Wolf figured $150 million in online gaming revenue into his budget for the year.
