Company asks state to tighten Category 4 regulations
On July 9, Penn National Gaming filed a lawsuit challenging the provision of the state’s new gaming law creating 750-slot satellite or “min-casinos,” claiming the new law puts Penn at an inherent competitive disadvantage. The following day, Penn National outbid three other licensees to win the first satellite casino license, which it will use to build a casino in York, Pennsylvania—around 44 miles from its satellite Hollywood Casino at Penn National Race Course outside of Harrisburg.
Auctions for the mini-casino licenses began Wednesday, and will continue through the spring. Current land-based licensees get first crack at the licenses, the bids for which start at $7.5 million for a facility with a maximum 750 slot machines. For an extra $2.5 million fee, the law authorizes 30 table games.
Penn National won the license with a bid of more than $50 million. The operator also has paid the extra fee for table games at its planned mini-casino in York, which is apparently a hedge against competition as the company attempts to get the law changed through the courts.
The lawsuit, filed by Mountainview Thoroughbred Racing Association—operator of the Hollywood Casino—names several portions of the law as putting Penn at a competitive disadvantage, the first being the provision that allows the satellite facilities to be located anywhere outside 25 miles of an exiting casino. Penn’s Hollywood Casino draws most of its customers from beyond that radius.
In addition to the federal lawsuit, Mountainview last week filed a petition in Commonwealth Court demanding that the Gaming Control Board take a strict view of where mini-casinos could be located, and asking that the court order a rewriting of some parts of the satellite provision, including the “protected buffer zone” of 15 miles established for mini-casinos. According to the petition, the fact that a mini-casino does not have to be in the center of that 15-mile one, it means they can be placed anywhere along the perimeter, which “would lead to the absurd result that two (mini-) casinos could potentially be located next door to each other, or literally across the street from one another,” despite the 15-mile buffer.
Mountainview also objected that bidders for mini-casino licenses will not have to identify where they would locate a facility.
Penn’s lawsuit joins another filed by Sands Casino Resort Bethlehem December 28, alleging the law violates state and federal constitutions by requiring high-performing casinos to pay a tax to subsidize financially struggling casinos. It appears to be aimed at the rival Mount Airy casino, which many saw as getting favorable treatment in the new gaming law.
Nine other public auctions are scheduled for the mini-casinos, with one winner announced at each, between January 24 and May 16.
Around 40 percent of Pennsylvania’s municipalities voted to opt out of the satellite casino provision, essentially banning the facilities within their jurisdictions. The Pennsylvania Gaming Control Board published a list of 1,017 municipalities that voted to ban the satellite facilities.
The Pennsylvania Gaming Control Board has so far declined media requests for comment on the Penn National situation, citing the pending litigation. The board has pledged to continue the auctions in an efficient manner.
Meanwhile, the other main provision of Pennsylvania’s gaming law, the authorization of online gaming, may benefit the state’s lottery agency before any licensees establish online casinos. A spokesman for the lottery told the Pittsburgh Tribune-Review that the Pennsylvania Lottery will likely establish iLottery games that can be played on mobile devices by this spring.
“Consumer tastes are changing, which is why the lottery must modernize its 45-year-old business model,” spokesman Jeffrey A. Johnson told the newspaper, “We are facing growing competition from other forms of entertainment and must act to increase our market share, because older Pennsylvanians are relying on our support for vital benefit programs.”
