The Pennsylvania legislature voted last week for a major expansion of gambling to help plug a billion shortfall in the state budget for 2016-17.
The bill calls for the legalization of poker and casino-style gambling on the Web, daily fantasy sports betting and slot machines in airports and OTBs. Backers in the lower chamber say that combined this will raise some $266.5 million in new revenues from licenses, fees and taxes.
The original House bill authorized video gaming terminals in bars—a controversial provision that drew heated opposition from the state’s casinos—but it was deleted from the final version, which passed the House on Thursday by a vote of 114-85.
If the bill is signed into law by Governor Tom Wolf, it’s possible Pennsylvanians could be gambling on their computers legally in as little as nine to 12 months, according to a timeline offered by state Gaming Control Board chief Kevin O’Toole.
Wolf, he has not stated a position one way or the other, but it’s believed he is not opposed to legalization in principle if it can benefit Pennsylvania economically.
He has, however, stated that he considers the current budget plan—which includes raising tobacco taxes and other moneymakers in addition to expanding gaming—inadequate to close the projected gap in the $31.5 billion spending plan for the next fiscal year. Wolf now has 10 days to weigh the plan and can either veto it, sign it or let it become law without his signature.
Not surprisingly, estimates of the state’s online gaming potential vary, though none are as wildly optimistic as those that preceded legalization in neighboring New Jersey in 2012 and 2013. Analysts currently believe around $165 million in gross revenue is realistic in Year 1, growing to more than $220 million as the market matures. Some sources say that based on New Jersey’s experience, the 16 percent tax on gross revenue contemplated by the House bill could raise as much as $35 million-$45 million for the state in the early going, with another $90 million-$120 million from upfront licensing fees.
Then again, this could all change if liquidity-sharing agreements are concluded with other jurisdictions, which the bill provides for. Nevada and Delaware, the other states with legal internet gambling, have a system in place for sharing poker liquidity. New Jersey does not.
Here’s what is known:
Under bill, the state’s casinos will be able to apply to the GCB to operate remotely, and this includes mobile platforms, though these would be restricted to international airports. The fee would be $8 million. Revenue would be taxed at 14 percent plus 2 percent for economic development projects. Mobile would be taxed at 34 percent plus 20 percent to the host airport.
Daily fantasy sports operators (FanDuel and DraftKings and the like) could apply to the Control Board for licenses and pay a 5 percent tax based on in-state participation. Applicants would have to establish the identity and location of their players and verify they are over 18.
Casinos can operate slot machines at international airports accessible only to ticketed passengers. Fees would range from $5 million at Philadelphia International to $1 million for airports in Erie, Wilkes-Barre/Scranton, the Lehigh Valley and Harrisburg. Revenue would be taxed at 34 percent plus 20 percent to the airport.
Casinos also could apply to operate up to 250 slot machines at any of the state’s 10 licensed off-track betting parlors. The fee would be $5 million per venue. Revenue would be taxed at 54 percent, 92 percent of which would go to the state and the rest split between the host county and the municipality.
Finally, casinos could apply to the gaming board to operate sports betting at the casino or online should it become legal under federal law or under a federal court ruling.
Senate Majority Leader Jake Corman is pushing the bill to avoid the contentious budget negotiations of a year ago when Wolf allowed the legislature’s plan to become law without his signature.
Republicans, outnumbered by Democrats, lost their battle early on to cut state spending.
“I feel like I’ve stepped into an episode of ‘The Twilight Zone,'” said Rep. Dan Truitt. “We’re about to vote on a bill to spend $31.6 billion and we literally don’t know where we’re going to get the money.”
