Even though plans are in the works to introduce bills to legalize intra-state online gambling in Pennsylvania, a recent hearing on the issue showed widely divided opinions in the state including substantial opposition.
Legislators in both the Pennsylvania House and the Senate have said they plan on introducing a bill that would legalize online poker in the state in the coming weeks. But judging from the back-and-forth testimony at a hearing on online gambling before the Senate Community, Economic and Recreational Development Committee, that legislation passing quickly hardly seems like a sure thing.
William Ryan, Chairman of the Pennsylvania Gaming Control Board, injected a note of caution into the debate saying that legislators should be wary of large revenue projections for online gambling.
Econsult Solutions—which conducted a state study on its gambling industry—estimates online gambling would bring in $68 million in tax revenue for the state in the first year and $110 million in subsequent years.
But Ryan cited the example of neighboring New Jersey, which began online gambling in November. Revenue from New Jersey’s online sites has been well below projections made before gambling went live in the state and taxes collected by New jersey are only a slight fraction of initial projections.
“It would seem to me, from what we are observing, that intrastate I-gaming will never be big,” Ryan said. “The way it looks now, it doesn’t look like it’s going to approach the bricks-and-mortar casinos. It’s just not there.”
Several state legislators also questioned whether online gaming would truly have a significant impact on the state’s budget at the hearing.
Ryan said Pennsylvania would need time to implement online gambling and warned against rushing the process, saying it could take a full year. Several legislators pointed out that such a timetable means online gaming can’t help this year’s state budget regardless.
Casino operators in the state also warned against Pennsylvania setting too high a tax rate on online revenue and a desire to be the only operators eligible for online gaming licenses in the state.
But not all casino operators are in favor of online gambling—at least not right away.
Wendy Hamilton, General Manager at Sugar House Casino, said the state should “proceed with caution” when considering online gaming and suggested the state should wait a year to see how online gaming evolves in the three states that currently allow it—New Jersey, Nevada and Delaware.
One recurring issue was whether online gambling takes players away from land-based casinos. Hamilton said that despite some early indications that it doesn’t, the issue is still in doubt.
“There are no facts that exist yet to tell us whether it will be helpful or harmful. We’re watching as closely as everybody else,” Hamilton said.
Michael Cohen, Senior Vice President at Caesars Acquisition Company, however, said that Caesars has not seen a cannibalization of players in New Jersey where 91 percent of Caesars’ online poker are new players.
He did, however, call for a long implementation process to allow operators to become comfortable with the technology. New Jersey was seen to have rushed its online gambling bill through and has been plagued by technical issues involving geolocation and online payment processing since going live.
There was also testimony indicating that online players may not necessarily play in land-based casinos at all, bringing in new customers.
On the other side, Bob Green, chairman of Parx owner Greenwood Gaming & Entertainment Inc., said legalization of online poker in New Jersey has hurt Parx casino in Bensalem.
“We have lost 20 percent of our New Jersey poker players in our poker room,” Green said. “I don’t think you can say with any authority that there is no impact on bricks-and-mortar casinos.”
A fair amount of legislators speaking at the hearing simply opposed the idea on principle and questioned whether the industry can adequately protect underage gamblers.
As expected, Andy Abboud, senior vice president of government relations and community development for Las Vegas Sands Corp. spoke against online gambling.
Sands is controlled by Billionaire Sheldon Adelson, who is financing a drive for a federal ban on online gambling.
“We are going to turn every house in Pennsylvania into a casino,” Abboud said. “Gambling was never supposed to be everywhere. It’s not an entitlement. It’s a vice. It needs to be doled out to the public in a very careful way.”
Abboud was pressed by committee members as to why Adelson and the Sands are so opposed to online gaming when most other casino companies favor it.
“We looked at it and the profit modeling never came back as anything other than marginal,” Abboud said. “It’s a small opportunity, but with a tremendous liability.”
Casino executives like Cohen, however, pointed out the often-cited argument that illegal online sites operate and draw in gamblers regardless of bans and put consumers at risk. He also urged the state to move quickly to be grandfathered in on online gambling if a federal ban is adopted.
Shortly after a state report concluded that land-based casino revenue in Pennsylvania will continue to decline, a state Senator if proposing a bill to legalize online poker.
State Senator Edwin Erickson said he will introduce the bill “in the coming weeks.”
“In the next few weeks I intend to introduce Senate Bill 1386, legislation that would authorize Interactive Gaming in the form of online poker,” Erickson said in a statement. “A recent study from the Legislative Budget and Finance Committee found that internet Gaming is a large new source of revenue that the Commonwealth could explore. This means more revenue to assist in the reduction of real estate taxes.”
The study—titled the Current Condition and Future Viability of Casino Gaming in Pennsylvania—concluded that online gambling would have a positive impact on state casino revenue by attracting new players and not necessarily taking players away from land-based casinos.
Erickson’s bill would tax online gambling revenue at 14 percent and would include a ‘bad actor’ clause that will “exclude those who violated the Unlawful Internet Gambling Enforcement Act (UIGEA) of 2006.
Only online poker would be legalized under the bill.
“Many Pennsylvania residents participate in illegal and unregulated poker sites,” Erickson said “Establishing a strong regulatory framework under the Gaming Control Board will assist in shutting down these illegal sites and enhance consumer protection for our gaming residents.”
Erickson also said that online poker, unlike straight casino games, leaves the operators indifferent to the outcome of the game and thus makes the game a better introduction to interactive online gaming.
According to the feasibility study online poker could generate $129 million in revenues in its first year of and $68 million in tax revenues for the state.
However, a recent Senate hearing on online gambling in Pennsylvania showed that there is little consensus on the issue in the state and state officials said any plan to offer online gambling could take more than a year to implement.
