After 30 days, remaining licenses can go to outside operators
After much speculation as to whether Pennsylvania casino operators would pay for full online gaming licenses given an onerous online slot tax, nine operators swallowed their wallets and submitted applications for full online gaming to the Pennsylvania Gaming Control Board just ahead of last Monday’s deadline.
Last week’s deadline was the last day operators could petition for a discounted license fee of $10 million to operate online poker, online slot games and online table games. Each license costs $4 million individually.
Parx Casino at Philadelphia Park in Bensalem, Mount Airy Casino Resort in the Pocono Mountains resort region and Live! Hotel and Casino, currently under construction in Philadelphia, were the first to petition for the $10 million full iGaming license, a week ahead of the deadline.
Six others slipped their applications in on the final day: Penn National Gaming, which applied for a license tied to its Hollywood Casino outside of Harrisburg; Harrah’s Philadelphia in Chester; SugarHouse Casino in Philadelphia; Rivers Casino in Pittsburgh; Valley Forge Casino Resort in King of Prussia; and Sands Casino Resort Bethlehem.
The Sands would have been the most unlikely to apply for an iGaming license, given the longstanding battle against legal online gaming pursued by Sheldon Adelson, chairman of parent company Las Vegas Sands Corp. However, the property is in the process of being acquired by Wind Creek Hospitality, an arm of Alabama’s Poarch Band of Creek Indians, for $1.3 billion.
The tribe made it part of the purchase agreement for Sands to pursue an online gaming certificate “in good faith.” The casino even made sure to give the tribe credit for the iGaming application in its petition, writing, “Sands submits to this petition in the interest of Wind Creek so that, if approved, and after Wind Creek acquires the purchased interests, Sands can conduct interactive gaming in the commonwealth of Pennsylvania.”
The gaming board must approve or deny petitions within 90 days, and the fees are due within 60 days after approval.
Of the four remaining Pennsylvania licensees, the Meadows Racetrack & Casino outside of Pittsburgh is in the process of being acquired by Penn National, and would be able to move forward with it own online gaming site under Penn National’s license. (The gaming law permits each licensee up to three “skins,” or iGaming websites.) The casino would need a separate license to operate sports betting online under the one domain. (Sports betting is limited to one skin.)
The three operators now have until August 14 to submit individual applications to offer any or all of the online games. Should there be licenses left over that, under last November’s gaming expansion law, the Pennsylvania Gaming Control Board could open up the petitions to out-of-state operators.
Many among Pennsylvania lawmakers and in the budget-crunched state government breathed a sigh of relief after the last-minute petitions, and the $90 million in quick revenue it will bring in the application fees. It had been uncertain how many operators would go for the full licenses, particularly the license to operate online slot games. The revenue tax on online slot games is set at 54 percent, the same as slots in brick-and-mortar casinos. Many have called the tax unworkable, and it is a big reason there may be iGaming licenses left over in mid-August.
The other factor that had been expected to reduce the number of takers for the slot licenses—and which may delay the creation of iGaming sites—is the state’s iLottery, which is offering the same slot-style games that the operators would offer on their online casino sites. The operators are threatening to sue to eliminate the games, which are nearly identical in play to online slot games and, the operators say, thus illegal under the state’s gaming law.
So far, the state Revenue Department, which runs the lottery, has refused the operators’ request, sent in a letter late in June, to eliminate the slot-style iLottery games, agreeing only to stop marketing them as slot games.
As in New Jersey, Pennsylvania operators will only be ably to offer play to those physically located in the state, and can prove through identity confirmation software that they are at least 21. Pennsylvania also has the option to create interstate compacts with other states that offer legal iGaming, permitting players in those states to choose any legal iGaming site licensed by those states.
What remains to be seen is what type of profit will be possible with the high tax on internet slot games, which drive the revenue in the current legal markets of New Jersey and Delaware (Nevada has online poker only). In New Jersey, online games accounted for $139.5 million in revenue the first six months of the year, up around 15 percent from 2017.
Online and sports betting come to Pennsylvania at a good time for the casino licensees, who recorded record revenue for the 2017-18 fiscal year.
The gaming board reported last week that casino gaming revenue from slot machines and table games at the state’s 12 operating casinos totaled about $3.25 billion for the year, up about 1.4 percent over FY 2016-17.
The previous record was set two years ago, with nearly $3.23 billion in revenue.
The board said table games revenue grew about 3.3 percent to $895.3 million, while slot machine revenue inched closer to $2.4 billion with a 0.7 percent increase for the year.
Tops in revenue growth for table games was The Meadows Casino (up 22.2 percent), followed by Lady Luck Casino Nemacolin (up 14.7 percent) and Valley Forge Casino Resort (up 10.3 percent). Valley Forge also grew slots revenue by 8 percent last year, the highest of the 12 casinos, according to the board.
