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Casinos Not Biting During Pennsylvania’s Online Gaming Licensing Push

Earl Burton, Jun 29, 2018 02:42 UTC

When Pennsylvania became the fourth state to pass online gaming and poker regulation, it was expected that there would be a flood of activity from the 12 casinos in the state fighting for those licenses. Instead, it appears that the casinos are a bit warier than previously believed, with a slow start to the licensing procedures that might jeopardize the opening of the Pennsylvania industry later this year.

What is Available?

At the beginning of April, the Pennsylvania Gaming Control Board announced that they were ready to begin receiving applications for licenses under the new online gaming regulations passed in 2017. The first phase of the licensing procedures was specifically targeted towards those companies that were already in the Keystone State, the 12 casinos and racetracks that already were licensed for casino gaming by the PGCB. For a 90-day period, these businesses would receive a “first chance” at the 36 licenses that covered three different areas. Online slots, online table games and online poker licenses (with 12 each for the 12 gaming outlets in the state) were available, with the list price for purchasing all three a neat $10 million (a $2 million savings over the $4 million individual license price).

After the 90-day period expires – July 2 – the licenses would then be opened to outside vendors. They would have a similar 90-day application period, but they wouldn’t be given the financial break. Each license that an outside vendor applies for would be charged at the full $4 million. After this process is completed (roughly October 2), then the Pennsylvania system would be ready to go online.

Or So We Thought…

As of early this week, the PGCB has revealed that exactly ZERO of the 12 companies already licensed in the state had applied for any of the licenses available. With the time frame for businesses to get in the game, there has instead been an eerie silence. Such companies as Sugar House in Philadelphia, the Rivers Casino in Pittsburgh, Presque Isle Downs & Casino in Erie, Parx Casino in Bensalem and Caesars Entertainment (ownership of Harrah’s Philadelphia) have not put in any applications and, with the application process closing next week, are running out of time on the subject, especially if they want the discounted rate for the licenses.

What could be the reasons for this? One of the reasons for the lack of excitement from the companies could be the exorbitant tax rate being levied on the new iGaming outlets. Online slots – which are offering 12 licenses – are being taxed at an unheard-of 55% of revenues, what the state charges for the live slot take of the casinos. Businesses don’t like paying taxes and they especially don’t like paying outrageous amounts of money in taxes.

The second reason for the lack of action on the licensing front could be simply competition. Nobody in business likes to be the first into the pool, especially if it shows off a strategic philosophy or course of action that another business might copy. Casinos are the same way – the Pennsylvania casinos may not want to give their competitors an indication of what their thoughts are in a fear of having said competition make a tactical move against them.

It Isn’t Just Online Gaming and Poker with Issues

After the U. S. Supreme Court struck down the Professional and Amateur Sports Protection Act (PASPA) of 1992 in May, sports betting became the new raison du jour for state legislatures to raise revenues. Pennsylvania had already been in on this, however, passing sports betting regulations along with their online gaming and poker regulations and just waiting for the SCOTUS ruling before moving forward. As with online gaming, however, there has been absolutely no action by the casinos in the state for any sports betting licenses.

The problem with the casinos and sports betting? Once again, it appears that the taxation rate is something that many are having trouble with. Sports betting revenues will be taxed at 36% under the Pennsylvania plan, which isn’t palatable for many companies who would like to offer sports betting in the state. Thus, they are sitting on the sidelines instead of starting up the action inside Pennsylvania’s borders, something that may become a concern for state lawmakers should it continue.

Delay of the Opening of Business?

The continued lack of applications by anyone involved in gaming must be of concern to the Pennsylvania General Assembly. Revenue money from the online casino gaming and poker industry has already been counted in the budget and each month that goes by without any action on that front is money that is lost by the state. If it continues that no one is showing any interest in getting into Pennsylvania’s regulated market, it could delay the opening of that industry from this fall into perhaps 2019.

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