Latest PA Proposed Online Gaming Legislation Carries Poison Pill

Red and white pharmaceutical pill

As Pennsylvania once again attempts to legalize online gaming for the fourth consecutive year, the path towards successful culmination of those efforts only seems to be getting thornier, with no shortage of help on that front from the state’s legislators. Chris Krafcik of Gambling Compliance sent out a series of tweets on Tuesday detailing where the Keystone State Senate appears to be.

Separate Licenses for Poker, Casino

The decision to offer distinct licenses for online casinos and online poker providers would differentiate Pennsylvania from New Jersey, which has operated on a single-license system for online gaming establishments since the activity was legalized in 2013.

Notably, the Garden State also charges a much less onerous $200,000 initial licensing fee, with $100,000 of that as an initial deposit going toward a company background check.

Requiring online poker providers to pay a separate and robust $5 million license fee could well be a non-starter for many, as online poker simply won’t generate enough revenue to justify that kind of investment. Illustrating this point, during what was a very profitable March overall for New Jersey iGaming, online poker revenues (just over $2.2 million) still paled in comparison to online casino proceeds (nearly $19.5 million).

Category 3 Licenses Excluded

Category 3 license holders are restricted to no more than 600 slot machines and 50 table games on their premises, and all gamblers at their resorts must be registered members. The provision excluding these casinos would automatically eliminate Valley Forge Casino Resort and Lady Luck Casino Nemacolin from eligibility.

Taxes – The Big Problem

The biggest area of concern is the 54 percent tax rate on both table games and slots. This is considerably higher than the 16 percent rate that the state’s brick-and-mortar casinos pay for table games, and equals the rate they pay for slots. It also would represent the highest tax rate for online gaming worldwide.

As alluded to previously, the fees proposed are also considerably higher than those in New Jersey or Nevada, two other states with an established and regulated online gaming industry.

The tax rate for online gambling revenue in New Jersey is 15 percent. Nevada only allows online poker at present, with a tax rate of 6.75%.

The Bottom Line

By virtue of simple math, a bloated tax rate would naturally lead one to conclude that the state would rake in greater revenue. The practical reality, though, is that the proposed rate would actually serve as a deterrent to Pennsylvania maximizing the number of participants the iGaming space, as certain entities would undoubtedly find the taxes and fees untenable for their bottom lines.


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