It’s been just over a year since Gov. Tom Wolf signed PA’s omnibus gambling expansion bill into law, yet so far, the state’s online gaming industry has yet to kick off.
But that will soon change. Wednesday, the Pennsylvania Gaming Control Board (PGCB) held a hearing to discuss online casino petitions for two operators, Presque Isle Downs, Inc. and Stadium Casino, LLC, pushing the industry ever closer to going live.
Regulators unanimously approved both companies to offer select forms of real-money online gambling.
Their approval brings the number of certificates awarded to 28, leaving 11 of the 39 total original permits still up for grabs.
State slots licensees were initially allowed to purchase permits to offer online slots, online table games and online poker, all for a flat $10 million fee. Following a window lasting several months, casinos then had the option of buying certificates à la carte for $4 million. A sports wagering certificate, which includes mobile, is separate and costs $10 million.
With the exclusivity window for PA operators to buy licenses now closed, regulators have opened up the process to out-of-state entities (e.g. MGM Resorts).
Presque Isle’s new partners
Presque Isle Downs, which is being acquired by Kentucky-based Churchill Downs, was first up for PGCB approval. The property submitted its petition for online casino (not including poker) in August, and told regulators that Churchill will also serve as its online gaming supplier.
“Presque Isle Downs anticipates that this transaction will close very soon, and in furtherance of their joint agreement, Presque Isle Downs is relying on Churchill Downs as its partner for the iGaming platform and operations,” executives stated in a slideshow presentation.
It’s worth noting that Churchill Downs has about 10 years of experience with online/mobile betting on horse races.
Churchill will operate its PA online site under the BetAmerica brand, which is already part of the regulated Mississippi sports betting landscape. Gaming software maker SBTech, based out of the United Kingdom, will supply the online gambling platform for the Churchill product in the Keystone State.
While SBTech is already heavily involved with sports betting in the U.S., its deal with Presque Isle in Pennsylvania marks its first entry into the online casino space in the country.
Presque Isle has yet to seek sports betting approval in PA, but execs told regulators Wednesday that its BetAmerica platform will be ready for “instant activation” of sports betting should it decide to purchase a certificate. In other words, it is more than likely going to seek sports betting licensure.
Stadium’s situation a bit muddled
Stadium Casino, which was awarded a license in 2014 to build a $600 million casino in Philadelphia, might actually be planning to abandon those brick-and-mortar plans. There have been rumors that the license might be sold thanks to “apparent ownership issues,” according to a report from TribLive.com.
Stadium didn’t provide any real clarity on the situation at the hearing, but it did say that it is in “a bit of a pickle,” in reference to applying for an online casino license with the speculation circulating.
During the hearing, Stadium Casino stated that it would relinquish its peer-to-peer poker certificate, which it bought as part of the original $10 million online gambling licensing package.
It’s not hard to see why; online poker in New Jersey generated just $16.4 million in revenue through the first nine months of 2018, down 11.7%. New Jersey online casino revenue was up 20.9% to $199.5 million through September, according to Garden State figures.
Stadium Casino has also purchased a satellite casino permit, which it plans to build at the Westmoreland Mall near Pittsburgh. Despite the uncertainty in Philly, Stadium’s mini-casino reportedly doesn’t have any roadblocks.
Pennsylvania’s gaming market
Online gambling sites could give the PA market a welcome boost. The state’s brick-and-mortar casino market won $2.46 billion from gamblers through the first nine months of 2018, only 0.6% more than the same period last year. The market grew only 0.4% in 2017, trailing far behind nationwide commercial casino revenue growth of 3.3%, according to American Gaming Association data.
So far this year, slots have accounted for $1.79 billion (up 1.1%), while table games have generated $666.4 million (down 0.5%).
It wasn’t long ago that Pennsylvania’s market was red hot and Atlantic City’s was ice cold. But online casino, and recently sports betting, have turned things around for neighboring New Jersey.
Presque Isle had $99.5 million in gaming revenue through September, up 2.5% year-over-year. That’s despite its table games revenue of $10.7 million representing a 7.7% year-over-year decline.
Catching up to NJ
Pennsylvania will tax table games and online poker revenue at 16%, while operators will pay a whopping 54% tax on online slots. New Jersey, on the other hand, charges a flat 15% online casino tax.
The tax rates in Pennsylvania will play a role in the growth, or lack thereof, of its online casino market. Annual online casino estimates for Pennsylvania have ranged from about $150 million to $300 million. New Jersey’s projected 2018 online casino revenue is more than $260 million.
Pennsylvania has about 12.8 million people, while New Jersey has about nine million.
Based on those factors, the online casino markets in the two states should eventually be comparable. New Jersey went online in late 2013, and it generated $93.8 million in its first full calendar year. When 2018 is finished, New Jersey’s online casino market will have grown by about 180% since 2014.
Pennsylvania’s market will start off significantly behind, but it will slowly but surely close the gap as the market matures.