Kevin O’Toole has been executive director of the Pennsylvania Gaming Control Board since 2009, following positions as deputy attorney general for the New Jersey Division of Gaming Enforcement and executive director of the Gaming Commission of the Oneida Indian Nation.
He is head of a regulatory agency that, since passage of wide-ranging 2017 legislation, has overseen Pennsylvania’s development of retail and online sports betting, iCasinos, mini-casinos, truck stop VGTs, and regulated fantasy sports wagering.
Penn Bets interviewed O’Toole Tuesday to get his assessment of the broad changes in Pennsylvania’s gaming industry that have taken place over the past two years and those that still lie ahead.
(Note: The interview has been edited for brevity and clarity.)
There was a lot on the plate at the outset
PB: Pennsylvania’s 2017 gambling expansion legislation created a lot for the gaming board to deal with. What’s been the biggest challenges?
O’Toole: We certainly knew there were a lot of challenges ahead for our agency, because we weren’t talking about one or even two initiatives — we had five or six, at least. We wanted to try and get all of those initiatives up and running in a time frame that met the expectations of the industry.
PB: What surprises did you deal with in going about that?
O’Toole: Nothing was surprising. It was just a matter of balancing the various initiatives and making sure they were all moving forward simultaneously. The challenges were in getting ourselves to the point where we were comfortable with the technology. Online activity, whether it’s sports wagering or slot-like games or table games, is using technology which is a different type of technology than what is at a casino when you go through the door and sit down at a slot machine or table game.
PB: There was some perception by industry observers that Pennsylvania regulators were slower and more cautious than peers in other states. What are your thoughts about there being any truth to that?
O’Toole: You have to look at the whole picture. We were tasked with five or six major initiatives — not just getting sports wagering up, not just getting iGaming up, not just getting VGTs at truck stops up. Our job is to do that thoroughly and in compliance with legislative directives, and that was not something that could be turned around in short order. I think we did everything right. We made sure that the entities that were coming into our jurisdiction from Europe and from other locations were properly vetted. Most importantly, we were able to launch new gambling initiatives at the time that the industry was ready themselves to move forward with these new initiatives.
PB: There was a lot of concern initially that Pennsylvania’s tax rates and fees were going to prevent the sports betting and iGaming sectors from developing here. Did you have your own worries about that when the casinos took some months before applying for licenses?
O’Toole: We had no doubts that it would work out. The legislation, as most legislation, involves a number of compromises, and the casinos in Pennsylvania were aware of what aspects could benefit them, what would allow them to get into areas that would help them attract new clientele — a younger clientele — and along the way would hopefully allow them to be successful at what they currently do. There was no doubt they were going to enter the arena.
PB: Did the legislature come to the gaming control board for advice or help in crafting the legislation?
O’Toole: We respond to inquiries when legislative staff have any questions. We give them the best answers we can. We did not craft the legislation. Once that legislation was passed and in the books, we’ve looked forward from that day forward. We’re moving forward on all these initiatives and they’re all working well.
Sports betting will grow, but without college prop bets
PB: Sports wagering, while still young with many casinos just getting started, had $1.5 billion in handle and $84 million in revenue in 2019. How does that compare with what you would have expected?
O’Toole: The expectations were somewhat unknown, so it wasn’t really a case of trying to meet expectations. We wanted to continue the process of opening up sportsbooks and online sports wagering as properties became ready, and we’re continuing to see growth in the sports wagering market.
PB: So what do you think of the idea of Pennsylvania reaching the kind of sports betting levels seen in New Jersey and Nevada?
O’Toole: Our board doesn’t try to do any revenue projections. We’re optimistic that there’s still growth out there, but we don’t have any particular target.
PB: Is there anything the sportsbooks might have wanted to do that you’ve rejected?
O’Toole: Early on we did look closely at collegiate sports. Given the fact that it’s an amateur athletic event, and in order to further protect the integrity of the events, our board decided that individual proposition bets in college athletics should not be allowed. You can’t say that Quarterback X is going to pass for X number of yards or touchdowns. You can wager on collegiate events, but they have to be team-oriented. We had talked to college sports administrators to see if they had any concerns, and it was one of the points they raised.
It’s still too soon to think of multi-state poker
PB: Are you happy with how online casino gaming has progressed?
O’Toole: I think those have gone very well. We’re still seeing growth and we’ll continue to see growth for the foreseeable future. Probably anywhere between two to four months in the future we should have some additional launches.
PB: But there’s still just one poker site. Why is that?
O’Toole: I think the casinos have focused on the other aspects so far, and I’m sure that poker will expand. I think in the next two or three months, we’ll have some additional poker platforms available in Pennsylvania. I think we’ve been pleasantly surprised that poker has shown very good activity through the poker platform at Mount Airy, run by the Stars Group. They have performed very well.
PB: What does any of that mean for joining a multi-state poker compact with New Jersey, Delaware and Nevada?
O’Toole: We’re still moving forward with getting the platforms up and running in Pennsylvania, so that will be something we’ll give serious thought to down the road, but not right at this time.
No concerns yet about over-saturation
PB: While the legislation allowed for 10 mini-casinos in Pennsylvania, we’re now looking at no more than four planned for development. Does that surprise you?
O’Toole: There was no expectation, because there was nothing to base those expectations on. This was a new type of activity, opening up mini-casinos. We were just going to see how those auctions went, and it went the way it went. There was very good competition and over $100 million raised in the auction process, and I think that was certainly well-received by most observers. It raised money for the commonwealth and gave an opportunity for the bidders to expand their market into additional areas.
PB: By the end of 2020, three of those mini-casinos plus the Philadelphia Live! casino are all scheduled to be opened. Do you have any concerns about over-saturation or a lot of cannibalization of existing casinos, based on those?
O’Toole: It’s not really something I think about. Eventually, I think we’ll be up around 17 casinos (counting the mini-casinos), and it’s really a wait-and-see approach. If we get them up and running on their timetable with good slot machine products and excellent table game operations, we’re optimistic.
More gambling imminent at truck stops, not airports
PB: What’s the future hold for the number of truck stop VGT locations?
O’Toole: We’re up to 23 tested and approved, and between now and the end of the fiscal year, I think realistically we might have another 20 establishments up and running. As we go into the 2020-21 fiscal year, we’ll probably have another 20 or 30 up and running in the first seven or eight months.
PB: The one part of the gambling expansion that’s never discussed is the provision allowing airports to provide a form of gambling that can be done on tablets. What’s the future of that?
O’Toole: The legislation says an airport or airport authority has to partner with a slot machine iGaming certificate holder. So an airport authority has to partner with a casino, and as of January 2020 we have not been advised of any arrangement finalized in that regard. We’re not working right at the moment at getting any airport up and running.
PB: In putting all the new forms of legal gambling together in 2019 with what already existed, the state set a record high of $3.41 billion in revenue generated. What do you see that number reaching in the future, given all the expansion still to take place?
O’Toole: I think it’s too speculative to come up with any specific figure or growth percentage, because of the dynamics of having additional properties. It’s going to expand the overall accessibility of legalized gambling, and we’re going to continue doing everything we can to allow patrons to be aware of how they can gamble responsibly. Just having additional properties will grow the market, but I can’t be more specific than that general statement.
