Pennsylvania’s gaming operators entered the world of online casino games six years later than counterparts in New Jersey and had a lot of catching up to do.
The April revenue figures from the two states show Pennsylvania made its biggest strides yet toward achieving the Garden State’s level of success.
For the first time, Pennsylvania’s iCasino revenue in April reached more than half of New Jersey’s level, $43.1 million compared to $80 million.
Perhaps more significantly at a time when states across the country are facing revenue shortfalls due to economic impact of the COVID-19 shutdowns, Pennsylvania also for the first time surpassed New Jersey in tax revenue from iCasinos: $17.3 million compared to $12 million.
Pennsylvania gathered more in taxes despite having just 54% of New Jersey’s April revenue due to the different tax structures in the two states. Pennsylvania taxes all forms of gaming higher than New Jersey, including its blended iCasino tax rate amounting to 40%, compared to 15% for its neighbor to the east.
In fact, although Pennsylvania’s total 2020 iCasino revenue of $101.4 million through April is only 40% that of New Jersey’s, its tax collection of $37.6 million for the year nearly matches New Jersey’s $37.8 million.
PA still trails, and let us count the ways
Pennsylvania’s iCasino industry is marking such progress after 10 months despite a variety of shortcomings compared to operators in New Jersey:
- There were many fears initially that growth of the industry in Pennsylvania would be hampered by the comparatively high tax rate and a $10 million licensing fee for operators who wanted to offer all types of games.
- While the number of iCasino sites has been growing in Pennsylvania in recent months, they number just 10 compared to 32 in New Jersey.
- Pennsylvania sites have a far smaller number of game options available, typically with fewer than 100 slots on their menu compared to several hundred among New Jersey counterparts.
- While live dealer games are a popular option in New Jersey, there are none yet available in Pennsylvania, which also has just one poker site compared to three in New Jersey.
PA has had a lot more room for growth
Both states’ interactive gaming has benefited greatly from the shutdown of land-based casinos in mid-March, driving their home-bound patrons to pursue online gambling in a way they might not have considered before.
But with nearly 4 million more people residing in the Keystone State than its neighbor, Pennsylvania’s iCasino industry may be getting an even bigger boost from the shutdowns. Its April iCasino revenue was up 73.1% from March, while New Jersey’s increased 23.5%.
Starting from a lower base, of course, Pennsylvania has a lot more room for growth, especially as new sites continue to be added.
DraftKings and Caesars, for instance, just added online casinos to their sportsbook sites in April, while New Jersey’s seven-year-old industry has long been at maturity.
Doug Harbach, a spokesman for the Pennsylvania Gaming Control Board, said it’s no surprise that the state’s young industry has trailed New Jersey’s from inception.
“Markets take time to develop, reach maturity, and become stabilized,” he said in an email. “PA’s online market was just launched in July 2019 while NJ launched casino games six years earlier in 2013, so this market is still in its infancy. It can take years for operators to build a loyal customer base.”
New Jersey regarded as a role model
New Jersey is held up by advocates for iGaming of all kinds as a shining model for other states, but its first few years were far less successful than the numbers it is pulling in today.
It took four years of existence before gross annual revenue tallied more than $200 million in New Jersey. In 2019, it had a big jump to nearly $483 million from about $299 million the year before.
In the first four months of 2020, with $101.4 million in revenue, Pennsylvania is on pace to exceed $300 million in its first full calendar year.
An October 2019 study for the iDevelopment & Economic Association, a trade group that promotes iGaming, gave a number of reasons for how the industry has progressed in ways that explain New Jersey’s impressive gains.
“These factors include the evolving acceptance of iGaming among New Jersey residents who choose to gamble, the continuing improvement of product offerings and operating platforms, and the maturation of marketing and operations technologies, as well as the increasing acceptance of credit card payment transactions by the large issuing banks,” the iDEA report stated.
At that time, the report said, it was hard to predict how Pennsylvania’s industry would do compared to New Jersey’s, with its “high taxes and fees that may effectively prevent operators from achieving their full revenue potential.”
Jeff Ifrah, founder and counsel for the iDEA group, said that he still believes Pennsylvania has constrained its industry. The numbers being generated might be even higher with lesser costs to the operators, he suggested.
“I do think that PA was of course smart to recognize and regulate iCasino in order to supplement land-based casino revenue and generate new tax revenue,” said Ifrah, who is hopeful that other states impacted by the shutdown of their land-based casinos could find cause to legalize more iGaming by looking at the experience of Pennsylvania, New Jersey, and, to a lesser extent, Delaware.
More games are in the pipeline in PA
While tax revenue is the only way in which Pennsylvania’s iCasino industry equals or surpasses New Jersey’s now, it is reasonable to expect other gaps between the two will gradually narrow.
The Pennsylvania operators have been adding to their available games — which require state gaming board testing and approval — by dribs and drabs, though they remain far behind New Jersey counterparts.
The Pennsylvania PlaySugarHouse site of Rush Street Interactive, for instance, offers 101 slots, which is 23 more than a month ago but 355 fewer than the New Jersey version of the PlaySugarHouse casino. The PA site has two blackjack and four roulette versions compared to seven and eight, respectively, in NJ.
Harbach said a number of factors explain the fewer games still available in Pennsylvania: the time it takes in the testing process, with different regulations in different states; the operators’ choice between whether to focus their efforts on sports betting vs. casino games; some companies’ preference to get online casinos started even with a small menu rather than sit on the sidelines; and more.
While operators contacted by Penn Bets declined to describe their future plans, Harbach said that combined, they have 95 more games pending approval in addition to 289 that have already been authorized. He said the COVID-19 virus has not slowed down the state’s testing and approval process.
Updates on live dealers and poker
He also said that plans for live dealer games in Pennsylvania were disrupted by the controversial U.S. Justice Department interpretation of the federal Wire Act concerning gambling that crosses state lines. It meant all live dealer operations will have to take place in Pennsylvania instead of relying on New Jersey studios, which has slowed down the process, but only temporarily.
“PGCB staff have been working closely with a live dealer studio operator for more than a year and we expect that a full array of live dealer games including blackjack, roulette, baccarat, and carnival poker games will be available for play in the near future,” Harbach said.
He also indicated that while more poker sites are planned in Pennsylvania besides the one run by PokerStars since November, the operators are the ones to decide when they’re ready for test launches. The gaming board’s executive director, Kevin O’Toole, indicated in February that he expected more poker sites to launch within two to three months, but that has not occurred.
None have active proposals pending with the gaming board, although it’s possible some could be influenced to act soon by seeing PokerStars’ success during the COVID-19 shutdown of live poker. Its April revenue of $5.3 million in Pennsylvania was more than that of the three New Jersey poker sites combined.
“The decision on when they will offer is up to them,” Harbach said of the six other casinos that obtained poker licenses: Parx, Harrah’s Philadelphia, Rivers Philadelphia, Hollywood Casino, Valley Forge Casino Resort, and Wind Creek Bethlehem.
“There certainly has been discussions with some of these operators about launching a poker site, but none has moved the project forward toward a review and test,” Harbach noted.
Photo by Sergey Nivens / Shutterstock.com
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