It’s been 20 months since the Pennsylvania state legislature legalized sports betting pending the Supreme Court’s decision in May 2018 to overturn the Professional and Amateur Sports Protection Act. Given the timetable, and that Pennsylvania had laws in place ahead of the momentous decision, those who follow sports betting would have bet the Keystone State would be a “first mover,” in launching sports betting, both retail and mobile.
But Pennsylvania has been the tortoise to the hares of Delaware, New Jersey, Mississippi, and West Virginia. All of those states legalized and/or launched sports betting within months of the Supreme Court decision.
But Pennsylvania didn’t launch at any of its brick and mortar sites until Nov. 18, 2018, and is only now on the cusp of launching its first mobile sports betting sites. Which of the currently nine licensed sportsbooks will launch has not been officially announced, though many industry experts have their opinions.
In either case, with each delay Pennsylvania is missing out on a substantial tax revenue opportunity, far larger than that in New Jersey due to the state’s oppressive tax rate on sports betting revenue.
A select few candidates for the first mobile launch
Parx Casino seems like a fair candidate to be among the first to get mobile sports betting up and running. The casino already supports a land-based book at its casino, along with two others under its license — one at the South Philadelphia Turf Club and another at the Valley Forge Race & Sportsbook.
“The Parx Casino® online sports betting app complete with live in-game betting is also close to launch,” according to the sports betting page of the company’s website, on which the company has also been aggressively touting its “Betslip Builder” app, which allows bettors to see live odds on mobile devices.
According to the Pennsylvania Gaming Control Board, it will begin testing on one mobile app in the near future, though no firm date has been set, and it won’t confirm which sportsbook will launch.
Other strong candidates to launch first include SugarHouse Casino, which already has a retail book at its Pennsylvania casino, and more importantly, an online sportsbook in neighboring New Jersey. Assuming SugarHouse is prepping to launch a near equivalent version of its NJ sports betting app in Pennsylvania, it’s the odds on favorite to be first to market. Rivers Casino, which like SugarHouse is operated by Rush Street Gaming, could launch at the same time or just behind SugarHouse, as it’s believed the two will utilize the same platform and Kambi powered back end.
The long rollout in Pennsylvania can be credited in part to the state’s astronomically high licensing fees — $10 million. Potential operators were slow to pony up for a license, and it was five weeks between when the PGCB rolled out regulations and Penn National (Hollywood Casino) became the first to apply on Aug. 16.
The Hollywood Casino’s sportsbook license application was approved on Oct. 3, 2018, and the sportsbook opened Nov. 18, 2018.
From the PGCB’s perspective, the rollout hasn’t been slow … and even if it’s perceived that way, the state isn’t feeling any pressure to move more quickly.
“We had bricks-and-mortar up in six months following the court decision,” PGCB spokesman Doug Harbach said. “I don’t consider that slow. As for mobile, there is no doubt that the DOJ Wire Act interpretation announcement (in January) may have slowed things a bit, but our jurisdiction wanted to make sure we got this right above doing it fast.”
The delay is costing the state money.
Using “Pennsylvania as an example, the fees were so high that in some cases they went unclaimed,” said Robert Davidman, a partner in Spreads.com. “That has slowed the process, leaving a lot of tax revenue on the floor.”
Look to New Jersey for peek at mobile boon
Pennsylvania made 13 sports betting licenses available, one for each existing casino plus one for a new casino planned in the sports stadium area in Philadelphia.
Since sports betting started, the state has taken in $4.3 million in taxes in the five months (the April revenue report isn’t available yet), though in fairness, only one sportsbook was live in November. By March, eight sportsbooks were open, and there was no mobile. In March, according to the PGCB, state sportsbooks took in $44.5 million in handle with gross revenue of $5.5 million and $1.9 million in tax revenue.
Harbach said the only projection he was aware of was one made by the Pennsylvania Department of Revenue for “around $11 million for FY 2018-19.” At the current pace, Pennsylvania should take in right around that number by the end of the fiscal year, meaning that while those outside the state see plenty more revenue to be had, those inside it likely don’t feel they’re “losing” anything during the rollout.
Comparatively, mobile has accounted for up to 80 percent of handle and tax revenue in New Jersey. In March, $372.4 million in sports bets were placed in New Jersey. Sportsbook revenue was $31.6 million and the state took in $3.7 million in tax revenue (NJ levies an 8.5 percent tax on physical sports books and 13 percent on mobile sports books).
Had Pennsylvania sportsbooks had taxable revenue of $31.7 million in March, the state would have taken in $10.8 million in tax revenue. That’s because Pennsylvania levies a tax of 34% (plus 2% local share assessment) on sports betting revenue.
Of course this assumes Pennsylvania will do as much revenue as New Jersey. So will it?
Our internal projections based on analysis of the New Jersey and Las Vegas markets leads us to believe that Pennsylvania online/mobile sports betting sites will generate handle of $3.94 billion in 2020, which translates to $236.4 million in sportsbook revenue and just over $80 million in tax revenue.. These numbers line up with Gambling Compliance projections that see the industry generating $320 million per month via mobile.
Pennsylvania will bring in more tax revenue than NJ
There are multiple factors that could lead to even higher tax revenue in Pennsylvania:
- New Jersey has a population of 9 million, while Pennsylvania’s is 12.8 million;
- Pennsylvania can have up to 13 land-based sportsbooks, and already PA features more retail books in major population centers than NJ does. (NJ will always have more mobile apps, however, due to PA license holders being limited to one skin per license);
- Geolocation data has shown that New Jersey is benefiting from consumers crossing the border from New York and Pennsylvania to place bets on their phones. Once Pennsylvania launches mobile sports betting, it would be logical to assume that most Pennsylvania residents will bet in-state.
“(Mobile) is definitely going to help,” said Brendan Bussmann, partner and director of government affairs for Global Market Advisors. “If you went to look at the at the NJ DGE (geolocation maps), you’re going to see less dots in Philadelphia. In the western part of the state, you’re going to get some people who are going to cross over from Ohio.”
Since sports betting went live in Pennsylvania in November, handle has risen consistently as more and more sportsbooks have come online. That trend will likely continue, and even without mobile, numbers will likely rise at the start of football season.
But until Pennsylvania not only launches mobile, but offers it through multiple apps and websites, the state will continue, as Davidman said, to leave money “on the floor.”