Pennsylvania Casinos Double Down Against Lottery Ahead Of Online Gambling Launch

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All signs still point to the first Pennsylvania-sanctioned traditional, real-money online casino games launching in mid-July. However, the casinos are doubling down on a claim that the state lottery’s online offerings are encroaching on their turf and thus threatening the success of those games.

According to a report from Penn Live, a group of the state’s Las Vegas-style brick-and-mortar casinos have asked the state’s Commonwealth Court to intervene ahead of next month’s anticipated kick off. It’s unclear which PA online casino or casinos will launch next month.

The casino group has requested an injunction that if granted could require the PA Lottery to stop offering some of its games, which the casinos say are too similar to what they will soon be offering. PA is home to nearly 13 mm people and sees tens of millions of tourists annually, but the gaming market is mature and the potential gaming revenue from the expansion to internet casino gambling is finite. PA casinos are hoping to replicate the success of NJ’s online casino industry, which won $179.4 mm through the first five months of this year, up more than 50% year-over-year.

The PA Lottery’s online gambling offerings are expected to generate about $30 mm this fiscal year.

The lawsuit was filed in 2018. Pennsylvania legalized online gambling, for both the casinos and the lottery, in late 2017. The PA Lottery began its online gambling in May of last year. In August, the PA Lottery launched a simulated form of sports wagering called Xpress Sports. The casinos filed suit that same month.

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The casino group is comprised of Parx Casino, Hollywood Casino at Penn National Race Course, Harrah’s Philadelphia Casino & Racetrack, The Meadows Casino Racetrack Hotel, Stadium Casino, Valley Forge Casino Resort, and Mohegan Sun Pocono, according to Pennwatch.org.

Slots are front and center

In terms of the revenue they generate, the one-armed bandits are the kings of online casino gambling in NJ. The PA casinos are especially concerned about the PA Lottery’s games that they say are too similar to their slots. According to the lawsuit, the casinos identified at least nine iLottery games that allegedly have identical titles and/or themes to slots found on casino floors.

The lawsuit also alleges that the PA Lottery is running its version of online slots like the casinos will do. The Lottery is said to pay out an average of 85% of the handle from the games in question in the form of winnings to gamblers, a payout percentage that customers are accustomed to on brick-and-mortar casino floors. The payout percentage could bolster the argument that the Lottery’s games are similar to traditional slots, whether online or on a casino floor. Furthermore, the suit alleges that the PA Lottery is allowing its online gamblers to play in denominations that are similar to traditional slots.

The Lottery’s offerings also offer free plays to customers, another common feature of a traditional slot game. And finally, the PA Lottery has games for those 18 year of age and older, while the casinos can only permit those 21 and over to play.

The casinos apparently are not worried about their upcoming online blackjack tables, for example.

The 2017 gaming expansion law

The monumental law passed in 2017 to legalize online gambling, as well as sports betting, included a provision that appeared to restrict the Lottery from offering games that the casinos would have a problem with. Looking back at the provision, can one say it wasn’t written in the most explicit language?

From Act 42:

“iLottery game.”  Internet instant games and other lottery products offered through iLottery. The term does not include games that represent physical, Internet-based or monitor-based interactive lottery games which simulate casino-style lottery games, specifically including poker, roulette, slot machines or blackjack.

The words “represent” and “simulate” are particularly interesting in this context. The PA Lottery believes its games to be legal under Act 42’s provisions. The casinos couldn’t disagree more.

“The actions of the Pennsylvania Lottery are illegal,” the casino coalition spokesperson David La Torre said last August. “To make matters even worse, the agency is promoting casino-style gambling to teenagers. Pennsylvania casinos must follow very stringent regulations on underage gaming or face millions of dollars in fines. Meanwhile, the Lottery is openly violating the law and marketing these games to anyone as young as 18. Not to mention, any loss in casino revenue will hurt Pennsylvania’s tax collection for property tax relief and local improvement projects funded by gaming tax dollars.”

The legal system will ultimately decide the matter, and its ruling could have a major impact on the size of the traditional online casino gambling market in PA.

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Brian Pempus

Brian served as a senior reporter and online content manager for Card Player Magazine for nearly a decade before joining USBets in October 2018. He is currently focused on legal and regulated sports betting and online gaming. He's an avid jiu-jitsu practitioner in his free time.

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