Pennsylvania Becomes Fourth US State To Legalize Online Gambling

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*Updated 10/30: Governor Tom Wolf has signed HB 271, officially legalizing online gambling in Pennsylvania!

The Pennsylvania General Assembly passed an expansive gambling bill Thursday which authorizes online casino and poker games, VGTs at select truck stops and the opening of several satellite casinos. The legislation is one part of a broader revenue package meant to solve the state’s $2.2 billion budget deficit.

HB271 was amended by the Senate on Wednesday afternoon, where it subsequently passed by a margin of 31-19. The bill was then moved to the House, where opponents made a last-minute push to effectively derail by sending it back to committee. The effort proved unsuccessful, however, and the legislation was taken up again the following morning. After several more hours of legitimate debates and even more grandstanding, the bill passed at 11 a.m. by a vote of 109-72.

The legislation makes Pennsylvania the fourth state to legalize online gambling in the US, behind Nevada, Delaware and New Jersey. The achievement is the result of years of efforts by Commonwealth lawmakers like John Payne, Rosita Youngblood and Nick Miccarelli, who have advocated for regulated iGaming as a potential untapped source of recurring revenue.

Online gambling overview

HB271 will allow Pennsylvania’s licensed land-based casino operators to offer three categories of Internet gambling games:

  • Online slots
  • Online table games
  • Peer to peer online poker

Operators must buy a license for each of the game types they wish to offer, at a cost of $4 million per license. They also have the choice of buying all three for a discounted total of $10 million, if the purchase is made within the first 90 days.

After 120 days, “entities” outside of PA will have the option of buying a license as well, at the $4 million price point.

Sen. Jay Costa (D-Allegheny County) recently stated his hope that the industry will bring an upfront cash infusion of around $200 million in total licensing fees for the general fund in 2017-18.

Onerous tax rates could the crippling

Both online table games and poker will be taxed at a rate of 14 percent, with an additional 2 percent local tax added on top, which is close to the 17.5 percent rate that New Jersey’s regulated online casinos pay for all game types across the board. But lawmakers in PA have seen fit to charge a whopping 54 percent on slots revenues, a shortsighted move which could severely hamper the growth of the industry in the state.

As slots are one of the biggest iGaming revenue generators, the crushing tax rate, along with the need to purchase multiple licenses, could lead the state’s smaller operators to steer clear of the industry altogether. Even in a best case scenario, it will likely lead to an industry that is weaker than it could have been had the slot tax rate been more sustainable.

Casino interests and lobbyists were displeased with constituents of the amended proposal, with the slot tax rate presumably one of its foremost grievances:

What else is in the package

Satellite casinos

The bill authorizes the operation of 10 satellite casinos, open to licensed racetrack and freestanding casinos. Operators must bid on the licenses, which start at $10 million a pop, and which will allow them to run between 300 and 750 slot machines and up to 30 table games each. Satellite casinos cannot be built within 25 miles of any existing competitor casino.

VGTs at truck stops

Video gaming terminals were a huge sticking point for lawmakers in previous gaming package negotiations. The Senate, originally against VGTs altogether, compromised by allowing for VGTs at qualified truck stops, but not at bars, restaurants and private clubs, which many House members had originally pushed for.

The terminals will be allowed at locations which have at least 20 parking spaces dedicated to commercial vehicles, and which sold at least 50,000 gallons of diesel fuel the prior year.

DFS, sports betting and online lottery

In addition, the bill allows for regulation of daily fantasy sports companies and includes provisions to legalize betting on live sporting events should the federal ban on that industry be lifted.

The Pennsylvania lottery will also have access to the online market and will be allowed to sell numbers game tickets and offer new instant web games.

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Bill Grinstead

Bill has over a decade of experience working in diverse aspects of the online gambling space. He is currently focused on legal, US online gaming, which he has reported on since the industry first became regulated in the country.

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