Each year, Americans wager billions of dollars on their favorite sporting events, and usually not legally. Due to a law passed over 25 years ago, the sports betting industry is mostly relegated to Nevada, and is not yet legal in the Keystone State.
This legislation has had the effect of channeling gamblers into unregulated, black-market sportsbooks, which offer little consumer protections.
That could all change very soon, however, as the Supreme Court is currently debating whether to amend the law, or overturn it altogether. PA lawmakers are poised to take advantage of that likely scenario, and have already passed legislation which would allow the state’s brick-and-mortar casinos to offer both live and online sports betting to their patrons.
Here’s what you need to know about the current legality of sports betting in Pennsylvania, and the future of the industry in the state.
What’s holding back sports wagering in PA?
In 1992, Congress effectively banned sports betting throughout most of the US with the passage of the Professional and Amateur Sports Protection Act (PASPA). The legislation prohibits state entities from authorizing or licensing any type of gambling on competitive sports, and was created ostensibly as a way to protect the integrity of such events.
Nevada was grandfathered into the deal, and is, to this day, the only state which offers gamblers a full range of sports wagering options. The law included a carveout for a handful of other states as well, and gave New Jersey a one-year window in which to pass its own sports betting legislation.
Garden State lawmakers couldn’t come to an agreement on a bill in time, however, essentially shutting NJ out of what could have been a very lucrative industry.
The Supreme Court case that could open the floodgates
Realizing its missed opportunity, NJ passed the Sports Wagering Act in 2012, which would allow sports betting at licensed New Jersey casinos and racetracks despite the overarching PASPA prohibition. Five sports leagues subsequently sued to stop them, pumping the brakes on the plan.
New Jersey Gov. Chris Christie responded by arguing that PASPA violates states’ rights, and is therefore unconstitutional. The US Supreme Court agreed to hear the case (Christie v. NCAA) in 2017, and a decision is expected at any time. Industry experts and legal analysts believe there is a high probability that New Jersey will prevail, possibly leading to an explosion of sports betting across the country.
A win for NJ could still be a loss for PA
The Supreme Court decision might not be as clear-cut as many are hoping. Instead of fully overturning the law, the court may only repeal it partially, while holding it up as constitutional.
In that complex legal scenario, operators could still offer sports betting in New Jersey, but the state would not be permitted to regulate or tax it. So while NJ may get its wish, other states, like PA, wouldn’t be able to immediately follow suit.
Pennsylvania’s sports betting law and framework
Pennsylvania has not dallied on the prospect of legalizing sports betting within its borders. Last year, lawmakers passed an expansive gambling package which, apart from regulating online gambling, includes an option for the state’s casinos to open their own sportsbooks, should New Jersey prevail in its case.
Huge taxes and fees will test profitability
In the event that PASPA is overturned, PA slot licensees will have the opportunity to offer single-game sports wagering both live and through Internet sites.
But doing so will come at a huge price in terms of fees and taxes, and will likely cause some venues to opt out due to concerns over profitability.
To get up and running, venues will need to pay the following:
- $10 million licensing fee
- 34% tax on gross gaming revenue
- 2% local share assessment tax
- .25% federal excise tax on handle
In total, sportsbooks will be giving back around 41% of their profits, a huge chunk for a vertical known for razor-thin margins.
For comparison, New Jersey plans to impose a much more reasonable 17.5% tax on revenue, while charging $400,000 per license.
What’s more, Congress could implement a so-called “integrity fee”, which would require operators to hand over a small percentage of their entire handle (1%) to professional sports leagues. These fees could equate to 20% of revenue and could potentially put the nail in the coffin of the industry altogether.
Luckily the introduction of an integrity fee is an unlikely scenario, as PA passed its legislation before they became a hot topic. Not to mention, leagues probably chose the 1% on handle as a starting point for negotiation. Already we’re seeing other states introduce more reasonable integrity fees, such as New York, which proposed a fee of 0.25% on handle.
Shortsighted money grab could have long-term consequences
PA sportsbook fees are undoubtedly massive, but come as no surprise in a state where lawmakers routinely squeeze casinos for the most cash possible.
Indeed, we need look no further than the state’s forthcoming online casino industry to watch the unprecedented money grab in progress. Brick-and-mortar casinos that wish to open their own online sites will be charged a $10 million fee to offer a full suite of gambling games (or $4 million per game type), and must pay an outrageous 54% tax on slot machine revenue.
The shortsighted approach could have the opposite intended effect, hampering both the sports betting and iGaming industries before they can get off the ground.
When and where will I be able to bet on sports in PA?
In the event that PASPA is fully repealed, we may very well see sportsbooks opening up shop in the state sometime later this year. Why there’s even a provision in the state’s expanded gambling bill (HB 271) that permits license holders to open up temporary facilities, presumably to help expedite the rollout.
Here’s where you may be able to play:
Sportsbooks at casinos
According to the law, potentially any of the state’s 12 licensed slots casinos may open their own books. Here’s the original text from the bill:
“The board may authorize a slot machine licensee to conduct sports wagering and to operate a system of wagering associated with the conduct of sports wagering at the slot machine licensee’s licensed facility… or through an Internet-based system.”
Any of the following operators could apply:
- Sands Bethlehem
- Rivers Casino
- The Meadows
- Harrah’s Philadelphia
- Hollywood Casino at Penn National
- Mohegan Sun
- Mount Airy
- Presque Isle Downs
- Valley Forge
- Lady Luck Nemacolin
A thirteen casino, Live! Casino and Hotel Philadelphia, is in the works and likely would be able to offer sports betting right out of the gate.
Philadelphia casinos well-positioned
Casinos located in proximity to the Wells Fargo Center, Lincoln Financial Field and Citizens Bank Park, the state’s sports epicenter, could be the biggest benefactors when and if sports betting goes live.
This includes SugarHouse Casino, Harrah’s Philadelphia and the soon to be constructed Live! Hotel & Casino Philadelphia. The prospect of legalized sports betting is especially mouthwatering for Live!, which will be built only a short walking distance from the three sports venues.
Fans streaming into the area on game day will be hungry to bet on their favorite teams, and could provide a big boost to the casino’s bottom line.
Online sports betting
Players will also be able to wager on sports in a much more convenient way, via online betting portals and mobile apps. The ease of betting from the comfort of home, or on-the-go through a mobile device, will likely make Internet wagering a much bigger opportunity for PA casinos.
How big would the PA sports betting market be?
With few legal options available, many Americans have taken their business to unregulated, offshore online sportsbooks.
In this lose-lose scenario, gamblers risk losing their money through fraud, while the state misses out on what could be substantial tax revenue. Indeed, some estimates put the sports betting black-market in the range of $150-$400 billion.
Pennsylvania’s legalization of sports betting is a step in the right direction, although its high taxes and fees might keep the market from reaching its full potential.
At any rate, a recent report by Gambling Compliance estimates that the PA sports wagering market could be worth as much as $400 million per year. This figure is higher than any of the other states expected to most first with sports betting, should the Supreme Court strike down PASPA.
Online betting would likely make up the lion share of the sum, which, according to our projections, could be as much as 81% of the total.
Sports wagering bigger than online casinos?
The opportunity for sportsbooks could very well be larger than the state’s forthcoming online casino industry.
New Jersey has a population of 9 million, and banked $245.6 million in iGaming revenue in 2017. PA boasts three million more residents than its neighbor, and could potentially rake in upwards of $350 million.
That number may be an overestimation though, when taking into account the onerous financial burdens involved in operating an iGaming site in the state.
At this early stage, there are still too many unknowns to predict with any certainty how much revenue PA sports wagering might bring in. But with Pennsylvania’s large population of passionate sports fans, it’s clear that the industry could thrive in the state.
PA gamblers and sports fanatics unfortunately do not currently have the ability to legally place bets on their favorite competitive events. However, if the US Supreme Court rules in favor of New Jersey in the landmark Christie v. NCAA case, they may be able to do so sooner rather than later.
PA is eager to capture some of the revenue being sent to offshore sportsbooks and already has a legal and regulatory framework in place. In the case of a favorable SCOTUS decision, we might very well see Keystone State casinos offering a full menu of sports betting options sometime later this year.
But can the state’s casinos compete in the face of exceptionally high fees and taxes? There are no doubt throngs of Pennsylvanians eager to start making sports wagers, but the financial burdens and low profit margins inherent to the industry may be too much for many to overcome.
By overreaching, PA lawmakers may very well have shot themselves in the foot, creating an unsustainable environment for what could be an exceptionally lucrative industry.
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