The announcement of Susan Hensel’s retirement from her position as director of the Pennsylvania Gaming Control Board’s Bureau of Licensing at the board’s April 21 meeting was notable for multiple reasons.
Hensel was not only the bureau’s longtime director overseeing thousands of licensing applications each year from gaming operators and employees, she was the first original staff member in 2005 of an agency that now has some 300 employees. As a lawyer for the state, she even had a role before the gaming board came into existence in planning implementation of the 2004 law that first allowed for casinos in Pennsylvania.
Hensel, a past president of the International Association of Gaming Regulators and a frequent guest on industry panels, has newly opened a gaming consulting practice, Hensel Grad PC, with a former state agency colleague. Due to her extensive experience with Pennsylvania gaming, Penn Bets sought out Hensel’s thoughts on the evolution of what is headed toward becoming a $4 billion industry in the state in 2021.
(The following interview has been edited for brevity and clarity.)
Penn Bets: Can you set the scene a bit for how you got started in this field back when Pennsylvania first legalized gaming?
Hensel: It was in August of 2004 and the law had just passed in July. I was an assistant counsel in the governor’s office and I was asked in for an interview with the secretary of revenue and other officials. The secretary asked me to be the first person in Pennsylvania starting work on the implementation of gaming issues. At the time, there was no agency, no employees, no regulations.
PB: What was your background in gaming at the time? Was it something you’d been interested in, or participated much in personally?
Hensel: We’ve all been exposed to gambling in our lives, but I would not consider myself a gambler. I had socially visited Atlantic City. While I didn’t really have a background in gaming, I was an attorney who had a track record of being able to solve problems and accomplish goals. It was certainly an intriguing and big project, and I like challenges and coming up with solutions on the front end of whatever it is.
PB: So how did you get things started in Pennsylvania, if it was up to you back then?
Hensel: Other people came on in the fall of 2004 as a small team focused on everything from finding office space to hiring employees to figuring out how to develop gaming regulations. We went out to speak with other jurisdictions that started before us — Nevada, Delaware, and New Jersey — and asked how they do gaming. The regulators in each of those states were extraordinarily generous with their knowledge and their time in helping to assist Pennsylvania in learning from their experience.
PB: What do you recall as notable about how Pennsylvania might have gone about things any differently from those states?
Hensel: I think the Pennsylvania law was very clever in one of its goals, which was to stand up gaming in a reasonably rapid period of time. All of the applicants for casino operator licenses (there were 14 potential new casino licenses to be awarded at the outset) had to be considered at the same time, and we had a one-year period from when applications were deemed complete to consider the applications, and it led to what the law wanted to accomplish — the startup of gaming in the commonwealth in a very reasonable period of time. (Pennsylvania’s first casino, initially only allowed to have slot machines, opened in 2006.)
PB: Can you describe that process of the board selecting operators and what you thought of the choices it made?
Hensel: Everything begins in licensing, but the board is the decision-maker. One clever thing in the law was it established the areas in the state that the casinos would be located in, and what Pennsylvania did was really show that convenience gaming works. Unlike having destination gaming locations like Las Vegas or Atlantic City, Pennsylvania made the decision to put casinos in areas of population so that a person can get in their car and drive to the casinos without having to get on a plane. The board made their decisions based on information in front of them, and Pennsylvania ended up having a really great set of casinos.
PB: There was a lot of consternation in the industry initially about Pennsylvania setting a higher tax rate for slots (54%) than other states, a discussion that came up again with its tax rate for sports betting and online casinos. Did you ever sense that creating hesitation from casino operators about seeking licenses, or any other impact?
Hensel: You can look at the success of Pennsylvania and say that the model worked. Different jurisdictions make different policy choices about what they want. The primary goals in Pennsylvania were to assist the horse racing industry, to create jobs, and to raise tax revenue, and you can look back on Pennsylvania’s history and say they were successful in all those and continue to be.
PB: The first notable expansion was legislation to add table games in 2010. What kind of impact did that have for you?
Hensel: We had to evaluate what kind of new companies would come into the fold and how to fit them into the licensing scheme. There were different types of dice manufacturers and card manufacturers and table manufacturers, including tables that had felt on them, and now there were a lot more individuals to be licensed working in the casinos, the dealers and others, because table games are a lot more labor intensive than slot machines.
PB: What can you say about what kinds of problems arise for some companies and individuals, that may have difficulty getting licenses?
Hensel: It’s not a common problem, but there are standards in place. On an individual basis, the board is looking at character, honesty, and integrity, and the background of that individual to ensure they meet that standard. At the corporate level, we’re looking at a business entity to make sure not only do the people who run it have that same integrity, but that they also have the necessary financial capability.
PB: Pennsylvania’s 2017 legislation widely expanded gaming to sports betting, online gaming, mini-casinos, and more. Would that have been something anyone in the legislature or governor’s office would have consulted you about beforehand because of your knowledge, or what did you think of it?
Hensel: I don’t specifically remember any interactions there would have been. By then, I’d been president of the International Association of Gaming Regulators and a speaker at different venues, and I’d started to focus energy on online gaming and working to learn everything about it even before it was authorized in the commonwealth. Then, as we got expansion, I was able to assist the agency with understanding it.
PB: And what opinion did you have of the new expansion?
Hensel: Again, I think the legislature took a very wise view of gaming expansion [by being so broad]. It didn’t want to keep going back and forth adding one thing at a time. But the role of the regulator is not really to have an opinion, it’s to implement.
PB: Again there were concerns about high tax rates and fees, and there was an initial period with no applications for sports betting or iGaming when some thought that meant the industry would not succeed in Pennsylvania. Do you recall sharing those concerns at the time, or what were you thinking?
Hensel: We had heard the same complaints when slots were authorized, and that has proved to be same with gaming expansion fees as well. You can look at the success of Pennsylvania and say it worked. Pennsylvania’s doing really well, and we are now a leader in the online space. Each jurisdiction makes a decision based on what’s going to be best in that jurisdiction.
PB: The 2017 legislation anticipated the possibility of sports betting even before the Supreme Court ruled on the PASPA ban in May of 2018 to allow it outside of Nevada. As a lawyer, did you follow that legal case closely and recall being surprised or not when the decision came down and sports betting was able to begin in Pennsylvania?
Hensel: There had been a lot of talk about what the issues were legally with PASPA, and I believe the expectation was that it would not be a stretch for it to be found unconstitutional. I certainly paid attention to what was going on with PASPA, and once it was determined to be unconstitutional, we knew it was time to get moving.
PB: What prompted you to leave the board now?
Hensel: I’ve had experience in Pennsylvania on everything from slots to tables to online gaming to sports wagering to daily fantasy and VGTs, and I feel it’s time to take that knowledge and put it to work another way. So my partner and I will focus on helping clients who want to grow and thrive in the U.S. gaming market, especially international operators that may not be here yet and want to participate in online gaming and sports wagering and other gaming products. We’ll be assisting companies in navigating the U.S. regulatory scheme, because each state approaches gaming regulations differently.
PB: How do you feel about all the growth taking place and what lies ahead? Anything particularly surprising?
Hensel: Years ago, the thinking was that online gaming would spread more rapidly than sports wagering, and now that has flipped. With sports wagering, we’re reading every day about new jurisdictions, while online gaming is slower.
PB: And why do you think that’s occurred?
Hensel: I just think sports are very popular. There are a lot of people who follow sports, and now that they’re allowed to make it legal, a lot of states went to get in on it.