Pennsylvania continues to make firm strides in its efforts to legalize online gambling in the state as this week, two Senate committees voted in favor and cleared House Bill 271 which seeks to legalize online poker, daily fantasy sports and internet lottery sales.
Two Senate Approvals
The Senate Appropriations Committee cleared the bill with a 24-2 vote while the Senate Community, Economic & Recreational Development Committee voted 11-3 in favour of the bill on May 24. The bill received majority support in both senates and will now be sent for a full Senate vote, which could end up happening before the end of this week. Pennsylvania is looking to become the fourth state after Nevada, Delaware and New Jersey to legalize online gambling.
If the Senate vote should also go in favor of House Bill 271, then it will once again come back to the Assembly for review. This is because there have been a number of amendments made to the bill by the Senate in order to address concerns that were raised regarding gaming taxes in particular. The bill looks to impose a 54% tax rate on gross gaming revenue (GGR) generated by table games and online slots. There will be a 16% tax rate imposed on GGR generated from online poker.
High Taxes & Licensing Fees
There are currently 12 licensed casinos in Pennsylvania and all of them will be eligible to apply for an online gambling license, should the ban be lifted. However some gaming analysts believe that by imposing a 54% tax rate on online slots and table games, gaming operators may not be very willing to jump into the online casino market and make significant investments.
This is because apart from the high taxes, the bill also wants operators to pay high upfront fees for securing a gaming license. Online casino operators will have to pay $5 million to secure a license for each gaming segment. This means if the Sands Bethlehem casino decides to be involved in all three online markets, it will have to pay the state a total of $15 million to secure these three licenses.
Smaller casino operators in the state could find it difficult to shell out that kind of money and might be forced to restrict themselves to just one offering or opt out of the online gaming market for now. Legislators in Pennsylvania are looking to raise as much as $250 million from the licensed online gambling industry but with the current stipulations, some gaming analysts believe that only a couple of operators would think about applying for an online poker license.
Daily Fantasy Sports
DFS operators will pay much lower fees compared to online casino games. The bill states that DFS providers who want to operate in the state will have to pay either 7.5% of adjusted revenue from its last year of operation in the state or $50,000 – whichever is the lesser amount. DFS operators who want to continue to operate in Pennsylvania will have to pay the state a compulsory sum of $50,000 and once the bill comes into existence and they receive their licenses, they will then have to pay the state a flat rate of 12%.
Lucrative Online Gambling Industry
Pennsylvania’s casinos have found it difficult to increase their revenues during the last 6 years but at the same time have not done too bad. The gambling industry in the state is estimated to be in the range of $3 billion and legislators are hoping that once the online gambling ban is lifted, the industry will provide land based casinos a much needed boost, just like the online gambling industry has done in New Jersey.
The online gambling industry in New Jersey generated around $200 million in 2016 and has continued to climb in the first quarter of 2017. Pennsylvania is expected to have a bigger online market than New Jersey and gaming analysts expect it to generate around $300 million in revenue.
Poker Thriving
Poker rooms in the state generated around $20.38 million in the first four months of 2017, which was a 1.4 percent increase from the same period in 2016. The total revenue generated by Pennsylvania’s land based casinos in 2016 stood at $58.6 million which was an increase of close to $1 million when compared to 2015. Gaming analysts expect the demand for poker in land based casinos to transition to online poker and bring in additional revenue for the casinos in the state.

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