It was certainly a memorable week in the poker world as Pennsylvania Governor Tom Wolf signed HB 271 on Monday, legalizing online poker in the Commonwealth. The previous week, the state Senate passed the bill by a 31-19 vote, sending it to the House, who passed it 109-72 the next day. Pennsylvania becomes only the fourth state with legalized online poker, following Nevada, Delaware, and New Jersey.
In addition to online poker, online table games, online slots, internet lottery sales, and daily fantasy sports were also made legal. The twelve licensed casinos in Pennsylvania will be the first to have priority for online gambling licenses. There are three separate licenses available, split into poker, table games, and slots. Each will come with a hefty $4 million application fee, but the casinos can pay $10 million if they chose to apply for all three within 90 days of when the application process starts.
If all twelve licenses are not taken within 120 days, other qualified operators can apply.
The tax rate on online poker and table games will be 14 percent plus a 2 percent local tax, which aligns pretty well with the tax rates in other states. Problematic, though, is the tax rate on online slots, set at 54 percent plus the 2 percent local tax. This – combined with the $4 million application fee – is expected to be a major barrier to entry and could kill a huge potential segment of the online gambling industry immediately. Online slots operators in other states run thin profit margins on the games and that is with tax rates in the teens. 54 percent may very well be a non-starter.
Those who feel the 54 percent rate is justified because Pennsylvania’s brick-and-mortar casinos pay the same rate on slots are ignoring the fact that those casinos also make money from things like restaurants, shops, and hotels. Online operators have no such revenue streams.
HB 271 authorizes the state’s Gaming Control Board to enter into liquidity sharing deals with other states, which most expect will happen. New Jersey recently entered into such an agreement with Delaware and Nevada, expanding the states’ potential player pools (the player pools have not been combined just yet).
The new law is not just limited to online gambling, also expanding land-based gambling throughout the state. Ten “satellite” casino licenses are up for grabs; these casinos can have up to 750 slots and 30 table games. Compare that to the casinos currently in existence, which can have up to 5,000 slot machines.
Eight airports in Pennsylvania will be able to have tablet gaming lounges, with licenses also going to casino operators. On top of that, qualified truck stops will be able to have as many as five video gaming terminals (VGTs). VGTs were a source of great contention in the legislature, as a great many lawmakers did not want them, nor did casinos. VGT language once included venues such as bars and taverns; one big fear was that having gambling more accessible to more people would take business away from casinos. The reduction to just truck stops was a way to compromise.
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