Pennsylvania is set to become the fourth state with legal online gambling. The Pennsylvania Gaming Control Board (PGCB) announced this morning that nine casinos have applied for licenses under a new law permitting online gambling.

Here’s the full list of casinos that are seeking authorization for online gambling in Pennsylvania:

  • Parx Casino
  • Live! Hotel and Casino Philadelphia
  • Mount Airy Casino Resort
  • Sands Casino Resort Bethlehem
  • Hollywood Casino at Penn National Race Course
  • Valley Forge Casino Resort
  • Harrah’s Philadelphia Casino & Racetrack
  • Rivers Casino
  • SugarHouse Casino

In a press release, the PGCB explained that all nine casinos have requested authorization to operate three different types of gaming online:

  • Online slots
  • Online table games
  • Online poker

All nine casinos submitted their applications between July 12th and July 16th, which coincides with the July 16th deadline by which casino operators can get a package deal on all three licenses for $10 million. This means that if all nine applications are approved, the state stands to earn $90 million off this round of licensing.

The PGCB has 90 days to make a decision on each license. Casinos that receive approval will then have 60 days to pay the $10 million licensing fee.

Casinos that missed the deadline still have until August 14th to apply for licenses individually at a cost of $4 million per license. After August 14th, the PGCB will consider accepting license applications from other “qualified gaming entities.”

This was all written into the gaming law that was passed last year, which purposely gave existing casinos in Pennsylvania a 120-day head start over other entities in applying for online gambling licenses.

Four Casino Operators Notably Missing from the List

Four existing casino operators in Pennsylvania have not yet submitted online gambling applications. Those include:

  • Lady Luck Casino
  • Mohegan Sun
  • Presque Isle Downs & Casino
  • Meadows Casino

These casinos still have until August 14th to apply for licenses at a cost of $4 million per license type, but PennLive.com reported none could be reached for comment regarding their plans. It’s possible these casinos are simply uninterested in offering online poker and will therefore find it cheaper to apply for online slots and table game licenses for $8 million rather than snagging the package deal at $10 million.

Over in New Jersey, online poker has proven much less lucrative than online casino gambling. In New Jersey’s June 2018 revenue report, revenue from online poker totaled just $1,175,839 while revenue from online gambling totaled $20,926,255.

Pennsylvania Still Having Trouble Attracting Sports Betting Applicants

While the sudden surge of applications for online gambling permits should be encouraging for pro-gaming lawmakers hungry for revenue, it seems they may have gotten a little greedy when it comes to squeezing those tax dollars out of sports betting.

Pennsylvania’s 2017 gaming law also permits casinos to offer in-person and online sports betting. The PGCB opened the books for licensing applications back in May, but not a single casino has applied for a license due to prohibitively high licensing fees and taxes.

Casinos that want to offer sports betting in Pennsylvania must first cough up a $10 million licensing fee just to get started. After that, they’ll be subject to an ongoing 36% tax on revenue. That’s more than four times New Jersey’s sports betting tax of 8.5% for bets placed in-person and 13% for online wagers.

Sports betting is not a high margin business. For instance, Las Vegas typically only retains 5-6% of the total wagers it takes in each year. That means that out of every $100 wagered in Vegas, a sportsbook might keep $6 on a good day – and that’s before we consider all the other costs of doing business.

William Hill USA Vice President of Business Development Dan Shapiro was quoted by the York Dispatch saying this:

“With a 36% tax and a $10 million licensing fee, there are other states that are more interesting to us… It’s just not something we’re looking at seriously right now.”

That’s not just idle talk coming from a company sitting on the sidelines. William Hill US operates two of the four sportsbooks that are currently active in New Jersey. This company has the funds and the expertise to expand across the US, so if they’re not interested in Pennsylvania, something is clearly wrong.

If Pennsylvania lawmakers do not step in to change things, they risk pushing bettors back to illegal offshore operations. Under a high-tax regime, PA casinos will have few options beyond offering customers significantly less attractive odds or simply not offering sports betting at all. In either case, it motivates potential bettors to stick with underground bookies and offshore operators.

Philly.com discussed the issue yesterday and pointed to the comically random way in which lawmakers decided 36% would be an appropriate rate. Lawmakers initially set the tax rate at 18% because that’s the rate charged on table games. But then, lawmakers studied the business more closely and decided online sports betting resembles online slots, which tend to be taxed at a higher rate. So, they decided to double the sports betting tax.

The sports betting issue is something that will need to be dealt with sooner or later. If Pennsylvania’s casino operators decide to hold out over time, lawmakers are likely to revisit the issue at some point. Until then, PA gamblers will at least have online casino gambling to look forward to over the near future.

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