The passage on Thursday of online gaming, poker, and daily fantasy sports (DFS) regulations in the state of Pennsylvania (among other gaming such as video gaming terminals and “mini-casinos”) was arguably one of the most surprising things to occur this year. Although they had been discussing it for upwards of two years, legislators in Pennsylvania almost were treating proposed gaming regulations as an afterthought rather than the revenue-provider that it could be. Thus, when they actually pulled the trigger and passed the legislation in a two-day span before the close of the legislative session, it was a bit surprising.
For Pennsylvanians looking to get their online action going, they’re going to have to cool their heels. The bill, HB 271, hasn’t been signed yet by Governor Tom Wolf (although that is thought to be a foregone conclusion) and, even after that signature is on the document, there will still be a lengthy period before the first cards are virtually pitched. There will be a 90-day period in which the Pennsylvania Gaming Control Board will be accepting licenses from qualified entities in the state. After that period has elapsed, then the next key date would be 120 days after that for accepting license applications from non-Pennsylvania gaming operations. With the state most likely wanting to let all entities start simultaneously (in the interest of fair competition), it could be nine months to a year before the Pennsylvania online gaming industry gets going.
Still, the passage of regulation by Pennsylvania is a cause for celebration. It is also a cause for looking out to see what is the path forward after Pennsylvania’s actions.
First, there’s a taxation issue that is facing Pennsylvania. While the online poker segment of their industry seems to have a fair taxation rate set (16%), the slots are being taxed at an exorbitant rate (54%) that may scare off potential operations from the state’s burgeoning industry. With the legislature looking to rack up plenty of money through the initial licensing (there are three platforms – online slots, table games and poker – that, if a company was to apply for all three, would cost $10 million; there are 12 licenses available for each…as George Clooney said in Ocean’s Eleven, you do the math), anything that might inhibit companies from getting in the game would be detrimental.
Second, a compact with Pennsylvania and the three states that have passed legislation back in 2013 – Nevada, New Jersey, and Delaware – would be a watershed moment. With the Keystone State’s population equaling that of the “First Three” combined, a compact would double the numbers participating in some form of U. S. online gaming and/or poker. The problem lies in that Pennsylvania didn’t get in this game to share money with other states; they will more than likely want to see how their product is working (AKA seeing if it can be profitable on its own) before entertaining the thought of compacting. Thus, it could be two years or more before this happens.
Finally, which states would be the next to step up? Although Michigan has made some noise lately about wanting to have legislation done by Thanksgiving, New York has had legislation up for the past three years and even Illinois is re-examining the issue, there’s not a consensus as to who will push the legislation forward. Even California, which has been entertaining some form of online poker for the past decade, doesn’t appear to be any closer than these other states mentioned to passing significant legislation.
Just as it has been since the “First Three” passed the regulations in 2013, the crystal ball remains cloudy as to the future of online gaming and poker in the States of America. Hopefully with the passage of regulations in Pennsylvania, other states will not be as reluctant to step forward and open online gaming in their locales. If a couple more states fall (especially bigger ones like New York, Michigan or even California), then the floodgates may truly have opened.
