After postponing a hearing on the subject of online gaming and poker last week due to the uproar over daily fantasy sports (DFS), Pennsylvania legislators once again postponed a planned hearing on the subject on Tuesday, this time due to movement in their logjam over the state budget.
Although there was no action expected to be taken on any of the proposed legislation that faces the General Assembly (the hearing was expected to discuss “the potential of online lottery/gaming in Pennsylvania), the continued postponements cannot be something that excites those looking for the next state to regulate the online industry. Even the gentleman presenting the bill with the greatest chance at passage, Representative John Payne (also the chairman of the House Gaming Oversight Committee, the committee responsible for the hearings regarding online poker and gaming), has admitted that the push for a new state budget is overruling his desire to regulate the online industry.
Over the course of 2015, Pennsylvania has passed California as the most likely state to pass some sort of online gaming and/or poker regulations for an intra-state operation. Since the beginning of the year, when Payne introduced HB 649, several other bills have followed in its footsteps. Payne’s bill, considered the best of the lot and the one most likely to be put through the Pennsylvania House, would allow for full online casino gaming and poker in the Keystone State, regulate the licensing of software providers and those who would offer the games and prevent an explosion of “internet cafes” that could spring up after passage of any online gaming bill.
After Payne’s bill was submitted, Representative Nick Miccarelli joined the party with his bill, HB 695. In Miccarelli’s bill, online poker was the only activity allowed and there was a ‘bad actor’ clause in the bill that would have prevented those that offered online activities to U. S. citizens after December 2006 (the effective date of the start of the Unlawful Internet Gaming Enforcement Act (UIGEA)). This was the original intent of Payne’s bill but Payne, after further analysis and investigation into neighboring New Jersey’s full online casino gaming industry, decided that full gaming was what Pennsylvania needed.
In April, Representative Tina Davis introduced her legislation, HB 920, which featured several stringent requirements that were unpopular among online gaming supporters. Only casinos licensed within Pennsylvania would be able to receive an iGaming license that would originally cost $5 million for one year and then have a three-year, $500,000 renewal clause after that initial year. Taxation would also be harsh under Davis’ bill, calling for a 28% tax on gross daily revenues from the online operations. Those taxes would go towards tax relief, transit for the elderly and the Pennsylvania Race Horse Development Fund.
There is companion legislation in the Pennsylvania Senate that would need to be matched up with anything that would come out of the House regarding online gaming. Under that Senate bill, SB 900, an initial $10 million would be required for a five-year license in the state and would require a $1 million payment for renewal. The state’s casinos would be the only ones eligible to receive a license – meaning that Pennsylvania horse racing tracks that have some casino gaming would be shut out of the action – and, if the casinos decide to partner with a software provider rather than develop their own tools, that software provider would also have to be licensed. Any servers for online gaming would have to be located on the casino’s physical site, but backup servers and storage could be located elsewhere.
The budget impasse has been the major thorn in the process of moving any online gaming regulation forward. Pennsylvania Governor Tom Wolf, a Democrat elected last fall, is facing a budget shortfall of $2 billion and has wanted to raise taxes to bring that deficit under control. With a Republican-dominated General Assembly, however, Wolf has been thwarted in any efforts to raise taxes on Pennsylvanians. The discussions regarding the budget and the running debt has stymied the legislative and executive branches in Pennsylvania, putting such options as online gaming and poker regulation (projected by analysts to pull in $184 million overall and $77 million from online poker in its first year of regulation) on the table for a potential new revenue stream.
If online gaming and/or poker regulation is going to pass, many pundits in the state of Pennsylvania have stated it will be as a part of a larger budget bill and not as a “stand alone” issue.
With the hearing postponed again, the next time that the House Gaming Oversight Committee will convene will be in November. On November 9, there is a public hearing as to changes to licensing requirements in the state. The next day, the committee will meet to discuss fantasy sports and sports betting and, on November 19, the committee will take on a host of issues. One of those, however, will not be any action regarding online gaming or poker.
