Pennsylvania first legalized casino gambling in 2004, when Governor Ed Rendell signed Pennsylvania’s Racehorse Development and Gaming Act on July 5, 2004.

The new law (HB 2330) permitted suitable facilities to apply for slot licenses.

This seems simple enough, but as a non-gambling state the law ended up being 145 pages long, and called for the creation of the Pennsylvania Gaming Control Board (PGCB) and created three separate categories of slot machine licenses.

Category 1 licenses were designed to bolster the state’s existing racetracks, and Category 3 licenses aimed to do the same for the state’s resorts.

Sandwiched in between is the Category 2 license, awarded to new facilities with no history of gaming or operating a hotel that were required to be located in designated “tourist” areas, including two in Philadelphia and one in Pittsburgh.

In 2010, the state further expanded their land-based gaming, adding table games to the list of approved games through SB 711.

Each of Pennsylvania’s gaming licenses has its advantages, but at the same time each category of license presents its own limitations.

Category 1 License  – Racino

Category 1 licenses were designed specifically to assist the state’s struggling racing industry. Under Pennsylvania’s 2004 casino law, each of the state’s existing racetracks were able to apply for a slots license and turn their facilities into what is known as a racino – a combination racerack/casino – with no more than seven Category 1 licenses to be awarded.

A Category 1 license permits the facility to house up to 250 table games and 5,000 slot machines.

Six racetracks have been approved thus far, leaving the state with a single Category 1 license to be awarded:

  1. Harrah’s Philadelphia
  2. The Meadows Racetrack and Casino
  3. Mohegan Sun at Pocono Downs
  4. Parx Casino and Racing
  5. Penn National Racecourse
  6. Presque Isle Downs

Even though they essentially pay the same licensing fees as Category 2 licensees, the six racinos in Pennsylvania must adhere to several rules in order to keep their Category 1 license in good standing.

Racinos applying for a Category 1 license must meet one of the following requirements:

  1. Existing racetracks are required to host live racing for at least two years prior to being awarded a license, and live racing must occur at the property at least 100 days per year.
  2. New properties applying for a Category 1 license that have never hosted live racing must host live racing for a minimum of 150 days by the second year of their license being approved.

Current proposals in the state legislature are considering softening the requirements for live racing.

Category 2 License – Stand-Alone Casino

Category 2 licensees are what many of us would consider a classic casino.

Pennsylvania authorized up to five of these stand-alone casinos. So far four have been approved:

  1. Mount Airy Casino Resort
  2. Sands Casino Resort Bethlehem
  3. Rivers Casino in Pittsburgh
  4. SugarHouse Casino in Philadelphia

Just like Category 1 licensees, Category 2 license holders are permitted up to 250 table games and 5,000 slot machines. They can also offer the amenities of any major resort casino, including restaurants, spas, and entertainment options.

There is one catch, however. Category 2 casinos are not permitted to operate hotels on premises – there is some leeway to build a hotel elsewhere on the property.

They also must be located in major cities or tourist areas, and cannot be within 30 miles of a Category 1 facility.

Category 3 License  – Resort Casino

Pennsylvania law allows only three Category 3 licenses to be issued, and so far only two have been awarded.

  1. Valley Forge Casino Resort
  2. Lady Luck Casino Nemacolin

Category 3 license holders are the most restricted in terms of gaming options, as they are allowed up to 600 slot machines and 50 table games on premises, but these are also the only gaming facilities that have attached hotels.

Still, the use of the term resort casino is a bit of a misnomer in Pennsylvania, as it tends to conjure images of the multi-billion dollar destination casinos in Las Vegas.

But in Pennsylvania a resort casino is essentially an existing hotel/resort property that is outfitted with a small amount of gaming devices. These are not casinos with hotels. These are hotels where the casino is simply just another amenity on offer.

Not surprisingly, the fee for a Category 3 license was initially set at only $5 million whereas Category 1 and 2 licensees paid $50 million. A subsequent additional licensing fee was also collected when Pennsylvania added table games in 2010.

Category 3 licensees must also deal with the unenviable “membership” issue. By law, only guests at the hotel, or “members,” are allowed to gamble at Category 3 casinos. To become a “member” at one of the state’s three resort casinos a person must pay a yearly membership fee.

Legislation set to be introduced in the near future would eliminate this severe handicap.

When you compare Category 2 and Category 3 licenses, the trade-off in Pennsylvania appears to be that if you want to operate a hotel/casino (a Category 3 license) you are limited in the amount of gaming you can offer and must restrict access to your casino.

Conversely, if you want to be a full-fledged casino you cannot operate a hotel.