On Wednesday the Pennsylvania Senate Community, Economic, and Recreational Development Committee hosted a hearing that discussed, among other things, the legislature’s current efforts to expand into online gambling.
The hearing featured a number of witnesses from the Pennsylvania Gaming Control Board (PGCB), who hit on topics ranging from regulations and safeguards, to problem gambling and the health of the state’s horse racing industry.
Wednesday’s hearing occurred just a week after the state’s casino stakeholders appeared in front of the Pennsylvania Senate CERD Committee to talk online gaming expansion and gaming reforms.
Both hearings provided positive momentum for online gaming expansion in the Keystone State, but there are still quite a few wrinkles that will need to be ironed out if iGaming is going to become a component of the state’s budget.
That budget that is due in just 14 days, although there seems to be wiggle room for an extension.
Regulators unafraid of online gambling
The key takeaway from Wednesday’s hearing? The Pennsylvania Gaming Control Board is ready, willing, and able to tackle online gambling. PGCB Executive Director Kevin O’Toole was the first witness to tout the PGCB’s capabilities and willingness to take on this oversight role.
“The Board is confident [Internet gambling] can be regulated,” O’Toole stated.
The PGCB has “experienced and capable regulators,” O’Toole told the committee, adding that the board would be ready to regulate Internet gaming in an efficient and controlled manner if and when it’s legalized.
According to O’Toole, the PGCB could have regulations drafted, licenses handed out, and the sites online within nine to twelve months of the legislature passing an online gambling bill. O’Toole qualified this aggressive timeline by saying it was dependent on the speed of the license application process.
Another witness, Michael Cruz, the Chief Technology Officer of the PGCB, said the state would draw heavily on New Jersey’s experiences.
“I’m not interested in reinventing the wheel,” Cruz told the committee. Cruz added that Pennsylvania regulators would look towards the New Jersey model in drafting Pennsylvania’s regulations.
What are the remaining issues?
Unlike California, the policy differences among Pennsylvania’s potential iGaming stakeholders don’t seem as hard-line. In-person registrations and whether Category 3 casinos should be allowed to apply for an online gambling license appear solvable.
The pricklier issues seem to be differences between the state’s casinos and the legislature when it comes to an acceptable tax rate.
The casinos and most iGaming advocates would like to see the tax rate set around 14% (the rate in Representative John Payne’s HB 649) while the recently introduced Senate gaming bill sponsored by Senator Kim Ward, SB 900, calls for a 54% tax rate on online gambling.
However, these are merely the iGaming issues the state is wrestling with.
The senate is trying to pass a comprehensive gaming reform bill, not a standalone online gambling bill. It’s the policies in the other sections of SB 900 that seem far more contentious.
Liquor, Category 3 restrictions, and OTB’s are the REAL issues
The issues that could sideline the bill (including online gambling) appear to be the following proposed brick-and-mortar gambling reforms:
- Loosening restrictions on Category 3 license holders – specifically, the requirement that casino players must be guests or “members” of the casino.
- Increasing the number of off-track betting locations (and slot machines at these locations) in Pennsylvania.
- Making liquor available 24/7 at casinos.
Under SB 900, for a one-time $5 million fee, the state’s two Category 3 casinos would be able to do away with their “membership” requirements. Category 3 casinos are in favor of this proposal, while virtually every other casino is opposed to it. The strength of opposition seems contingent on the proximity to the Category 3 casino.
This provision would not allow Category 3 license holders to add more slots or table games. Currently Category 1 and 2 casinos are permitted 5,000 slot machines and 250 table games, while Category 3 casinos are permitted 600 slot machines and 50 table games.
Another provision in SB 900 would allow casinos (this appears only to apply to racinos) to open multiple OTB parlors and place slot machines at them.
Each OTB (there could be as many as 32) would cost $5 million with the slot revenue taxed at 54%.
Category 1 racinos are all for this expansion effort, while Category 2 casinos (most notably SugarHouse Casino) are opposed to this type of expansion.
Liquor around the clock
The final sticking point is a provision that would allow casinos to serve liquor around the clock, which once again calls for a $5 million permit fee.
Every casino is in favor of increasing the number of hours they are allowed to serve liquor, so this issue will pit legislator against legislator, as many are opposed to increasing the number of hours casinos can serve liquor.
For the bill to move forward, these three non-Internet gaming issues (which seem far more contentious and far more difficult to solve) need to be addressed or scrapped.
Alternatively, iGaming could be separated from the other parts of SB 900 and added to the budget. Pennsylvania’s iGaming future may very well hinge on his happening.