A pair of Pennsylvania casinos is pushing for a limit on the number of online gambling websites licensees can launch. However, industry insiders say limits on “skins” also puts a limit on competition, innovation, and revenue. For both operators and the state.

Pennsylvania lawmakers passed a comprehensive gambling expansion bill in October 2017.

The new law authorizes the Pennsylvania Gaming Control Board to issue licenses for online slots, online table games, and online poker operations. Existing casinos in the state will get the first crack at them. Casinos can purchase all three licenses at once for $10 million. Individual licenses for any of the three online gambling categories will then be available at $4 million each.

Outside entities can apply for what’s left of the 39 total licenses. If any of the state’s 12 casinos, or owners of the under-construction Stadium Casino project in Philadelphia, pass.

The gaming control board is currently in the process of putting together regulations. This includes clarifying exactly what the licenses will allow and defining the application process.

Parx Casino says one skin is enough

Last week, gambling legislation watchdog GamblingCompliance (paywall) released a letter from Parx Casino to the board. The letter details Parx’ preferences for state regulations. It also includes the idea that skins be limited to just one:

“The Board should establish a limitation on the number of interactive gaming skins an Interactive Gaming Certificate Holder (“Certificate Holder”) may operate, and that limitation should be one skin per Certificate Holder, with the different categories of interactive games the Certificate Holder is authorized to offer on that single skin limited to the different categories of interactive games approved in its Interactive Gaming Certificate(s).”

Parx also wants the board to ensure all online gambling operators and license holders share the same branding:

“The Board should require that any branding associated with a skin match, or be predominantly the same, as the brand of the Certificate Holder as noted on the Interactive Gaming Certificate.”

Penn National Gaming, owner and operator of the Hollywood Casino at Penn National Race Course in Grantville, PA, has previously stated it wants the number of skins limited as well.

Protecting its own interests

Parx is the top-grossing brick-and-mortar casino in PA. Throughout the legislative process leading to the new online gambling laws, Parx executives expressed fear opening an online gambling market in PA would cannibalize the existing casino industry. Parx pushed for tax rate equity and in-person registration to try to protect its own interests.

Parx’ effort to limit the number of skins appears to be part of a similar strategy.

However, a gambling industry trade group says limiting skins is anti-competitive. Plus, its says allowing multiple skins will be good for the industry as a whole.

The iDevelopment and Economic Association (iDEA) wrote a letter to the board pushing for no limit on the number of skins. Or, limiting the number to five skins per licensee like New Jersey does:

“Experience has shown that online gaming operators will self-regulate to an efficient market size that maximizes operator and state revenue. To do so, however, requires licensees to have the flexibility to partner with other game providers and to operate under multiple skins.”

Limiting skins limits competition

The iDEA letter also says limiting operators to a single skin would act as a limit on competition. The organization claims smaller casino operations may not be able to afford to get in the market. Unless they can subsidize the expense through revenue sharing skin agreements:

“Limiting skins would effectively pick winners and losers in the Pennsylvania market and hand the market to the state’s largest land-based casino operators (that are willing to enter the market).”

The letter also says PA lawmakers considered a skins limit in drafting the legislation. However, they chose not to insert one. Therefore, it was never their intention.

Finally, iDEA points to the New Jersey online casino industry and the $20 million in monthly revenue it is generating. It says New Jersey is a successful model with a five skin per operator limit PA can easily follow:

“The experience of New Jersey of allowing multiple skins has resulted in competition, innovation and growing revenue. Pennsylvania should emulate that model by clarifying its regulations so that there is either no limit on the number of skins that may be operated by each licensee, or by adopting New Jersey’s five skin limit per license.”