Today is the one-year anniversary of Pennsylvania’s massive gaming reform law which helped the Keystone State join the modern world by becoming the fourth state to legalize online gambling.
Online gambling was the most ballyhooed part of the Keystone State’s comprehensive gaming reform law, but the 900-page bill did a whole lot more than that.
In addition to online gambling, the Pennsylvania gaming law:
- Legalized sports betting
- Regulated daily fantasy sports
- Legalized online lottery sales and monitor lottery games
- Created a fourth category of casinos, satellite casinos
- Loosened restrictions on Category 3 “resort” casinos
- Authorized video gambling terminals (VGTs) at select locations
- Authorized tablet gaming at select airports
- Paved the way for the issuance of a Category 2 license in Philadelphia
The success of these reforms can be measured in two ways:
- Revenue. Some of the reforms have lived up to the initial revenue expectations. Others have exceeded expectations. And still, others have fallen short of expectations.
- Timeline. Some of the reforms have met their target launch dates, but many have been slower to market than expected.
Here’s a look at the impact of the key components of the gaming reform bill.
Online gambling is behind schedule but already a moneymaker
As noted above, online gambling was the big ticket PA gaming revenue items in the bill. Bringing online poker and casino games to the state has been a slow and frustrating process.
Twelve months after legalizing online gambling, the state is still several months away from launch. That places it well behind the original timeline estimates of 9-12 months.
That said, money is flowing into the state’s coffers from online gambling.
The money isn’t coming from bets and wagers (that will come down the road), it’s coming from the one-time windfall the state receives for each interactive license it sells.
To date, Pennsylvania has collected $100 million in up-front licensing fees, and still has 10 licenses (three slot, three table game, and three poker) in its pocket.
The state is in the process of doling out those licenses to approved gaming entities from outside of Pennsylvania. The price for the a la carte licenses runs $4 million each.
Sports betting was an unexpected bonus
Pennsylvania passed its gaming reform law before the Supreme Court of the United States’ monumental decision that struck down PASPA and paved the way for legal sports betting in the US.
But Pennsylvania lawmakers had the foresight to tuck a provision that preemptively legalizes sports betting into the bill.
Despite an absurdly high tax rate of 36 percent, five Pennsylvania casinos have already coughed up the $10 million for a PA sports betting license.
Because Pennsylvania didn’t anticipate revenue from sports betting, revenues from licenses and later operations will be found money.
Category 4 casinos exceeding all expectations
One of the biggest unknowns in the gaming reform law was the auctioning off of up to 10 Category 4 satellite casino licenses.
Nobody knew how much interest there would be in these licenses or how much money casinos would be willing to pay for a glorified slot parlor.
Pennsylvania is already pretty well blanketed with casinos, but there are some pockets that are underserved, and those areas commanded serious bids.
The minimum bid for the licenses was set at $7.5 million. Pennsylvania estimated about $67.5 million coming from the auctions. Even though only five casino licenses were claimed, the state easily surpassed that number.
The revenue from Category 4 casinos is currently at $127.7 million and counting. Don’t get too excited about that number going up though. There has been no action on the remaining six licenses since April.
January 10 auction
- Winner: Mountainview Thoroughbred Racing Association, LLC (aka Hollywood Casino)
- Winning bid: $50,100,000
- Satellite location: Yoe, PA in York County
January 21 auction
- Winner: Stadium Casinos LLC (Philly Live! Casino)
- Winning bid: $40,100,005
- Satellite location: Derry, PA in Westmoreland County
February 8 auction
- Winner: Mount Airy Casino
- Winning bid: $21,888,888.88
- Satellite location: New Castle, PA in Lawrence County
February 22 auction
- Winner: Parx Casino
- Winning bid: $8,111,000
- Satellite location: South Newton, PA in Cumberland County
April 4 auction
- Winner: Hollywood Casino at Penn National
- Winning bid: $7,500,003
- Satellite location: West Cocalico Township, PA in Lancaster County
DFS is providing a slow revenue trickle
Daily fantasy sports (DFS) has been a hot topic for several years, but by the time the Pennsylvania legislature got around to it the fervor was already dying down. DFS simply wasn’t the revenue generator states were originally led to believe it was.
At the end of the day, legalizing DFS was an easy way to get some money (around a couple million dollars annually) flowing into the state’s coffers.
- May 2018: $199,755.94
- June 2018: $152,679.34
- July 2018: $131,727.75
- August 2018: $141,543.03
- September 2018: $320,057.10
- Total DFS tax revenue earned to date: $945,763.16
Online lottery and monitor gaming already paying dividends
One of the most unheralded parts of the gaming reform law was the legalization of online lottery and monitor gaming.
Both got off to a strong start following their rollouts earlier this year, and are well on their way of achieving their 2018-2019 revenue targets of around $50 million.
However, the online lottery instant win games have come under fire from the state’s casinos. The casinos are crying foul over the slot-like games, and after the state rebuked their calls to end the games, a group of casinos have filed suit.
Category 3 reforms provide a nice boost
In its quest to raise as much revenue as possible the PA legislature served up a couple of batting practice balls to the state’s Category 3 “resort” casinos.
For a one-time fee, Category 3 casinos could:
- Eliminate the amenity fee (a door charge for non-hotel-guests to gamble in the casino).
- Expand their slot and table game offerings.
Valley Forge jumped at the state’s amenity fee offer and has been reaping the rewards ever since. So, not only did the state receive the one-time payment, but Valley Forge’s monthly revenue has ballooned, which means more tax revenue for the state.
Further, neither casino has paid the $2.5 million to increase its number of slots, or the $1 million payment to increase its number of table games.
The jury is still out on VGTs
Like online gambling, VGTs were propped up as one of the cornerstones of the bill. Unlike online gambling, VGTs have been more fizzle than sizzle.
The state has received 11 applications and several have been conditionally approved. However, not a single VGT has been placed in a qualified truck stop.
Flights aren’t the only thing delayed at airports
Another part of the bill that hasn’t amounted to a hill of beans is tablet gaming at select airports.
Airport gaming seems to be on the backburner while the state squares away the bigger ticket items like sports betting, online gaming, VGTs, and satellite casinos.
The Stadium Casino project
Two provisions in the gaming reform put the stalled Stadium Casino project back on track by repealing limits on casino ownership in the state. Originally approved in 2014, the collaboration between Cordish Company and Parx Casino parent company Greenwood Racing.
The gaming reform law also ended a lawsuit by SugarHouse Casino with a provision that imposes heavy fines on casinos with active lawsuits.
With the project back on track, Cordish and Greenwood cut the state a $50 million check for the license.
But the story doesn’t end there. According to recent rumors, the two companies are getting cold feet, and are looking to back out of the project.