An anticipated joint hearing of the Pennsylvania Senate Community, Economic & Recreational Development Committee and the House Gaming Oversight Committee was held on Tuesday. The purpose of the hearing was to discuss gambling expansion, including iGaming.

What many felt would be the start of the process of making Pennsylvania the fourth U.S. state to regulate online poker has quickly flipped the script to where the issue may be a coin-flip at best.

Tax Rate and Industry Cannibalization Are Hot Topics

Two major issues came to the forefront in the hearing. The first was the tax rate. At present, lawmakers are considering a tax rate as high as 54% on iGaming.

The tax rate was argued in multiple ways. First, a prohibitively high rate such as the one currently floated would effectively drive away many from doing business online.

It's been argued that online poker operations would be next to impossible with such a high tax rate as casinos couldn't turn a profit in operations. The other argument is that a rate relatively low, such as a 14% rate proposed in SB 477, would give some PA casinos to move more of their operations online.

Caesars Entertainment Senior VP of Government Relations and Development David Satz dismissed that a lower tax rate would persuade casinos to move away from land-based operations. He also confirmed that a high tax rate as suggested previously would convince many to pass on iGaming.

Another issue that is more a concern of lawmakers is that of cannibalization. As argued in other states some believe that iGaming will lead to cannibalization of casinos, forcing some to reduce or even eliminate operations.

Satz also spoke on this and told the committees what the data in NJ and other states has already proven. Online gambling operations actually add to the bottom line of casinos. Not only does it help bring new customers onboard but it also persuades inactive clients to play again.

This makes perfect sense, especially for customers that live hours away from the casino or simply don't have but a few minutes each day to gamble.

Parx Casino Speaks Out Against Bill

Anthony Ricci, CEO of Parx Casino, argued against iGaming at the hearing on Tuesday, claiming that certain circumstances would reduce the amount of tax revenue currently enjoyed in the state from casinos.

Ricci believes that a lower tax rate coupled with cannibalization will reduce the present level of tax revenues for the state.

Sadly, Ricci's testimony may hold a bit more weight than other casinos in the state due to the fact that Parx collects the most revenue among the 11 casinos in the state.

Besides the Parx and the Sheldon Adelson-owned Sands Casino, every other casino in PA supports iGaming.

Hearing is Informational Only - What's Next?

This joint hearing was the first step in a process that will hopefully result in iGaming becoming legal in PA.

Two bills are presently being considered; SB 477 and HB 392 are presently in their respective committees and now must begin the trek towards a vote.

The Senate has been viewed as a "slam dunk" and prior to the hearing, word was that the Assembly might even vote on their measure. Now it remains to be seen whether the issues floated in this hearing will slow the momentum on either bill.

Considering the amount of debate regarding tax rates, one should expect a bit of a delay before a vote moves forward. In the end we expect some type of compromise on the tax rate that will probably put it in the low to mid 20's - a number that may be the "sweet spot" to get the ball rolling.