Pennsylvania has gone from being a lock to pass iGaming regulation in 2017 to a coin-flip. With the introduction of a third iGaming bill, PA may now have dropped to underdog status.
Senate Bill 524 was introduced on Monday by Senate Minority Leader Jay Costa and is co-sponsored by Senators Wayne Fontana, Vincent Hughes and Judy Schwank.
The bill is different from others in a few major areas, including tax rate. With the tax rate already a sticking point, this bill may slow down this process ever further.
Key Differences Are Most Important Ones
SB 524 is very similar to SB 477 and HB 392 in that it addresses many gambling reforms and regulates both online gambling and Daily Fantasy Sports betting.
However, there are four important differences that set it apart from the others. First, the bill will regulate online lottery. Next, it makes significant changes to licensing fees and the tax rate.
The licensing fee for this bill is set at $10 million versus $8 million in the others. Also, vendors will have to pay $5 million versus $2 million.
Finally, the tax rate on gross gaming revenue for DFS and iGaming is set at 25% rather than 14%.
What Could the Changes Impact?
Depending on which angle you approach the issue from, these changes could be minor to debilitating.
Online lottery regulation would probably only be contested by anti-gambling groups and those that feel it would impact brick and mortar retailers.
The higher licensing fees will probably only serve as impediments to smaller vendors that can't handle a 60% jump in fees. Casinos would probably absorb the hit and focus more on casino gambling.
In regards to the tax rate, that could propose a more difficult challenge for some. While not as high as previously proposed rates, a 25% tax would be a significant consideration when contemplating a move to iGaming.
Likely, casinos would forego online poker with such a high tax rate as it just wouldn't prove as profitable to pursue. The only exception would be if a group of casinos partnered together and acted as agents for a group like PartyPoker or another.
PokerStars would likely still make the trek into Pennsylvania as 25% wouldn't be high enough to keep them away. Also, with Amaya focusing more on casino games as opposed to poker, they can still become profitable under the higher rate.
With a 25% tax rate, PokerStars and probably 2 more providers would offer online poker in Pennsylvania. Those other providers would likely either partner with other casinos or make online poker a small portion of their total gaming. 888 Holdings is a prime candidate for such an endeavour.
PA could end up as PokerStars and WSOP.com as the exclusive providers in the state under such a scenario.
Tax Rate Could Stagnate iGaming Regulation in 2017
At this point it appears that taxation will be the stagnation point for PA iGaming this year. With one group wanting lower rates and the other believing that higher rates protect casinos, this could be the fight that prevents a bill from advancing.
Granted, with 25% being the upper rate presently in play, there may be enough room for a compromise between parties. A rate of 20% would be a nice middle ground for both parties.
At 20%, the rate would be workable for both general casino gaming and iPoker and may prove high enough to quell misguided concerns from some lawmakers about cannibalization of brick and mortar casinos.