STATUS OF ONLINE GAMBLING IN PENNSYLVANIA
by Mark Gruetze
Mark Gruetze write's the weekly "Player's Advantage" gambling column for the Pittsburg Tribune-Review in Pennsylvania. His columns are online athttp://triblive.com/aande/gambling. He has been a skilled recreational player for more than 30 years, focusing on blackjack, video poker, and poker. E-Mail questions or comments to firstname.lastname@example.org.
A Fix for Budget Woes?
Online gambling and a loosening of rules governing traditional casinos might be among the tools Pennsylvania uses to fix a chronic budget problem, a key lawmaker says.
The idea of online gaming is "alive and well" in the Legislature, state Rep. John Payne, majority chairman of the House Gaming Oversight Committee, told me on Aug. 25.
At least four bills to legalize online poker or all forms of casino gambling were introduced this year, and the prospect of additional income for the state without the necessity of a tax increase increased interest in the idea. In addition, Payne supports legislation that would allow casinos to serve alcohol around the clock and to offer skill-based slot games. Other proposals would permit slot machines at airports and let casinos open secondary slots parlors. Legalization of fantasy sports betting also is on the table.
Two advocates of Internet gambling caution that the state should not get greedy in setting the tax rate for online games."People won't invest proper marketing dollars to drive revenue if the tax rate's too high," said David Licht, executive chairman and CEO of All American Poker Network, which operates an online network in New Jersey and has an agreement with Mt. Airy Casino, Monroe County, to set up online gaming if Pennsylvania legalizes it. "If the tax rate is exceedingly high, the operator is going to take that out on the consumer," said John Pappas, executive director of the Poker Players Alliance, which bills itself as a voice for gamblers. Proposed online tax rates are 14 percent, 28 percent and 54 percent.
Potential Leader in Online Gambling
Licht and Pappas told me that Pennsylvania's population of about 12.8 million and residents' fondness for betting - only Nevada generates more gambling revenue - make it important to supporters of online gaming."That sets up Pennsylvania to be the (online) leader in all the states," Licht said. "I think it's an enormous opportunity both for the government to raise money and the operators to operate in a profitable fashion."
With a tax rate around 15 percent and a $5 million licensing fee, online gaming could bring about $100 million to the state in its first year, Licht estimated.
He said $300 million in gross online gaming revenue is reasonable in Pennsylvania's first year. For comparison, New Jersey, with a population of about 9 million, had almost $123 million in gross online gaming revenue in 2014.
$120 to $700 Million in Potential Annual Revenue
Rep. Payne, a Republican from Dauphin County, said online gaming could bring the state $120 million in its first year, while the full package of proposed casino law changes - 24-hour liquor licenses, secondary slot parlors, airport slot machines and skill-based games - would increase that to $700 million."We need to be progressive," Payne said.
15 or 54%?
Gambling revenue is part of budget negotiations in Harrisburg. An online tax rate of 15 percent apparently is considered too low by many in state government, Payne said, while industry officials say 54 percent is too high. State law says the budget should be approved by June 30, but a stalemate between the Republican-controlled Legislature and new Democratic Gov. Tom Wolfe continued in late August.
Licht said operators have learned from their experiences in Nevada, New Jersey and Delaware, the only states with legal online gaming. Banks and credit-card companies, which sometimes wouldn't process payments to online casinos, had to adapt.
Licht said a key factor to consider is that online gambling is underway already, with people in all states betting on websites based in other countries.
Regulation by the Pennsylvania Gaming Control Board would protect gamblers against unscrupulous operators, he says, noting that New Jersey has had no instances of minors or of people outside the state being able to gamble online. "When you legalize, you have better safeguards against minors, you have safeguards against fraud, you have tax revenue that's being generated," Licht said."It's a very safe way for the government to try to balance their budget."
Pappas said he's encouraged that lawmakers view regulation of online gambling as a way to protect consumers while also being able to generate revenue. "It can be a very significant domino as other states look to do this," he said.
Lower Hold Percent
Licht said players should be able to register online rather than having to visit a land-based casino to set up an online account. Licht offered one other reason for Pennsylvanians to look forward to online gaming."The odds of winning are much greater for the consumer online than they are at a physical casino," he said. "(It's) just the nature of the business. The hold percentage is much lower for online than it is for physical casinos."
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