Pennsylvania Continues To Complicate Online Gambling Legalization, Which Is Not That Complicated

April 26, 2017
Pennsylvania Continues To Complicate Online Gambling Legalization, Which Is Not That Complicated

Pennsylvania stands to receive an immediate return of more than $100 million and tax revenue in the $40 to $50 million range if it simply adopts the successful model of its neighbor to the east, New Jersey.

Yet the Pennsylvania legislature continues to float alternative proposals that would put this at risk. Here is the latest example:

Whether it’s severely limiting the number of skins, imposing a high tax rate, or the latest proposal that the state lottery — and not the commercial casino industry — should operate online gambling sites, Pennsylvania lawmakers are playing a dangerous game.

At best, they’re delaying online gambling legalization, which means they’re delaying revenue flowing into the state’s coffers. At worst, they’re trying to kill online gambling and, with no other proposals on the table, all but ensuring tax increases are coming.

Assuming they’re not playing politics or trying to deftly kill the bill, legislators are seeking a solution to a problem that doesn’t exist.

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It’s not just about revenue for online gambling

Chris Grove laid out the many reasons why placing online gambling under the stewardship of the state lottery is a bad idea in this column. In a more general sense, refer back to what former Gaming Oversight Chairman John Payne said in a 2015 interview, when he first began pushing for online gambling in Pennsylvania.

“My mission statement is to keep gaming in general healthy, but in particular to make sure our casinos stay healthy and competitive against our surrounding states,” Payne said.

Putting online gambling under the control of the state lottery would do no such thing. Instead of adding another arrow to the quiver of Pennsylvania casinos, it would put them at a competitive disadvantage to casinos in surrounding states.

Yes, online gambling is meant to put a chunk of money in the state’s coffers. But at the same time it’s also meant to strengthen the state’s commercial casinos. The Pennsylvania casino industry employs tens of thousands of people and sends more than a billion dollars in tax revenue to the state every year.

Scarnati himself didn’t want the lottery involved in online gambling

It’s not clear where Scarnati’s idea to put the PA Lottery in charge of online gambling came from. What we do know: He thought that was a really bad idea not long ago.

Here’s a story from just a few years ago where Scarnati and other top Republican lawmakers put the brakes on the lottery getting into iGaming:

But the senators, including President Pro Tempore Joe Scarnati of Jefferson County and Majority Leader Dominic Pileggi of Delaware County, now say they want the private manager’s contract rewritten to prohibit interactive video games or simulated slot machines or table games, even if there are no plans for such games. …

The worry, Scarnati said in an interview Tuesday, is the “bleeding into casino-land gambling.”

Why are those concerns suddenly out the window, when PA already has a perfectly viable strategy to implement iGaming through its casinos? That’s not clear. But online gambling should be the domain of PA’s casinos, as it can help their land-based operations in addition to creating a new revenue stream.

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A dangerous game of chicken on PA iGaming

Pennsylvania lawmakers are losing sight of the forest for the trees and forgetting what the state is trying to accomplish.

The state is trying to raise revenue (immediate and long-term) and strengthen its commercial casinos. New Jersey has accomplished both of those things, as online gambling is generating money through tax revenue and licensing fees.

And as the Associated Press noted after New Jersey’s online casinos set a revenue record in March, helping Atlantic City’s land-based casinos post solid year-over-year gains, “There’s no longer much of a debate about it: Internet gambling is helping to save Atlantic City’s casinos.”

Pennsylvania has established a solid framework that would allow the state to:

  • Receive an estimated $126 million from up front licensing fees
  • Generate close to $50 million in tax revenue in year one: a number that will grow to $77 million by year five
  • Bolster the state’s commercial casinos by giving them the tools to compete in an ever-evolving gaming world

Excessive tax rates or placing online gambling in the hands of state lottery would put all of this in jeopardy.

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