Regulators Say They Are Up To The Task Of Overseeing PA Online Gambling

June 19, 2015
Regulators Say They Are Up To The Task Of Overseeing PA Online Gambling

For the second consecutive week, Pennsylvania Senator Kim Ward’s Community, Economic & Recreational Development Committee held a hearing to discuss proposed online gaming legislation in the state.

PGCB supportive

Speaking at this week’s hearing was Kevin O’Toole, Director of the Pennsylvania Gaming Control Board.

O’Toole praised the success of gaming in the state since 2004’s Gaming Act, which legalized and regulated land-based operations. He said gaming revenue in the state would likely exceed $3 billion in fiscal 2014/2015, the fourth consecutive fiscal year in which the milestone was reached.

“The industry is beginning to reach a stabilized period,” O’Toole said. “It is probably safe to say that the industry will not see the explosive growth of years past, and it will probably also not see any staggering decline in revenues.”

O’Toole spoke specifically about two pieces of proposed legislation: SB 700 and SB 900, both sponsored by Ward and others on the committee.

O’Toole urged legislators to consider a five year licensing renewal period, as opposed to the three year periods currently proposed. The move “will lessen costs without sacrificing oversight,” he said.

This appeal seems to have been successful, as the three year renewal period initially outlined in Ward’s SB 900 has since been amended to a period of five years.

Chairman addresses interstate compacts, security

O’Toole also supported a provision allowing the PGCB to negotiate and enter into agreements with gaming apparatus outside Pennsylvania.

Gaming oversight bodies in the three states currently allowing Internet gaming – Nevada, New Jersey, and Delaware – currently have the power to negotiate such agreements, O’Toole said, requesting a similar arrangement in Pennsylvania.

O’Toole also addressed the potential for underage players to utilize online gaming systems.

“Security measures will never be foolproof. There will always be a bad parent or a sophisticated person who wants to undermine the system,” he said, but added that safeguards in New Jersey, Nevada, and Delaware “seem to be working.”

O’Toole’s support was echoed by PCGB Chief Technology Officer Michael Cruz.

Internet gaming “would cause a significant restructuring of the Gaming Control Board’s IT organization,” added Cruz, who was confident that such restructuring would be feasible.

Proposed tax rates remain crucial

Tax rates have remained the most significant point of contention throughout the legislative process.

The latest bill proposed by the Pennsylvania Senate, SB 900, would see online gaming revenues taxed at a rate of 54 percent. The rate is significantly higher than the 15 percent figure called for by casino operators, who have argued that higher rates will price Pennsylvania businesses out of contention with casinos based in New Jersey and Delaware, as well as those hosted offshore.

Earlier this year, Representative John Payne introduced the HB 649 online gaming bill, which proposed a tax rate of 14 percent.

Senator Robert “Tommy” Tomlinson, a member of Ward’s committee, reiterated fears that taxing brick and mortar establishments at a higher rate than online casinos would disincentivize spending on land-based casinos.

Fiscal problems loom for PA

The hearing took place against a backdrop of budgetary woes for Pennsylvania, which faces an impending deficit of $1.2 billion. Pennsylvania Governor Tom Wolf, who ran on a platform of avoiding tax hikes, recently reneged on that promise.

Online gaming, its proponents say, represents a rare win-win scenario for the state, allowing legislators to chip away at the deficit without resorting to tax increases.

Given the buzz surrounding regulation in the state – five bills have been introduced this year – legislators also appear to see online gaming as a pragmatic solution to budget issues.

But opponents are vociferous, influential, and moneyed. The de facto leader of the charge against online gaming, Sheldon Adelson, was represented at last week’s hearing by Sands executives who cautioned Ward’s committee against regulation.

Tomlinson, in committee hearings, has called for an online gaming tax rate comparable to that of land-based casinos in the state.

Parx CEO Bob Green, while supporting online gaming in principle, has not warmly embraced the idea. Parx has championed a much-maligned caveat to regulation which would require would-be online players to first register at brick and mortar casinos.

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