Can Two Competing Visions Of Pennsylvania’s Gaming Future Find Common Ground?

Based on recent comments coming out of Pennsylvania, California isn’t the only state considering expanding into the iGaming arena that has to first solve some internal discord.

House Gaming Oversight Committee Chairman John Payne has made his desire to keep Pennsylvania’s gaming industry healthy and competitive abundantly clear, as Payne’s plan includes looking into regulating online gaming and fantasy sports, and overhauling current gaming laws to ease burdens on operators.

But there is yin to Payne’s yang in Pennsylvania, and his name is Representative Robert “Tommy” Tomlinson. The two have very different paths forward for PA gaming.

Tomlinson can best be described as pro-casino, and is calling on regulators to (among other things):

• Speed up their approval process of new games.
• Give the casinos tax credits.
• Pass a law allowing casinos to serve drinks 24 hours per day.

This is according to a recent write-up in Philly.com.

Tomlinson would also like to see casino expansion halted, be it new construction or increased gaming options at existing land-based casinos.

Here is a comparison of where the two state representatives stand on a couple of key issues.

Online gambling in Pennsylvania

Representative Payne’s online gambling bill clearly lays out his vision of online gaming in the state. Payne’s bill calls for iGaming licenses to go to current casinos in PA with a low 14% tax rate and an upfront $5 million licensing fee.

But Payne doesn’t see this is as expansion or adding iGaming, this is not about expanding gaming.

“Internet gaming is already here,” Payne said. “I’m not trying to expand it, I’m trying to make it legal, and I’m trying to make sure we make sure people aren’t ripped off.”

Payne’s view was echoed by Caesars Entertainment Executive Vice President Jan Jones Blackhurst, whose company is involved in regulated online gaming in Nevada and New Jersey, and has a casino in Pennsylvania.

“Today’s reality is that Internet gambling is taking place in all 50 states, almost all of it illegally,” Blackhurst stated at a hearing on Tuesday. “It’s an environment that’s ripe for fraud and criminal activity and it provides no tax revenue.”

Tomlinson is not necessarily opposed to online gaming, but he wants a much higher tax rate (telling Philly.com the tax rate for iGaming cannot be lower than the current tax rate imposed on casinos [55% on slots and 16% on table games]) and to implement a policy first floated in California by which online players would have to register in-person at a Pennsylvania casino.

Both of these measures would severely handicap legal online gaming in the state.

With calls for higher taxes and in-person registration, it seems Tomlinson (and whomever he is speaking for) feels iGaming will cannibalize brick and mortar casinos, a theory that has proven to not only be false but the exact opposite of the experience of iGaming operators in New Jersey, where it has been considered complimentary.

“Online gaming is likely to increase, not cannibalize, existing gaming revenues,” Blackhurst said at the hearing, noting that 80% of online gamblers in New Jersey were new (not in their loyalty program) and a further 15% were inactive.

Bar and tavern gaming

Representative Payne commented several times on fixing the current small games of chance bill in Pennsylvania, which allows bar and tavern owners to offer video gaming terminals on their premises.

Payne blames the steep licensing process and strict penalties for the lack of support the law has received from taverns and bars.

In Representative Payne’s opinion, the state has made it too difficult for mom and pop establishments to seek a license. Payne considered the $4,000 licensing fee too high for a family-run business, and also feels the penalty for underage gambling (currently resulting in the loss of a liquor license) far too steep, as these taverns rely on their liquor licenses for survival and the loss would likely bankrupt the establishment.

To drive this point home, Payne relayed an anecdote about a small local bar, owned by a husband and wife, that had to wait 18 months for their $4,000 license application fee to be returned – which he noted is a lot of money for a mom and pop business. Payne also presented a strong case as to why the tavern gaming law has failed, saying that the confiscation of a liquor license for a single instance of underage gambling was simply too much of a risk for most of these establishments to take – a risk he certainly wouldn’t take to add gaming.

Once again, Payne and others looking to simplify this process don’t see this as expanding gaming, but rather providing a way to regulate/replace the illegal video poker machines that are already found in some Pennsylvania bars and taverns.

On the other side of this issue is Rep. Tomlinson, who doesn’t want to make it easier for taverns to receive gaming licenses. Tomlinson once again cites cannibalization concerns.

Ten casinos agree with Tomlinson (or better stated, Tomlinson agrees with the ten casinos). They penned a letter to legislators citing their concern over tavern gaming expansion.

“A rollout of (video terminals) in Pennsylvania will almost certainly result in casino-like games on every Main Street in every town across the commonwealth and threaten thousands of living-wage jobs currently filled at our casino facilities.”

Rep. Paul Costa, D-Allegheny County, the sponsor of the bill that would legalize VLT’s, doesn’t see it this way. “I’m of the belief people who go to taverns and frequent local bars are more inclined to stay in their neighborhood,” Costa told TribLive.com.

Unlike iGaming, the current evidence does suggest that expanding tavern gaming could have a cannibalization effect on brick and mortar casinos.