Upcoming Hearing Could Provide A Roadmap For Pennsylvania Online Gambling

Steve Ruddock October 26, 2015
Pennsylvania online gambling hearing

Edited: As of October 26, the planned hearing has been cancelled and has yet to be rescheduled.

After several months of little movement, Pennsylvania is back on track for online gambling expansion. Analysts believe that if Pennsylvania passes an online gambling bill, it will be a tipping point for regulated online gaming in the United States, creating a domino effect in other states and ending the calls for federal prohibition.

The latest news

The Pennsylvania House Gaming Oversight Committee was scheduled to hold a hearing on October 21 where it was widely rumored they would vote on an online gambling bill. The hearing was abruptly cancelled earlier in the week.

Pennsylvania Representative John Payne confirmed that a vote was scheduled, and intimated to Card Player Magazine that he was asked to postpone the vote in order to give the daily fantasy sports industry a chance to come to the table, and perhaps add DFS regulation as part of a larger gaming reform package.

Therefore, the postponement of the vote could be a positive development; a sign that this is a serious effort to pass a bill and not just talk about it at a public hearing.

Based on his comments to Card Player, Payne sees an omnibus bill as the best chance for online gambling expansion to be part of the 2016 Pennsylvania budget compromise. The omnibus gambling package could include online lottery sales, slots at airports, daily fantasy sports betting, and online gambling.

When the vote would take place is unclear, but another hearing – a joint hearing between the House Gaming Oversight Committee and the Senate Finance Committee – is set for October 27, with the agenda including online gambling and online lottery. It’s possible the two committees will vote on some type of gambling reform package at that time or soon after the hearing.

Another signal that the legislature is making a serious iGaming push is the return of the Coalition to Stop Internet Gambling and the release of a new attack ad by the Sheldon Adelson-led group that specifically targeted the chairman of the House Gaming Oversight Committee, John Payne.

Reading the tea leaves

iGaming expansion was the talk of the town in the Pennsylvania legislature earlier this year, but seemed to be pushed to the back burner once budget talks between the legislature and Governor Tom Wolf began this summer.

However, on October 7, with the budget some 100 days past due and the two sides gridlocked, the legislature decided to bring Governor Tom Wolf’s proposal to the floor for a vote. Majority Leader Dave Reed (R-Indiana) decided on this unorthodox move as a way to show the governor his proposal (of largely tax increases) didn’t have enough support to pass in its current form.

The move paid off for Reed and the state republicans, who are looking to avoid tax hikes, as the governor’s budget was roundly defeated by a vote of 127-73.

The October 27 hearing could be the legislature’s chance to hash out a counter proposal (or simply a bargaining chip that could take the place of one or more of Governor Wolf’s tax proposals) they could then deliver to the governor, but to do that they will have to demonstrate they are a united front, and that means they will need to work out a key difference between the senate and house online gambling expansion proposals.

Tax rate is the sticking point

Payne’s online gambling proposal would tax online gambling at 14 percent, whereas the senate version sponsored by Kim Ward would impose a much higher rate of 54 percent. The industry has said that a rate above 15 percent would be too much of a burden, and likely do more harm than good, as few operators would be inclined to enter the space.

Proponents of the higher tax rate will have to abandon that position, or at the very least, reduce the tax rate on all forms of iGaming except slot machines.

If the two bills can be melded together, and the committees can also add iLottery and DFS to the mix, Pennsylvania could legalize online gambling in the coming weeks.

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