Live Reporting of Pennsylvania Online Gambling Hearing June 10

June 10, 2015
Live Reporting of Pennsylvania Online Gambling Hearing June 10

US Poker will post continuous updates of today’s hearing on gaming reforms, including online gambling expansion, in front of the Pennsylvania Senate CERD (Community, Economic and Recreational Development) Committee.

The hearing will begin at 9 AM and will include a panel featuring representatives from 11 of the state’s 12 casinos.

The hearing will cover a number of topics from the newly introduced SB 900 gaming reform bill. SB 900 was sponsored by CERD member Kim Ward, and cosponsored by the eight other Republican members of the CERD Committee.

9 AM Hearing underway

Senator Kim Ward notes SB 900 is not a final bill, and amendments have been made since it was introduced last night.

9:05 Sands rep goes on the offensive against iGaming

Representative from Sands Bethlehem Casino, Mark Juliano, detailing positive ramifications of gaming expansion in Pennsylvania. Feels further expansion, including online gambling would erode what they have built.

Juliano against all three gambling expansion proposals – iGaming, tavern gaming, and video gaming terminals.

9:10 Hollywood Casino/Penn National weighs in

Eric Schippers of Penn National/Hollywood Casino gives an overview of Penn National nationally and in Pennsylvania.

Schippers also opposes VGT’s and slot expansion outside of casinos.

Calls for reinvestment tax credits to help casinos continue to update and improve their offerings.

Penn National “iGaming is a vital tool” to evolve and protect what they’ve built.

“iGaming will not cannibalize brick & mortar gaming – opposite is true.”

Schippers has made numerous mentions about a 14% tax rate and $5 million licensing fee, as seen is John Payne’s HB 649 bill. SB 900 calls for 54% tax rate and $10 million licensing fee. According to Schippers the 54/10 proposal would cause Penn National to lose $20 million.

9:15 Bob Green of Parx

Most feel Parx is the casino pushing for in-person registrations, a measure included in SB 900.

Green calls SB 900 agenda “very expansive.”

Green says he will not address measures individually, but calls for any proposal “to do no harm.” Then goes on to address a number of measures individually.

Green, “we are not opposed to Internet [gaming]” but, “there must be safeguards.”

9:20 Melissa Richards from Harrah’s

Like the previous speakers (and undoubtedly the ones that will follow) Richards is outlining the positives of their property, Harrah’s Chester.

Richards, “We ask that the commonwealth protect our casinos from unhealthy competition and over saturation.”

Harrah’s opposes slot expansion and removal of Category 3 (membership fees) restrictions.

“Allow the Gaming Board to open new sources of revenue that will not be cannibalistic… we support online gaming.”

Richards “we have supported additional information on Internet Gaming.”

9:30 Sean Sullivan from Meadows Casino

Meadows is in favor of online gambling, “as long as it is affordable…”

Like the previous speakers, Meadows opposes VGT’s.

Sullivan also opposes relaxing restrictions on Cat 3 casinos, “cites “promises made promises kept”, says, “Everyone knew what they were signing on to.”

Meadows favors liquor expansion, opposed to smoke-free.

Meadows in favor of slot machines at Off-Track-betting locations, BUT feels Category 1 licensees are the only ones who should have slots at OTB’s.

9:45 Wendy Hamilton from Sugarhouse Casino

Hamilton speaking on behalf of SugarHouse and Rivers Casino – both are owned by Rush Street Gaming.

Hamilton, “Pennsylvania [gaming] has peaked and is receding.”

Notes closure of 4 AC properties did not spur growth for PA or New York.

Hamilton calls for casino issued liquor licenses and expansion into online gambling – these seem to be the only two issues with broad support (excluding Sands).

Hamilton opposes removing Category 3 restrictions and slot expansion.

Hamilton introduces Richard Schwartz to speak specifically about online gambling.

Schwartz says online will bolster B&M casinos in PA. [paraphrasing] “AC casinos are enticing players in eastern PA through online marketing.”

Schwartz rightly points out how iGaming can increase B&M databases by drawing in new customers. Schwartz essentially sees iGaming as a great marketing tool.

Schwartz again rightly points out that roadblocks such as in-person registration simply push players to unregulated sites.

Schwartz, calls for full casino regulation (not poker-only) and a tax at or below New Jersey, or >15%. This, according to Schwartz, leaves operators with just a 5% margin. Anything higher would be very challenging for anyone in PA to generate profits.

Schwartz, only Category 1 and 2 license holders should offer online gambling, because of the higher licensing fees they paid – $50M compared to $5M.

10 AM Robert Pickus of Valley Forge

Valley Forge in favor of online gambling, and like others is calling for a tax rate >15%.

They (obviously) also feel Category 3 casinos should not be prohibited from offering online gambling.

It should also be noted that Valley Forge has partnered with in Pennsylvania.

Valley Forge (again obviously) is in favor of removing “membership fee” on Category 3 licensees.

Pickus is essentially making the case that Category 3 licenses should be rolled into a Category 2 license: Wants increased access, increased number of games and machines, etc.

Pickus, “prepared to discusss [price]” to expand offerings at Category 3 casinos.

10:05: Q&A session beginning

Senator Ward, Parx not behind OTB offerings – an accusation made by Wendy Hamilton earlier in hearing.

Senator asks Bob Green if OTB’s and online gambling would have negative impact (cannibalization) on B&M casinos.

Green responds, if safeguards are in place it could have positive effect. Also cites previous testimony that 85% of online players at the Borgata are new or inactive players – falsely equates this to the need for in-person registrations.

“Do you feel iGaming will bring you a customer you currently don’t have?”

Green essentially thinks anyone who might gamble already has, and iGaming could perhaps bring them back.

Michael Cohen of Caesars: we don’t agree with in-person registrations. “if you force them to go they will continue to play at unlicensed sites. We want to entice them to go to B&M casino.”

Pickus implies Category 3 restrictions cause loss of gaming revenue: people come to Valley Forge, find out about membership fee and leave. Whether they go to another casino we don’t know.

Senator Tomlinson makes some wild accusations

Senator Tomlinson pushing back on the idea that Category 3 restrictions was a “mistake.” Basically says they’re lucky to have gotten anything, as he doesn’t even consider the property [Valley Forge] a “resort.”

Senator Tomlinson thinks (absurdly in my opinion) lowering tax rate on online gaming would cause casinos to focus on online gambling instead of B&M property.

Schwartz explaining that NJ operators (at 15% tax rate) are not making profits.

Chris Sheffield of Penn National now addressing these tax concerns.

Sheffield (paraphrasing), “4% tax rate in Gibraltar left us with 15% margin – margin would be lower in U.S.”

Sheffield, “more costs in Internet gambling than land-based.” from cyber security to revenue share with game providers, to marketing.

How would you use iGaming?

Sean Sullivan of Meadows: we would use online gambling to promote B&M casino and appeal to millennials. Further, Sullivan states, people are already doing it [online gambling] as well as illegal OTB slots.

Sullivan finishes with, online gambling and OTB’s help address the not often talked about issue of illegal gambling.

Senator Stefano: How many new customers will iGaming generate?

80% are new players, AND 15% of online players THEN visit casinos according to Michael Cohen of Caesars.

Schwartz indicates NJ trend cited by Cohen is also occurring globally.

Senator Stefano: “so iGaming is a good marketing tool for land-based?” Schwartz, “yes.”

Sheffield concurs, the two channels (online and live) work hand in hand when done properly.

Senator Tomlinson the redux

Tomlinson continues to (preposterously) assert B&M operators will “take advantage” of lower tax rate on iGaming and shirk their B&M casinos.

Again, Tomlinson doesn’t want an answer to this question, just to rant (for several minutes) about his concerns – concerns that could be answered by several people on the panel.


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