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A Years End Snapshot Of The Online Gaming And Sportsbook Situation In PA

2018 is almost over and Pennsylvania gambling has changed a great deal this year. Let’s take a look at where we are at right now, and what we can expect to happen in 2019.

PA now has legal sports betting!

Sports betting and online casino gaming made headlines this year due to some recent changes in both the PA and US legal landscape. Big moves were made in both these areas in 2018, but legal and licensed sports betting got to market first.

Hollywood Casino broke through first, opening a retail sportsbook at Penn National Race Course in mid-November. They had the field to themselves until mid-December when Rivers and SugarHouse opened sportsbooks of their own at their main casino locations.

More will soon follow

Parx or Harrah’s will probably be the next casinos to open a sportsbook, though Valley Forge has received conditional approval as well. The latter is partnering with heavyweight operator FanDuel, which is already tearing up the New Jersey market. These three sportsbooks are expected to open sometime in early 2019.

An application for a sportsbetting license has been filed by Presque Isle as well and we expect Mount Airy to soon apply. These casinos should have sportsbooks up and running sometime early next year as well.

The other five of the thirteen eligible land-based PA casinos didn’t line up to seize this new opportunity.

Why would a casino NOT want a sportsbook?

It’s hard to be sure why those casino operators have turned their nose up at the opportunity run a sportsbook, but there are a couple obvious and glaring possibilities: the fees and taxes. A license to operate a sports book in PA costs $10 million. That’s a lot. Especially if you’re one of Pensylvania’s smaller casino operations. Perhaps even more inhibiting, the tax rate to be applied to sports betting revenues is a walloping 36%.

That’s such a high tax rate it has led some industry analysts to wonder if it’s even profitable to run a sportsbook under the weight of it. Let’s remember there are operating and promotional costs to consider as well. Are some casinos prepared to offer sports betting as a loss leader? The mind boggles.

As a comparison, the tax rate on sports betting revenues in New Jersey is 8.5% (unless they are online sports bets – then it’s 13%). Despite that ridiculous and arbitrary distinction, both figures are far lower than Pennsylvania’s tax rate.

What about online sports betting?

All the casinos who are entering PA’s new legal sports betting market have expressed interest in launching mobile (online) versions of their sportsbooks and all will do so as soon as the Pennsylvania Gaming Control Board (PGCB) gives the go-ahead. The PGCB has stated that it will wait to give approval to launch online sports betting until all operators have proven success and stability running their retail books.

When the PGCB finally gives casinos permission to go wireless with sports betting, we will let you know here.

Still waiting on online casino betting

Similar to the sportsbook situation, the PGCB initially offered online casino licenses to their thirteen existing land-based casinos. Each casino was offered online slots, online table games, or online peer-to-peer (poker) licenses at $4 million each or they could buy all three in a bundle for $10 million.

As of right now, ten of the local operators have applied for two or three of the new online licenses while three of them have abstained. Right now the picture looks like this:

More tax and fee roadblocks?

Why are these three casinos abstaining from such a profitable opportunity as offering online gaming?

Rivers Casino’s decision to withdraw their online casino gaming application makes sense as their parent company (Rush Street Gaming) can operate under the license of their sister-casino, SugarHouse. It makes little sense to double-pay for licenses when you can reach the entire state with one casino brand.

The other two casinos who are sitting out may be frozen by the high license fee, but it’s even more likely that taxes might be the problem. Online slot revenue in PA will be taxed at an eye-popping 54% tax rate. Online table games and online poker revenue will be taxed at 16%.

These rates are shockingly high and bizarrely arbitrary. While 16% might seem cheap when compared to 54%, it’s still very high compared to the percentage other states will be taking for the same privilege. Again, as a comparison, New Jersey’s applicable tax rate is only 8.5%.

At any rate, for one reason or another, these casino operators don’t find the opportunity enticing enough to act.

That makes room for outside operators

After PA’s local casino operators time at the trough, the PGCB still has ten available online gaming licenses, two each for online slots and table games, and six for online poker.

To remedy that, the PGCB has now opened the door for Qualified Gaming Entities (QGEs) to apply for these licenses. Two outside entities have stepped forward to take a bite of the shiny new apple that is the enormous Pennsylvania online gaming market.

They are MGM and Golden Nugget. Both have applied for QGE status and submitted applications for online gaming licenses in the state. MGM opted for all three licenses (at the bundled price of $10 million) while Golden Nugget opted to pay $8 million for just online slots and online table games.

While their applications are still pending, they are expected to both be approved without any issues, given how well established these operators are in other US states.

Online gaming will take a bit more time until it’s rolled out

Legal sports betting in PA was breathed into being before 2018 came to a close, but online gaming has taken longer to implement.

It’s not completely clear why. Perhaps it’s because most of the PGCB’s attention seems to be on sports betting and online gaming has taken something of a back seat. On the other hand, its possible that the regulators are waiting until all casinos have been approved before giving the go-ahead. After all, nobody wants to lose out on state-wide online market share because a competitor (who paid the same fee as you did) was allowed out of the gate first.

For whatever reason, Pennsylvanians will have to wait at least until Q1 2019 for online gaming.

We will keep you informed!

Check back here for all the latest news on these and other Pennsylvania gaming and bonus code issues.