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Taxes Stifling Initial Pennsylvania Sportsbetting Movement

Earlier this month, the Pennsylvania Gaming Control Board announced that they would begin accepting petitions from the state’s 13 casinos to begin operating sports betting. With temporary regulations drafted and the petition process open, sports betting in Pennsylvania should be around the corner, right?

While the PGCB hopes to open up the market “as soon as possible,” there could be a major snag.

Through the first week of accepting license applications, not a single Pennsylvania casino has submitted a petition. Indications for the delay point to hefty costs of doing business in the state — a 36% tax on operator revenue plus a $10 million one-time fee. This compares to an effective tax rate of 11% in Nevada and a tax less than 10% in New Jersey. Other states such as New York are expected to adopt similar structures when they move forward with regulation — with much smaller fees.

Will PA get left behind for now?

Pennsylvania was one of a few states that anticipated and prepared for the possibility of the sports betting market climate improving. The state included sports betting language that allowed qualified entities to offer sports betting when the federal climate improved. Now that the Supreme Court has given the power of regulation to the states, Pennsylvania should be setting up to be one of the first to market, but instead could be put on the back burner for operators.

With the Supreme Court’s ruling on the unconstitutionality of PAPSA, sports betting in the United States is expected to expand greatly over the coming months and years. Delaware has already joining the sports betting regulation train this week. New Jersey also overwhelming passed a sports betting bill this week that should clear the way for the state to launch sports betting this month. With sports betting likely to spread rapidly it appears that sports books and casino may choose to focus on other states with more favorite tax schemes.

Who is allowed to offer sports betting in Pennsylvania?

In late May, the Pennsylvania Gaming Control Board passed temporarily regulations that put in motion the announcement of license applications. Over the coming weeks and months, the PGCB is expected to approve additional regulations that will be fine tuned. The PGCB is accepting comments until June 15th fir considerations before final regulations are drafted. With no deadline to submit petitions and no clear resolution to the tax problem, Pennsylvania could be in a bit of a holding pattern.

Once approved for a sports betting license, a Pennsylvania sports book will only be permitted to operate sports wagering at a licensed facility. Licenses are only open for existing Pennsylvania casinos at this time. The temporary facility will be good for a period up to 18 months. So called Category 1 casinos (racetracks) would also be able to offer sports wagering “in a non-primary location in which it conducts pari-mutuel wagering” or through an “internet based system.”

But all of this could be a moot point if the obstacle of taxes is not addressed. Pennsylvanians hoping for an alternative to offshore sports books and local bookies just may have to wait a bit longer.