Will Online Gambling Come to Pennsylvania?

By Ben Hamill - January 08 2017

pennsylvania online gambling soon

Jay Costa, a member of the Pennsylvania State Senate, promises to introduce a gambling bill soon that will be the basis for the State regulating online casinos. In Senator Costa's words, the bill would "allow the Commonwealth's gaming industry to continue to evolve and remain competitive in a responsible manner." Senator Costa says that his bill will be patterned after the bill that passed the State House of Representatives late last year but failed in the State Senate.

Taxes: The Eternal Bugaboo

The 2016 bill tried to resolve problems inherent in taxing profits of both the online casinos themselves and the winnings of their players. The tax issue revolves around what is called a "local share tax" meaning that the locality that hosts a casino should realize tax benefits rather than have all taxes flow to the state treasury and from there to trickle down to localities. The 2016 bill was passed in June but didn't contain provisions to relieve the tax revenue disparity. Then, in late October the House passed a second bill which was designed specifically to resolve the tax issue but it failed to be passed in the State Senate by the deadline set for November 30. As a Senator, Costa believes that his new bill can iron out these and other wrinkles that caused the bill regulating online casinos to fail last year in the State Senate.Pennsylvania State Senate

Complicating the issue and making it absolutely mandatory that the bill cover every conceivable detail in the large matter of regulating online casinos is that the State Supreme Court recently declared a law that had passed to be unconstitutional based on the State constitution because it had unequal impact on Pennsylvania's 12 land-based casinos.

Thus, an omnibus bill that desires to answer difficulties of regulating land-based casinos and also to resolve the difficulties of regulating online casinos is a tall order, indeed.

Revenues to Ease Budget Constraints

Experts have estimated that taxes paid by online casinos and gamblers would raise over $300,000,000 for the state. Some of the money is gambled in-state; Pennsylvania actually exceeds New Jersey in overall gambling, trailing only Nevada nationwide. Nevertheless, some of the money is gambled out of state. Where taxes are paid elsewhere, they represent a loss to Pennsylvania.

A Budgetary Sink Hole

Pennsylvania already has budgeted spending $100,000,000 to be raised from online gambling even before the final bill has been passed and revenues have begun to flow in! This would seem to provide the necessary momentum for the bill to finally be passed regulating online casinos as well as the many land-based gambling venues in Pennsylvania. But, Senator Costa feels that a new bill must be presented because the older bill was just flawed enough to make it politically preferable for many Senators to let it die in committee.

A Legislative Quagmire

The whole issue of regulating online casinos is not new to the Pennsylvania State Congress. Each of the last four years a bill has been presented but none was approved by both State Congressional Chambers. So the effort goes on, this time to be led by Senator Costa.Pennsylvania Shield

The Provisions that May Win the Day

Senator Costa's bill connects land-based casinos to online casino operations. That is, each of the now 12 land-based casinos in Pennsylvania would be allowed to set up an online casino providing they meet all regulatory requirements and pay $10,000,000 for an online gambling license. At least 10 of the 12 land-based casinos have expressed their intention to set up online gambling were the bill to be passed. Land-based casinos in Pennsylvania are divided into three categories. Only the top two categories of casinos would pay the license fee at the outset; the weaker category 3 casinos would have their fees waved for five years.

It is entirely unclear if category 3 casinos would be able to stay in business whilst facing strong competition from legalized online casinos even during the five year grace period from fees. The uncertainty looms even larger when we think of what those casinos will face when the five year grace period expires.

In addition to the overall online casino license fee, the gambling platform provider will pay a $5,000,000 fee. Fantasy sports gambling would also be legalized by this legislation. The license fee for such sports gambling would be $2,500,000. Finally, profits from all online gambling operations would face a 25% tax rate.Pennsylvania Beauty

The bill sponsored by Senator Costa would also ease the way for the State Lottery Commission to create online lotteries and would allow what is called tablet gambling at the two biggest state airports in Philadelphia and Pittsburgh. One objection has been raised: that a 25% tax on fantasy sports would be the highest in the nation and would send Pennsylvanian fantasy sports gamblers across state lines. More general criticism debunks the notion that a 25% tax would fly. To such critics, a 25% tax would do irreparable damage to the Pennsylvania gaming industry by sending gamblers to neighboring New Jersey amongst other locations. Despite the uncertainty, the drawbacks, the willingness of some Senators to let the bill die again, most Pennsylvanians want the state to begin regulating online casinos. From this we may surmise that there is enough money hidden in the "shale" of online gambling for Pennsylvanians that a little legal gambling "fracking" is all that is needed to draw the money out!