Pennsylvania, Illinois One Step Closer to Online Gaming Regulation



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Two states that, 18 months ago, weren’t even thought to be in the discussion regarding online gaming and poker regulation – Pennsylvania and Illinois – are now one step closer to passing that legislation.

In the Keystone State, the full Pennsylvania House passed their version of online gaming regulation with an interesting breakdown of the legislature. The vote on H. 271 was 102-89, with more Republicans (78) in favor of the bill than against it (38) and more Democrats against the bill (53) than in favor of it (24). As it is written now, H. 271 would allow Pennsylvania residents to partake of online casino gaming, poker, and daily fantasy sports (DFS).

The problem is that the bill passed by the House bears little resemblance to the bill passed a couple of weeks ago by the Pennsylvania Senate. The Senate, which passed their version by a 38-12 vote, taxed online casino games (slots and table games) at a massive 54% and online poker at 16% (more to the norm). The House dropped the casino games taxation down to 16% (plus a 3% “local share”) and added in video gaming terminals (VGTs) for bars and truck stops; the Senate doesn’t back the addition of the VGTs to the gaming bill.

With differences between the bills, there are two paths forward for H. 271. The Senate can reconsider the passed House version and take another vote on it, which is unlikely with the huge differences. The second option is a combined House/Senate committee, which would meet to reconcile the differences in the bills. If the committee cannot reconcile the actions, then the bill wouldn’t even reach the desk of Governor Tom Wolf (who has indicated he will sign an online gaming bill as it was in the budget for this year). The Senate is expected to decide on H. 271 by June 19.

Another state has come out of left field to be in consideration to be the fourth state to pass online gaming and/or poker legislation in the States of America. Last week the Illinois Senate stunned many in the Land of Lincoln by passing legislation that would regulate online gaming/poker and DFS. By a vote of 42-10, the Illinois Senate sent the legislation over to the Illinois House, where it is going to face a bit more scrutiny from a body whose leader, Speaker Michael Madigan, does not support online gaming.

The legislation passed by the Senate would allow the currently licensed casino and horse racing tracks in the state to apply for licenses, with the horse tracks facing the requirement of having run a 30-day schedule of events in the current year. The taxes on all gross revenues would be 15% but, for the first five years, the initial $100 million in revenues would only be taxed at 10%. The Illinois legislation also has a “bad actor” clause that would prevent any entity who “accepted wagers via the internet in contravention of this act or in contravention of any law of the United States.”

Illinois would tax DFS a bit differently than online gaming and poker. The state would use a sliding scale to determine licensing fees ($500 for those businesses making less than $100,000 up to $25,000 for those making over $10 million) and would require that DFS operators pay 5% on their first $1 million in revenues, 7.5% on revenues up to $3 million, 10% for those making between $3 and $8 million and 15% for those making more than $8 million.

Not only is the future of the Illinois legislation in question in the House, it is also in question should it head to the state’s Governor, Bruce Rauner. When running for Governor in 2014, Rauner was not a fan of moves to expand gaming in the state. Perhaps of more importance, however, is that the state cannot come up with a method to plug a $9.6 BILLION budget deficit, much of it racked up through the state not matching payments on state employees’ pension funds. Even if the online gaming/DFS bill was painted as a way of cutting into the deficit, the pittance made through the above taxation plans would barely put a dent in the deficit.

Whether these states will join Delaware, Nevada and New Jersey in the online gaming and poker industry in this country remains to be seen. There are also moves in other states – New York seems serious this time – that could bypass Pennsylvania and Illinois to become the fourth state in the Union to regulate the industry. Going on four years since the passage of online gaming legislation in the trio of states that have regulated it, it is high time more states picked up the action.

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