After more than a year of haggling over the details, the state of Pennsylvania passed online gaming, poker and DFS regulations for its citizens. While the passage of that bill was a watershed moment that brings to four the number of states with such legislation, the question now is when will it go live. Although state legislators are looking to move quickly on the issue, there are questions regarding the taxation that could keep suitors away from Pennsylvania’s burgeoning online gaming industry.
In a report prepared by Moody’s Investors Service, which provides financial bonds research for investors and other companies, the taxation rate for slots segment of the Keystone State’s online gaming industry could scare off some suitors. The rate of 54% is much higher than the rate that states such as New Jersey (16%) and slightly higher than that in Delaware (43.5%). Such heavy taxation could be anathema to online gaming operators, who would be looking to make more of a profit from the games than not even 50% of their “win.”
And what effect would that massive tax bill on casino gaming have on those who want to enter for online poker? While they continue to indicate that they want to be a part of the industry, companies like 888 Holdings (888Poker), The Stars Group (PokerStars) and partygaming (partypoker) might not want to invest heavily with either a poker or a casino gaming operation in a market that they won’t see a suitable return.
For now, the big question is when the clock starts ticking on just getting the licenses handed out. Although Governor Tom Wolf signed the bill into law at the end of October, the Pennsylvania Gaming Control Board hasn’t yet started the clock on accepting applications for online gaming licenses. Currently the PGCB is putting the final changes on the regulations themselves, pushing back further the opening of the Pennsylvania online gaming industry.
Once the PGCB opens the licensing process, those casinos inside the state will get first crack at the three levels of licensing. Those three licenses – for slots, table gaming and poker – will be available for a $4 million price tag for individual license. If an entity were looking to get all three, then the “hometown discount” would be $10 million for all three. The time frame for those companies already located in Pennsylvania will be 90 days from the date the PGCB opens for business.
After that 90-day period, outside operators would then be allowed to apply. They wouldn’t receive the discount price for all three licenses, instead they would be charged at the $4 million per license price. That process would run for 120 days, making for a grand total of 210 days – seven months – before just the licensing procedures would be complete. Looking at the calendar today, that would mean that just the licensing process would take until the beginning of July 2018.
Once the licensing process is complete, then the actual testing process for the different gaming software would have to be completed. If the PGCB was expedient in its review process, it is conceivable that it could take 30 days before online gaming would be opened in the state. Playing on the conservative side, let’s say it takes 90 days for them to complete their testing. That now makes it October 2018 before the first bets can be taken in the state of Pennsylvania.
Although online gaming and poker are now the law in the home of the Steelers and the Eagles, it isn’t going to be anytime soon that the games start. Hopefully within that time, state regulators will consider joining with the other three states that have online poker regulations – Nevada, New Jersey, and Delaware – and join that compact to fully maximize the abilities of the online poker segment of the industry. With 2018 around the corner – and several states examining the online gaming and poker question – a fully functioning and profitable Pennsylvania market would encourage others to join the party.