It feels like the awareness and legalization of online gambling did not exist until the repeal of PASPA in 2018, which opened the door for state-sanctioned sports betting.
Certainly, that is not the case. Prior to that historic decision by the US Supreme Court, several states enacted legislation to launch (or even went as far as launching) regulated online gaming markets. That includes Pennsylvania.
In 2017, the Keystone State passed into law a gambling expansion package that allowed online casinos, online poker and online sports betting. It was not until well over a year later that any of the verticals rolled out.
The lengthy waits have been well-documented, and so too have the drawbacks of such delays. Regardless, Pennsylvania stands as one of just three states with all three regulated markets operational.
And despite prolonged holdups, PA online gambling appears well on its way to a bright future. The Keystone State could get their faster, though, by addressing several issues while continuing to perpetuate its assets.
The good of Pennsylvania online gambling
PA sports betting off to strong start
Start with the obvious: Pennsylvania sports betting has boomed.
In its first year, legalized wagering in the state generated more than $1.1 billion in bets. And despite facing a sky-high tax rate of 36%, operators pocketed nearly $75 million in revenue.
Overall handle has increased in each month since April, a credit not only to thriving competition but also to the advent and swift takeover of betting apps. (Online wagers account for better than 80% of overall bets placed in Pennsylvania.)
Of course, football season helped: Each month between August and November featured handle totals exceeding $100 million – including November’s record total of $316 million.
With eight betting apps and 12 retail sportsbooks, Pennsylvania continues to expand its sports betting industry as it attempts to rival New Jersey and Nevada as legal sports betting powers. (For perspective, nearby New Jersey needed seven months to eclipse $1 billion.)
PA online casinos, poker establishing footholds
The other two online verticals in Pennsylvania operate in the shadows of sports betting. Like regulated wagering, though, online casinos and online poker remain in their infancy.
That said, the group of Pennsylvania online casinos has increased to five operators since going live in July 2019. In November, that collective totaled some $7.6 million in revenue, reflecting a $2.75 million increase from October. Since launching with three operators, online casinos in Pennsylvania have spiked $6.88 million in revenue.
As for online poker, November marked the first month of the vertical in the Keystone State. And it did not disappoint, as PokerStars debuted with rake and tournament fees totaling near $2 million.
Big names, big competition, big appetite for PA online gambling
Fear abounded that Pennsylvania’s high tax rates and licensing fees would prevent the state from reaching anything close to full maturity.
Who could blame them? Even today, PA’s rates stand as the highest in the country.
Operators, however, flocked toward the Keystone State; those who saw rising success in New Jersey opened up shop in PA. The likes of DraftKings Sportsbook, FanDuel Sportsbook and Fox Bet (among others) have thrown their hats into the Pennsylvania sports betting ring. As has Unibet, which, like SugarHouse and Parx, also powers an online casino.
Competition gradually swelled as 2019 wore on, seemingly in stride with the PA public’s growing hunger for and acceptance of online gambling.
How hungry has the public been? Of the state’s top five properties in terms of revenue during November 2019, four enjoyed noticeable boosts year over year – in part because of online gambling products:
- Parx Casino: +12.58%
- Rivers Pittsburgh: +14.48%
- Rivers Philadelphia: +23.35%
- Hollywood Casino: +9.13%
To boot, properties such as Valley Forge (+71.38%) and Mount Airy (+31.64%) saw big spikes from November 2018, again in part to the advent of online gambling.
The not-so-good aspects of Pennsylvania online gambling
In hindsight, not much was terrible about Pennsylvania’s modernization.
Initially, the state’s gouging tax rates and licensing fees didn’t sit right with stakeholders or analysts. They still don’t, of course, what with Pennsylvania’s rates still sitting as the highest in the country. That said, while that certainly has affected the bottom line for some, those rates have yet to scare off operators, who continue to hold an optimistic outlook for the potential of online gambling.
Then, of course, there was the whole Wire Act debacle of 2019. Just before the close of 2018, the Department of Justice issued an updated opinion of the act, essentially noting that the Wire Act should pertain to all forms of online gambling and thus prohibited under federal law.
As the New Hampshire Lottery started mounting its case against the DOJ (one that is still circulating through the courts), Pennsylvania maintained a cautionary approach. The state required operators to establish in-state servers and to submit plans to the Pennsylvania Gaming Control Board explaining how they would come into compliance should the new Wire Act opinion become enforced.
Such tactics no doubt delayed the debut of online casinos and online poker in Pennsylvania. Additionally, it restricts the title selection in the state.
How Pennsylvania online gambling could improve
Simply because Pennsylvania has opened up all three online verticals does not mean the state’s work is complete. These industries want to grow more. They want to become innovative. These are the paths Pennsylvania can take to help each industry reach its full potential – or at least close to it.
As such, moving forward, it would be ideal for Pennsylvania to be looking out for its casinos. While the safe bet is the following will not occur, it would sure help online gambling become even more profitable.
First, revisiting the tax rates would allow for industry stakeholders to open up their wallets more. Obviously the state claiming a larger take does not allow operators to take advantage of marketing and promotional tools. In such marginal industries, operators are already left with low percentage profits. These rates only dig into those pockets even more.
Certainly, Pennsylvania is unlikely to make any changes soon (if ever) surrounding tax rates. But what about its stance on the Wire Act opinion? One court has already ruled in favor of the NH Lottery condemning the DOJ’s take on the Wire Act. And now the DOJ is appealing that ruling. As such, that opinion appears a far cry from being enforceable.
Regardless, Pennsylvania remains cautious. And as a result, operators in the state are limited in what games and titles they can offer, while others can’t even get a foot in the PA door because of a lack of in-state servers.
Looking forward, what price could Pennsylvania pay by requiring so much of stakeholders? Under status quo, could Pennsylvania fall well short of its potential?
Former New Jersey Gov. Chris Christie essentially said as much in 2019, noting that these fees “are not going to encourage innovation” or “investment in the properties.”
“Every dollar you pay in licensing fees or in taxes is a dollar you don’t have available to bring new types of betting to the floor, to have state-of-the-art products to allow the experience to be more enjoyable. That’s why I think they are missing the boat.
“In the end, it’s a short-term problem and a long-term problem. The long-term problem is they’re not going to invest in getting Pennsylvanians the best technology because they spent all they are going to spend on the licensing fees and the taxes.”
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