As 2018 Ends, PA’s Sports Betting And Online Gaming Picture Summarized

2018 is almost over and Pennsylvania’s gambling situation has changed a great deal this year. Let’s take a look at where casino gaming is at right now, and what we can expect to happen in 2019.

Pennsylvania now has legal sports betting

Great progress was made in the areas of sports betting and online casino gaming in 2018 due to some recent changes in both the PA and US legal landscape. Both aspects of the gaming market saw much development throughout the year but legal and licensed sports betting got to the post first.

Hollywood Casino made headlines when they opened the state’s first legal retail sportsbook at Penn National Race Course in mid-November. They held the distinction of being the only one in the state until mid-December when Rivers and SugarHouse opened sportsbooks of their own.

More are on the way

Parx or Harrah’s will probably be the next casinos to open a sportsbook, though Valley Forge has received conditional approval as well. The latter made some noise by partnering with heavyweight operator FanDuel, which is already tearing up the New Jersey market. These three sportsbooks are expected to open sometime in early 2019.

Presque Isle has filed their application for a sports betting license and we expect Mount Airy to soon apply. These two casinos should have sportsbooks up and running sometime early next year as well.

The other five of the thirteen eligible land-based PA casinos have decided (so far) to pass.

Who wouldn’t want their own sportsbook?

We can’t be sure why these casino operators have turned their nose up at the opportunity run a sportsbook, but there are a couple obvious and glaring possibilities: the fees and taxes. A license to operate a sports book in PA costs $10 million. That’s a lot. Especially if you’re one of Pennsylvania’s smaller casino operations. Wouldn’t it be more fair for license fees to be scaled to the size of a casino’s market?

Perhaps a more likely inhibiting factor: the tax rate to be applied to sports betting revenues is a hefty 36%.

That’s such a high tax rate it has led some industry analysts to reconsider the profitability of running a sportsbook under the weight of it. Let’s remember there are operating and promotional costs to consider as well. Are some casinos prepared to offer sports betting as a loss leader?

By comparison, the tax rate on sports betting revenues in nearby New Jersey is 8.5% (unless they are online sports bets – then it’s 13%). Despite that ridiculous and arbitrary distinction, both NJ figures are far lower than what Pennsylvania’s is aiming to siphon off the casinos in their jurisdiction.

Is online sports betting on the way?

Absolutely. All of the casinos who are entering PA’s new legal sports betting market intend to launch mobile (online) versions of their sportsbooks and will do so as soon as the Pennsylvania Gaming Control Board (PGCB) gives the go-ahead. Exactly when that will happen is somewhat unclear. The PGCB has stated that it is waiting to give approval for online sports betting until all operators have demonstrated success and stability running their retail books.

When the PGCB gives casinos the green light to go wireless with sports betting, we will let you know here.

Online casino games on the way but still need more time

As with the sports betting licenses, the PGCB initially offered online casino licenses to the state’s thirteen existing land-based casinos. The casinos were offered online slots, online table games, or online peer-to-peer (poker) licenses at $4 million each or they could buy all three in a bundle for $10 million.

As of years end, ten of the local casinos have applied for at least two (and most three) of the new online licenses while three casinos have abstained. The picture looks like this:

So who wouldn’t want to offer online casino gaming?

Why are these three casinos abstaining from such a profitable opportunity as offering online gaming?

Rivers Casino’s decision to withdraw their online casino gaming application makes sense as their parent company (Rush Street Gaming) can operate under the license of their sister-casino, SugarHouse. It makes little sense to double-pay for licenses when you can reach the entire state with one casino brand.

The other two casinos who are sitting out may feel unable to handle the technological challenge online gaming presents. Or perhaps they were put off by the high license fee. A more likely culprit is (again) the tax rate. Online slot revenue in PA will be taxed at a blistering 54% tax rate. Online table games and online poker revenue will be taxed at 16%.

These rates are shockingly high and bizarrely arbitrary. While 16% might seem cheap when compared to 54%, it’s still very high compared to the percentage other states will be taking for the same privilege. Consider: New Jersey’s applicable tax rate is only 8.5%. The difference between jurisdictional tax rates is stark.

At any rate, for one reason or another, these casino operators don’t find the opportunity enticing enough to act.

Outside operators are interested in operating in PA

After selling licenses to all interested local casinos, the PGCB still has ten available online gaming licenses, two each for online slots and table games, and six for online poker.

To find buyers, the PGCB has now opened the door for Qualified Gaming Entities (QGEs) to apply for these licenses. Two outside operators have stepped forward to take a shot at competing in the enormous Pennsylvania online gaming market.

They are MGM and Golden Nugget. Both have applied for QGE status and submitted applications to the PGCB for online gaming licenses. MGM opted for all three licenses (at the volume discount price of $10 million) while Golden Nugget opted to go a la carte and pay $8 million for just online slots and online table games.

Their applications are still pending but both are expected to be approved given how well established these operators are in other US states.

When will online casino gaming arrive?

Legal sports betting in PA arrived in 2018, but online gaming has taken longer to implement and will have to wait until the new year.

It’s not completely clear why the delay. Perhaps it’s because most of the PGCB’s attention has been on sports betting and online gaming has taken something of a back seat. More likely, it could be that the regulators are waiting until all casinos have been approved before giving the go-ahead. After all, nobody wants to lose out on online market share because a competitor (who paid the same fee as you did) was allowed out of the gate first.

For whatever reason, Pennsylvanians will have to wait a little longer for online gaming.

When we know, you’ll know!

Check back here for all the latest news on these and other Pennsylvania gaming and bonus code issues.

Author: Adam Haman