Assuming all goes according to the plans of the Pennsylvania Gaming Control Board (PGCB), this summer will see Pennsylvania casinos rolling out online gambling platforms that host online versions of traditional casino games, including an old American favorite: online peer-to-peer poker.
Online poker used to be quite popular all across the US but that all came to a screeching halt on April 15 of 2011 when the US government effectively slammed the door on the practice. Since that horrible “Black Friday”, legal online poker in the US has been mostly dead. The only exceptions are small intra-state sites with limited player pools that operate in Nevada, New Jersey, and Delaware.
When Pennsylvania online poker launches, it will be the fourth US state to legally re-enter the market and at approximately 12 million people, the US’s 5th most populous state will be the biggest “ring-fenced” player poker pool operating in the country. How will Pennsylvania’s entry into the market impact online poker’s future in the US?
Currently, New Jersey is the country’s largest casino gambling market, but it’s expected that PA, having more people, will eventually overtake it. It’s an open question if PA’s success in this regard will provide an impetus for other states to follow suit re online gaming in general (and online poker in particular). Legal sports betting (including mobile betting platforms) is sweeping the nation and it’s a natural “gateway drug” to legalizing other forms of online gaming.
It’s all very interesting, and sparks some obvious questions and things you need to know about the coming online poker market in Pennsylvania.
What will PA’s online poker market look like on day 1?
According to the PGCB, July 15, 2019 is the official launch date of online gaming in PA, including online poker.
How big will the online poker market in PA be right out of the gate? It’s hard to say. New Jersey’s first full month operating online poker came in December 2013 and saw the sites collect roughly $2.8m in rake. That was just two and a half years after Black Friday so there was still a lot of residual interest in poker. Unfortunately, being trapped in an intra-state market isn’t doing much for the online poker market in New Jersey. Revenues are stagnant. Last month the NJ sites collected just $1.9m in rake.
The annual figures show the same thing in NJ. Online poker revenue in 2014 was $29.06m and every year since then has seen smaller revenue numbers than that initial year.
That’s understandable. It’s hard for poker players to get excited about being limited to playing vs. players in your state when you’re used to a player pool the size of the whole world.
That said, Pennsylvania is more populous than New Jersey, so what will PA sites be able to collect in rake during their first full month of operation (August 2019)? On one hand, more people should yield more players. On the other, it’s clear that interest in online poker across the country has waned since Black Friday occurred.
As far as opening day is concerned, PA will probably come under NJ’s $2.8m mark set in Dec 2013. Despite there being some clear pent-up demand for online poker in PA, with mobile sports betting arriving early in May and online table games and slots competing for interest among Pennsylvania’s gamblers, online poker’s initial revenues will probably be somewhat low.
Despite that, PA’s population exceeds that of NJ and live poker is more successful in the Keystone State as well. As time goes by, expect Pennsylvania to reach the #1 spot in US online poker market share. It probably won’t take that long, either.
Will online poker give live poker a boost?
Live poker in Pennsylvania is struggling. In 2018, the state’s ten live poker rooms collected $55.69m in rake. That’s down roughly 6% from the rake collected in 2017. 2016 revenues were very similar to 2017. Live poker in PA isn’t exactly crushing it.
Poker rooms are certainly trying. Sands Bethlehem and Parx both remodeled their poker rooms (to little effect) and Harrah’s just revamped their poker room as well.
Some speculate that synergies can be created between casino operators with live poker rooms alongside online poker sites. This hasn’t panned out in Nevada or New Jersey, where the addition of ring-fenced online poker (a disappointment to anybody familiar with US online poker prior to Black Friday) failed to give a boost to their live poker games.
Perhaps a PA casino operator will figure out how to leverage online poker into giving their live room a spark.
More likely though is that the presence of online poker will cause the marginal brick and mortar poker rooms to close. Presque Isle Casino (seven poker tables) and Mohegan Sun Pocano (18 poker tables) seem the most vulnerable in this regard. Not only are they the smallest rooms in the state, these casinos also are among those that didn’t bother acquiring an online poker license.
Which online poker site will lead the pack?
The best indicator for what the PA market will look like out of the gate is what the NJ market looks like right now. Sites already up and running in NJ should have an initial advantage to their competition.
The three operators in NJ that are relevant to the PA market are Harrah’s Philadelphia (WSOP – it’s a Caesar’s property), Mount Airy (partnered with PokerStars) and MGM/Borgata.
MGM is currently the #3 poker room operator in New Jersey. Also, they don’t have a physical poker room in Pennsylvania – they are eligible to operate online gaming in PA due to their receiving Qualified Gaming Entity (QGE) status which let them apply for licensure. Still, a lackluster performance in NJ and no physical room in PA rules MGM out as top dog in the new market.
PokerStars is the global leader in online poker but in markets that are ring-fenced that doesn’t count for as much as it would in an unrestricted market setting. WSOP is also a well-known poker brand in the US. PokerStars was the top site in NJ at first, but have been passed recently by WSOP thanks to an agreement with Nevada and Delaware to share their player pools that so far only benefits the WSOP brand.
That last detail won’t be a factor in PA, which will be ring-fenced (at least to begin with), so does PokerStars have the edge on the field in PA?
Not so fast. There are two more interesting participants. Parx Casino has by far the busiest live poker room in the state (with 48 tables). Parx controls roughly 30% of the live poker market and generates more than 4x the revenue of Harrah’s live poker room. Parx has partnered with GAN to run its online room and could well emerge on top in time.
The other wild card is PartyPoker, seeking to make a splash in US online poker through its partnership with Valley Forge Casino. PartyPoker was once dominated the US online poker market in the early 2000s. Also of note: Valley Forge is owned by Boyd Gaming, no stranger to poker, both live and virtual.
Who will still be standing when the dust settles?
So far, eight licenses to spread online poker have been issued. Even though Pennsylvania has a good-sized population at 12 million, it’s hard to picture eight separate poker sites all thriving in a limiting intra-state player pool situation. Further muddying the waters: Each license-holder is allowed to operate as many skins (brands) as they like. Mud aside, here’s a list of the potential players:
- Mount Airy (PokerStars)
- Harrah’s Philadelphia (WSOP/888)
- Parx (GAN)
- Valley Forge (PartyPoker)
- Borgata/MGM (PartyPoker)
- SugarHouse (Rush Street Interactive)
- Hollywood (IGT)
- Sands Bethlehem (TBD)
As of now, we don’t even know if all these operators will launch online poker, but they are all licensed to do so. Once the PA online poker market matures, who will remain operational? Who will thrive? Who will crash and burn?
We will just have to wait and see.
Will PA ever be able to merge its player pool with other states? With other countries?
For online poker enthusiasts, this is the biggest question of all. Intra-state player pool restrictions just… suck.
It will be nice for PA’s citizens to be able to return to the virtual felt tables in a relatively large pool of 12 million (potential) players, but what about the other 14 million playing in Nevada, New Jersey, and Delaware? What about the 2 million eligible to play when West Virginia legalizes online poker next year? What about the 10 million eligible when Michigan follows suit soon?
Currently each of these states is ring-fenced. There is a player-pool merge agreement between Nevada, New Jersey, and Delaware, but only the WSOP/888 network is able to take advantage of it. Worse, even that small merge is under fire thanks to the DOJ’s new “interpretation” of the Wire Act.
Pennsylvania’s PGCB, like most regulators, are risk-averse. They aren’t going to make any moves to expand PA’s online poker player pool until this new DOJ situation resolves itself. Right now, the matter is before a court in New Hampshire as very interested parties in PA and across the whole of the US look on.
It’s very likely the matter won’t be settled until the US Supreme Court weighs in on the issue… and that could take years.