New Online Poker-Only Proposal In Pennsylvania Faces An Uphill Battle

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Pennsylvania State Senator Sean Wiley is seeking cosponsors for a proposed bill that would reform a number of gaming laws in the state, as well as legalize online poker. Wiley’s proposal is all encompassing, and contains several controversial policy points that are currently being debated in the state. However, online expansion seems to be the central component of his plan, and his online gaming ideas are quite problematic. If it gains any traction, the bill will likely be discussed at a tentatively scheduled gaming hearing in the state senate CERD Committee on June 10. Bill would legalize online poker but not casino games Wiley’s legislation would only legalize online poker in Pennsylvania. This will put his proposal behind the eight ball from the outset, as the state’s primary reason for online expansion is revenue, which is mainly generated through casino games, not poker. For instance, in New Jersey online casino revenue was triple the amount of online poker in 2014, a split that has grown to 80/20 in recent months. Poker-only legislation would be a hard sell to a state legislature looking to find revenue in order to keep Governor Tom Wolf’s plans to raise taxes at bay. Archaic tax rate and licensing fee More concerning are the numbers Wiley uses. “I am proposing a $500,000 online gaming license fee and a tax rate of 36% on online poker revenues,” Wiley’s proposal states. Both of these numbers are way off, as the lack of upfront licensing fees diminishes the skin operators have in the game. It would also fail to give the state enough capital to do the regulatory grunt work. The tax rate alone would make it extremely difficult for operators to compete against unlicensed sites and turn a profit. The current proposal supported by analysis from the iGaming industry (and the numbers present in Representative John Payne’s HB 649 online gaming bill) calls for comprehensive online gaming expansion, a $5 million upfront licensing fee, and a tax rate of 14%. Wiley’s numbers look more like proposals from several years ago, prior to Nevada, Delaware, and New Jersey legalizing online gambling. Fear of RAWA Generating revenue doesn’t even appear to be the impetus for Wiley’s call for online poker legalization. Wiley’s online poker proposal appears to be more of preemptive strike against potential federal legislation. “This would effectively grandfather Pennsylvania in should there be changes to federal law re: online gaming,” Wiley states. Effectively, online poker’s rollout would be in a holding pattern under Wiley’s plan. “My proposal would allow the PGCB to authorize online poker only after conducting a study to determine the impact online gaming would have on existing brick and mortar casinos,” Wiley writes. Not a serious effort on the iGaming front The decision to go poker-only, the exorbitant tax rate and piddling licensing fee, the fear of RAWA passing, and the call for a study of online gaming’s impact on brick and mortar casinos are clear indications that Senator Wiley has not put a lot of time or energy into studying this issue. Anyone who has examined regulated online gaming will dismiss his proposal as an amateur attempt. The one saving grace The one aspect of Wiley’s plan that could be used in a more serious online gambling bill is the creation of a casino reinvestment fund. “The first $10 million of online gaming tax revenues would be used to fund a casino investment grant program for a five-year period,” Wiley’s proposal reads. Other toxic issues As noted above, the bill is far-reaching and attempts to reform several areas of gaming all at once. Some are popular ideas, but some are hot button issues likely to derail Wiley’s bill even if his online gaming proposal was overhauled. 7 year moratorium on remaining licenses With the state still sitting on a fourth casino license (and another Category 3 license available in 2017), Wiley would like to put a seven year freeze on further development. Regardless of where you stand on further land-based casino expansion in Pennsylvania, calling for a seven year moratorium seems like a hyper-reactive stance. Wiley also wants to make the remaining Category 1 casino license, which would be awarded no sooner than 2022 under his plan, made available to racetracks. Tracks would also be given priority over a non-racing applicant. Remove prohibition on owning more than 1/3 of a second casino Even though he notes this anti-monopoly has been effective, Wiley wants to change the existing law on ownership restrictions, to account for, “the changing nature of the gaming industry,” which he claims could “make this provision problematic in the future in the event the number of viable operators decreases.” Legalize fantasy sports competitions at brick and mortar casinos Wiley’s proposal would legalize brick and mortar fantasy sports contests at Pennsylvania’s casinos. Changes to liquor laws Wiley’s legislation would allow casinos to purchase – for a fee of $250,000 with an annual renewal fee of $50,000 – a special permit that would allow them to adjust the hours they sell and serve alcohol, currently 7 AM to 2 AM. The permit doesn’t extend the total number of hours liquor is available, just which hours it’s available. Casinos would also be able to offer free drinks to any patron, not just those playing slots or table games. Changes to the hours of liquor availability in casinos is a major point of contention in Pennsylvania.

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