Pennsylvania Passes Online Gambling Legislation

Pennsylvania is set to become the fourth state with legalized online poker, joining Delaware, Nevada, and New Jersey. The state's House of Representatives voted 109 - 72 on Thursday, Oct. 26 in favor of H271, which would significantly expand authorized real money gaming in the Keystone State. The bill had passed the Pennsylvania Senate the day before with a vote of 31-19. H271 will now proceed to the desk of Governor Tom Wolf who can sign it into law, veto it, or let it pass into law after 10 days without his signature.

The Framework Set up by H271

The creation of an online poker licensing regime is only one aspect of what H271 does. It's a broad expansion of the existing PA gambling environment, so it affects many other types of gaming as well. Some of the highlights are:

• Allows for online casino games
• Permits lottery tickets to be sold over the internet
• Legalizes daily fantasy sports
• Implements rules for mobile tablet gambling in airports
• Enables truck stops to host video gaming terminals
• Licenses for 10 “mini casinos” to be auctioned to existing casino owners

Money Matters

In order to offer online games, operators would have to pay a fee to obtain a license for whatever forms of gaming they intend to host. There are three separate types of games, and each requires its own license: slot machines, house-banked table games, and peer-to-peer contests, like poker. Within the first 90 days after the state begins to accept license applications, entities can request a combination package covering all three forms of games for a discounted price of $10 million. After 90 days, they must acquire licenses separately for each category of game they wish to offer and pay $4 million for each one. There will be 12 licenses available for each style of gaming, and existing slot machine license holders will have priority in applying for them. In the event that any remain unclaimed after 120 days, outside organizations will be able to petition for them.

Internet-based poker and table games will be taxed at a rate of 14% plus an additional 2% local tax. For slot machines, the corresponding figures are 52% and 2%. Many observers feel that while the 16% rate for poker is sustainable and in fact very appealing, the 54% levy on slots will cause a dearth of applicants for online slot machine licenses. This might, at first glance, seem to have little or no impact on the online poker segment of the market. However, there are a couple of ways in which it could hurt poker players' prospects. The first is that many customers wish to sign up for all-in-one gambling destinations, and so the absence of slots might hurt poker room traffic when fishy casino gamers decline to join. Also, some companies may crunch the numbers and decide it's not worth getting involved in any online gaming at all if their slot profits will be drastically reduced by the taxes.

Opposition to the Bill

With hundreds of pages containing plenty of exemptions, special cases, and pork-barrel projects, there's a lot for opponents of H271 to take issue with. Penn National Gaming, owner of the Hollywood Casino in Grantville, said that it may file a lawsuit if the gambling expansion bill becomes law because it feels that its commercial interests would be harmed by the many special clauses granting some of its competitors favorable treatment. Opponents of gambling in general have commented that the size of the legislation meant that they didn't have time to read it before it came up for votes in the House and Senate. The chairman of the House Gaming Oversight Committee, Republican Scott Petri, took exception to the provisions regarding gambling terminals in truck stops. He expressed his view that the wording was so vague that a convenience store could be considered a truck stop under the language of the bill. “You could literally drive a truck through the definition,” Representative Petri said.

Possibility of a Veto

H271 passed both chambers of the General Assembly by comfortable margins but not by two-thirds majorities. This means that Governor Wolf could veto it, and its supporters would have a hard time collecting enough votes to override the veto. Still, this is a remote possibility even given the fact that there is quite a bit of opposition to the bill. Pennsylvania expects a $2 billion budget shortfall in the upcoming fiscal year, and the authorities are desperately searching for ways of plugging it. The governor is unlikely to veto the gambling expansion bill because it is a way of driving much-needed revenue into the state's depleted coffers.

Impact on Existing USA Legal Poker

Should all go well with H271, Pennsylvania would become the largest state with a legally supervised real money internet poker ecosystem. The existing states that specifically authorize gaming operators to provide poker over the internet (Delaware, Nevada, and New Jersey) combine for a total population of around 12.8 million. This is about the same figure as the total number of people who reside in Pennsylvania. Therefore, the addition of PA regulated online poker would effectively double the size of the market assuming player participation rates in Pennsylvania turn out to be comparable to those in the aforementioned three states.

Perhaps even more exciting is the possibility of Pennsylvania signing compacts with these states to combine player liquidity. One of the problems with the existing sites in the states with supervised online gambling is that player pools are small, leading to a low number of games running and small tournament guarantees. New Jersey, Nevada, and Delaware have already reached an agreement to allow player sharing, and there's no reason why Pennsylvania couldn't also become a party to this arrangement.

You Don't Have to Wait for Harrisburg to Act

The officials at the General Assembly, the Governor's Office, and the Pennsylvania Gaming Control Board are – we're sure – fine, upstanding human beings. Yet, the ability to act quickly and decisively hasn't historically been one of their fortes. Assuming H271 isn't vetoed, it will still take some time before the necessary regulatory regime is enacted and license approvals start being issued. In the meantime, there are several offshore poker rooms that are happy to accept Pennsylvanians. Playing at these sites is perfectly legal from within the borders of Pennsylvania, and so they're a fine solution until the state government gets its act together. You can learn more about your options in our page describing the Pennsylvania online poker scene. For additional info regarding the possibilities for online card games in the rest of the country, our page on USA online poker may be what you seek.