Pennsylvania Budget Stalemate Cripples 2017 Online Gambling Hopes

Pennsylvania Representatives Preview Upcoming Online Poker Bill

After months of political wrangling, lawmakers in Pennsylvania were unable to pass legislation last year that would have legalized and regulated online gambling in the Commonwealth. Everyone knew that they would try again this year and right now, it looks like the ball is starting roll on that. On Wednesday, Representative George Dunbar and Representative Rosita C. Youngblood filed a House Co-Sponsorship Memorandum, essentially a notice to their colleagues that they plan on introducing online gambling legislation “in the near future.”

The bill will actually be an omnibus gaming bill that will cover a wide array of gambling issues, not just online gambling. Wrote the two Representatives:

Pennsylvania casinos are an integral part of the Commonwealth’s economy; to date, the industry has sustained 18,000 living-wage jobs and generated $11 billion in tax revenue that has benefited local communities, homeowners, the agricultural community and our General Fund. As impressive as these numbers may be, the General Assembly cannot afford to rest on its laurels and hope these numbers continue into the future. The Pennsylvania General Assembly must pass legislation to allow our gaming industry to adapt to the challenges of increased competition from other states. Additionally, the PGCB needs to be provided with the regulatory authority to safely and responsibly allow innovative gaming technologies to be offered to consumers in Pennsylvania.

One of those adaptations would be to “Regulate and tax iGaming,” though Dunbar and Youngblood provided no further information as to what exactly that would entail.

As mentioned, the previewed bill will cover many aspects of Pennsylvania gaming. From the Memorandum:

•    Fix the local share assessment issue by requiring all casinos, except Category 3 casinos, to pay a $10 million fee to host municipalities;
•    Regulate and tax iGaming;
•    Impose consumer protections on and tax online fantasy sports operators;
•    Allow gaming tablets in international airports;
•    Remove the Category 3 casino amenity requirement;
•    Streamline non-gaming vendor registration requirements;
•    Permit gaming manufactures to utilize private laboratories to test gaming devices;
•    Authorize the PGCB to create new regulations to allow for new types of slot machines;
•    Increase license, permit and registration renewal periods;
•    Allow multi-state linkage of slot machines to increase jackpots; and,
•    Require uniform advertisement of the problem gaming assistance number.

While we are obviously most concerned with online gambling, that first bullet point is actually the most urgent issue for Pennsylvania. The nine casinos outside of Philadelphia have been required to pay “host fees” to their local municipalities in the form of either two percent of slots “gross terminal revenue” or $10 million per year, whichever is higher. All of them have ended up paying the $10 million because they simply haven’t generated enough slots revenue.

pennsylvania-stampThe owner of the Mount Airy Casino & Resort sued the Commonwealth, claiming that because everyone always paid the $10 million, the host fees amounted to an unconstitutional tax; each casino basically paid a different effective tax rate. In late September, the state Supreme Court agreed with Mount Airy and said the legislature must come up with a solution with 120 days.

Dunbar and Youngblood apparently want to just require all but the Class 3 casinos to pay a flat $10 million host fee. I am not a lawyer, but I would assume by just making it a flat fee and in no way making it dependent on revenue eliminates the legal problem. It’s pretty lame, if you ask me, as the casinos are still in the same situation, but I’m not a politician, so who cares.

The two Class 3 casinos that would not be subject to the fee are the Valley Forge Casino Resort and Lady Luck Casino Nemacolin. In a nutshell, these are smaller casinos that were attached to a pre-existing hotel, as opposed to Class 1 casinos, which are racetracks and Class 2, which are traditional, stand-alone casinos.

State Senator Jay Costa filed a similar Memorandum in early January, also announcing his intention to introduce online gaming legislation. His Memorandum focused on internet gambling and the casino host fees (his solution for that sounds the same as the Representatives’).

As opposed to Dunbar and Youngblood, Costa did give some specifics about his internet gaming portion of the bill. The twelve brick-and-mortar casinos in Pennsylvania will be eligible to apply for licenses; those licenses will run $10 million each. Gaming technology providers who partner with casinos will have to pay a $5 million licensing fee. Gaming revenues would be taxed at 25 percent. All online gambling, including poker and casino games as well as internet lottery and daily fantasy sports would be legalized with Costa’s upcoming bill.

The Pennsylvania House of Representatives did pass an online gambling bill last year, but the Senate never voted on it. The Senate had come up with its amendment to solve the casino host fees problem and sent it on over to the House. The House then tacked on its online gambling portion before sending it back to the Senate, which upset some Senators, which is the main reason why they let the bill die.

“We told the House before, we don’t have consensus on I-gaming, yet they chose to load it into the host fee bill,” Senator Jake Corman, Senate majority leader, told The Morning Call at the time. “That basically killed it for this session.”

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