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Up until now, the growth of legal and regulated online gambling across the United States has only been slowed by the limited number of state governments willing to take the initiative and pass progressive legislation.
Now it appears the most recent state to pass online gambling legislation is actually getting in the way.
The Pennsylvania Gaming Control Board (PGCB) got a scare when, for almost three months, no casinos petitioned for an interactive gaming license. The board started accepting applications from the state’s 13 existing land-based casino license holders on April 16.
However, it is now approaching the end of the initial 90-day licensing period. During this time, Pennsylvania is allowing the casinos the exclusive right to obtain a PA online casino and gambling license. One license allowing them to operate online slots, online table games, and online poker sites at a cost of $10 million.
On Friday, July 13, three casino filed applications. The deadline is the end of the weekend. Even with the added time, it is unlikely every casino will fork up the cash.
It has been suggested that the lengthy application process is partly to blame. There are several pages of documents that need to be filled out and various partnership agreements to put together. However, its fairly obvious a casino champing at the bit to get in the PA market could get it done in a timely manner.
A high-stakes game of chicken
Instead, most are still standing on the sidelines. It is almost as if the casinos are waiting for the state to react to their lack of interest. It is increasingly becoming a high-stakes game of chicken.
The thing is, the casinos warned PA lawmakers about this before they passed the comprehensive gambling expansion package that authorized online gambling. In fact, several casinos said charging the same 54 tax rate for online slots that it does on land-based slot revenues could be a deal breaker.
Yet the state was in a hurry to get members of both the House and Senate to agree on the total package. In its haste, PA went ahead and did it anyway.
Now, PA casinos must be scrambling to work out how to eke out a profit, despite multi-million dollar licensing fees and a rather oppressive tax rate.
After the initial 90-day period is up, PA casinos will have 30 more days where they retain the exclusive right to obtain an online gambling license. This time the licenses will be for operating either online slot machines, online table games, or online poker sites. They’ll cost $4 million each.
That’s when the high-stakes game of chicken will really heat up.
The end of exclusivity
A full 120 days after the application process first opened, PA casinos will lose their exclusivity. The application process will be opened up to qualified entities outside the local casino industry. They will be asked to pay that same price of $4 million per license.
It looks like the casinos are betting nobody has figured out a way to make a buck off online slots with a 54 tax rate. If they do allow the 120-day timer to go off without making a move, they must be banking on it. Hoping not a single outside entity will apply for a license either.
Their hope has to be that lawmakers will realize their mistake and roll the rate back to a level where casinos can turn a profit. Plus, satisfy others who fear online slots with too low a tax rate will eat away at their existing land-based business.
The state must be thinking of PA casinos don’t want the online gambling licenses, someone surely will. All while the high-stakes game of chicken rapidly closes in on its August finish line.
PA’s online gambling regulations
In the meantime, the PGCB has some other pressing work to do. The board has yet to fully craft and release the regulations that will govern online gambling in PA. Which, it has also been suggested, is another reason why casinos are in no rush to get an application in.
Of course, if the state could simply see the writing on the wall right now, it could change the game. With a little understanding of where casinos stand on the issue, the state could work on adjusting the tax rate. A move that would surely speed things up.
Until then, Pennsylvania is only getting in its own way. Which, in turn, is slowing the growth of legal and regulated online gambling across the US.
