Pennsylvania iGaming Applications Still at Zero

In 2017, Pennsylvania lawmakers finally succeeded in passing online gambling legislation following years of debates, negotiations and alterations to proposed bills. Putting his seal of approval to the process, Governor Tom Wolf then signed H 271 into law last October, with the Pennsylvania Gaming Control Board (PGCB) subsequently establishing a framework and licensing process to govern the industry.

Two month after the PGCB started accepting iGaming license applications from existing land-based casinos, however, there appears to be a complete lack of interest from operators with not a single application having been submitted to date.

iGaming Licensing Process

The Keystone State is making 13 all-inclusive licenses available to gambling operators, with the process divided into three separate phases. Between April 16 and July 16, the state’s existing brick-and-mortar casinos can apply for an online license permitting them to offer all three online gambling games (table, slots, and poker) for a fee of $10 million.

In the second phase, casino operators can apply for licenses to offer individual online games at a cost of $4 million per game, while a final phase extending to August 14 will then see the tendering process opened up to other outside qualified petitioners interested in participating in the industry.

During this initial phase, though, the PGCB has not received a single application for the full range of online gambling games, despite all three games being offered at a $2 million discount for a limited amount of time only.

Possible Reasons for Zero Applications

Casino firms may have delayed applying for an all-inclusive license as they may be considering just offering online slots and table games, while leaving the less profitable poker vertical for sometime in the future. Online poker represents a significant challenge for operators, with revenues derived from the country’s regulated markets proving to be much lower than originally anticipated. Even the interstate liquidity pool agreed between New Jersey, Nevada and Delaware has resulted in only a minimal increase in traffic, with just the WSOP/888 partnership benefiting from a presence in all three states.

Casino operators might also still be deciding which online gaming providers to form partnerships with, and currently be locked in discussions with their potential partners. Regulatory clarity regarding online skins, however, is likely a further factor delaying partnership agreements, highlighted by the rather unclear stipulation made by the PGCB that:

“Interactive gaming operator licensees are not permitted to offer interactive games in this Commonwealth independent from an interactive gaming certificate holder and the interactive gaming certificate holder’s webpage or the webpage of an entity within the interactive gaming certificate holder’s organizational structure.”

Other factors helping to explain the lack of interest shown so far may also relate to the unusually high 54% tax rate the state has decided to impose on online slot game revenue, which is the same as that charged at land-based casinos, despite the online vertical offering fewer opportunities to balance high taxes with other forms of revenue.

Sports Betting Licenses

Meanwhile, the PGCB also started accepting applications for sports betting licenses earlier this month, and in the state budget online gambling and sports betting fees are forecast to net a combined $100 million bonanza for the state. Nonetheless, that figure is around half the amount estimated last year by lawmakers for online gambling alone.

Once again, Pennsylvania has chosen to impose a restrictive 36% tax on sports betting revenue that is a full four times more than is being charged in neighboring New Jersey, and may go some way to explaining the similar lack of interest being shown in this segment. Needless to say, industry analysts have started questioning the state’s overzealous approach to taxation, and have warned Pennsylvania against letting its greed curb the state’s potentially lucrative online gambling and sports betting markets.