Analysis: Pennsylvania online poker bill
We look at the five key points from Senator Edwin Erickson's online poker bill, due to be introduced to the legislature by the end of the month
California has stolen the spotlight during the last couple of weeks with 13 of the state’s most influential tribes finally reaching agreement on a single streamlined online poker bill. Over on the east coast, however, Pennsylvania has been quietly making progress too, albeit without as much excitement and scrutiny.
Last week Senator Edwin Erickson announced via the State Senate website that he planned to introduce legislation “ SB 1386 “ to legalise internet poker in the state “in the coming weeks”. The Bill, seen by eGaming Review, is poker only and would set tax rates at 14% of gross gaming revenue and licence fees at US$5m.
But with it being election year in the Commonwealth and lawmakers and operators still unsure how to proceed with regulated online gaming, is it the right time and will the legislation succeed?
Here are five key points from the bill:
1) Licence fees and tax rates
Pennsylvania is renowned for its high gaming taxes. In the land-based casinos table games are taxed at 15% of GGR, with slots games at a staggering 60%. Under SB 1386 internet poker tax rates would be set at 14% of GGR, still much higher than the 5% proposed in California and the 6.75% paid by online operators in Nevada.
In this week’s egaming hearing in Pennsylvania, Robert Pickus, chairman of the board of managers at Valley Forge Casino Resort, said “tax rates of more than 15% would make it difficult for operators in the Commonwealth to operate effectively.” Is the 14% therefore a little too high to sustain a robust market, and will it deter operators from entering the online space?
Operators will also have to consider the US$5m licence fee to decide whether the cost of launching into an internet poker-only market makes good business sense.
2) Compacts allowed
The Bill would allow the Pennsylvania Gaming Control Board to “negotiate interactive gaming agreements with other states, territories or possessions of the United States in which interactive gaming has been authorised to allow players in the Commonwealth to participate in authorised games with players in such other jurisdictions”.
This implies poker liquidity may be a problem in the state, despite having a population 50% larger than New Jersey. The latest California bill, on the other hand, bars the state from entering such agreements.
The Commonwealth would have no shortage of dance partners “ Delaware and Nevada in particular “ but surely Pennsylvania would need to join forces with a much larger state like New Jersey for it to be really worthwhile.
3) Branded sites
Interestingly the Bill would only allow licensed operators to offer sites under their own brands, and not rent out their licenses to suppliers such as bwin.party and 888. The bill states “the licensee’s internet website or similar public portal must be marketed and made available to the public under its own names and brands and not the brands of third parties”.
The clause is designed to stop the likes of bwin.party and its Party Poker brand claiming the lion’s share of the market as it has done in New Jersey. Operators in Pennsylvania seem far more concerned over potential cannibalisation issues and, much like the Tribes and card rooms in California, want to make sure they are in the best position to capitalise on the online market.
4) At your discretion
The language makes it clear that anyone who took bets from US players post the Unlawful Internet Gaming Enforcement Act 2006 (UIGEA) will not be granted a licence by the regulator. However unlike California, which has taken a very black and white approach to so-called ‘bad actor’, this Bill offers some level of flexibility and discretion.
It states: “Those persons that provided goods or services related to internet gaming involving citizens of the Commonwealth prior to the enactment of that statute but exited in an expeditious fashion after its enactment should be regarded differently from those that continued to flout U.S. federal and State law thereafter for purposes of suitability for licensing under this act.”
5) Only the beginning
This is the first piece of internet gaming regulation to be circulated in the state since the return of its gambling expansion study. The study found that egaming would be a positive force in the state “ predicting revenues of $307m per year. However the general consensus is that the figures aren’t enough to convince the bricks-and-mortar operators to take the plunge without serious consideration.
This year is election year in the Commonwealth with politicians wanting to steer clear of controversial topics like gaming expansion. While the introduction of this bill will certainly stoke the fire of debate, it is unlikely to be given serious consideration until next year. That said in the fast-moving US egaming industry, never say never.