Well, the initial round of applications are now in for online gambling licenses in Pennsylvania, and there were a few surprises along the way. First, it seemed to take forever for companies to decide if they even wanted to go down the path of applying for a license. Many industry experts agree that cost may have factored into the long decision-making process. Each master license comes with an up-front cost of $10,000,000 – a big nut for many of these casinos to swallow months, if not years before they can actually accept online wagers.
However, at the end of the first round on July 16th, there were 9 applicants for the full license. Here is the list of those applicants:
- Stadium Casino
- Sands Bethlehem
- Mount Airy
- Hollywood Casino
- Valley Forge
- Harrah’s Philadelphia
- Rivers Casino
- Sugarhouse Casino
By applying in time for the initial deadline of July 16th, each of these casinos saves a couple of million dollars by applying for the full licenses that are available. You may recall that in Pennsylvania, 13 master licenses were approved for operating in the state as part of the regulation. This matched the number of land-based casino licenses that exist today. Each casino was given the choice of paying 4 million for each of peer-to-peer games, table games, and slot machines. There was a bundle discount, similar to that being offered by a cable company, to take all three for $10 million. Now, the four remaining casinos have to pay the full $12 million if they want to apply for all three licenses.
The four properties that decided not to enter applications at this time are:
- Meadows Casino
- Mohegan Sun Pocono
- Presque Isle Downs
- Lady Luck Nemacolin
The government now has 3 months to award licenses to the applicants, which gives each casino time to prepare agreements with potential software partners. It is unlikely that any of the applicants will be rejected, so many of the companies are starting to add resources with the necessary online gaming experience.
Watching New Jersey closely
The state of Pennsylvania has watched its neighbor enter the online gambling market a few years ago, and the positive results have clearly motivated the state to be next. However, the huge upfront fee and the estimated 54% tax on slot machine revenue will make it very difficult for online casino owners to turn a profit. This is where sports betting may come into play. The online gambling law and regulations had already been passed when the Supreme Court handed down its judgment on repealing PASPA, so
there is a new set of regulations in place for sports betting operations. The tax is not set to be as high on sports bets, and the hope for operators is that they will be able to produce more profits from those people betting on sports than play at an online slot machine.
The irony of one application
Of particular note to people in the online gambling industry with a focus on the U.S. is the application for an online license from Sands Bethlehem. The entire U.S. gaming industry has been crippled at the hands of Sheldon Adelson, who has lobbied hard against regulated online gambling in the country for decades. Adelson currently owns Sands, although it is in the process of changing hands. Unfortunately for Adelson, the timeline of the closing of the sale didn’t match the deadline for applications, so his name needed to be on the Sands application in Pennsylvania. We suspect that this made him cringe as much as it made many of us laugh at the predicament he was in.
After the licensing process is complete, the race will be on for these sites to release their digital platforms and start accepting bets. The real focus will then be on marketing – what each casino does to entice Pennsylvania resident to choose their online games over another competing brand. There is no doubt more news to come from this state, and we will see when or if the four remaining properties pony up the fee for applying themselves.