New VGT Proposals Could Replace iGaming Regulation in PA

PennsylvaniaNew proposals to regulate Video Gaming Terminals in Pennsylvania´s bars and clubs have found favor with one of the state´s key brick-and-mortar casinos.

The situation regarding the regulation of online gambling in Pennsylvania seems to get more complicated by the day. At the start of the year, it was pretty much a question of when, not if, the state would regulate online gambling to fill a hole in its budget.

However, disputes over tax rates, fears about cannibalization and the introduction of a bill banning all forms of Internet gambling have thrown obstacles into the path of regulation. Now, new proposals to regulate Video Gaming Terminals (VGTs) in the state´s bars and clubs could replace igaming regulation as the key revenue-raising vehicle for the state – particularly as the proposals have found favor with one of Pennsylvania´s key brick-and-mortar casinos.

The Background to the VGT Proposals

The suggestion that VGTs should be regulated and taxed has been around for a long while. Throughout the state it is estimated that 40,000 VGTs already exist in veteran´s clubs and bars, and although the “already present industry” would be easier to regulate than online gambling and produce more tax revenues, brick-and-mortar casinos have opposed the suggestion due to alleged cannibalization.

Under pressure from the casino industry, proposals to regulate VGTs were rejected by the House of Representatives last year. However, back in January, the newly-formed Pennsylvania Video Gaming Association [geolink href=””]made a convincing argument[/geolink] for proposals to be reintroduced. The argument found favor with several lawmakers, who have amended the previous proposals to better suit the casino industry.

A Compromise to Suit Everybody?

The yet-to-be-introduced proposals are being sponsored by Senator Guy Reschenthale and Representative Mark Musto. They address several key issues – such as allowing tavern owners to recover lost income following changes in the law permitting grocery stores to sell beers and spirits – and also resolve the local share tax issue as well as relieving the tax burden on brick-and-mortar casinos.

Under the proposals, VGT operators would be required to pay 34% tax on gaming revenues, plus the 4% local share tax. Casinos would no longer be liable for the share tax and see the amount of base slots tax they pay reduced from 34% to 29%. The figures are supported by historical evidence from Illinois – where VGTs have been regulated since 2009 – and, according to Representative Musto, also have the support of Governor Tom Wolf (who I reported last month was [geolink href=””]leaning towards the regulation of VGTs[/geolink]).

The Math Adds Up for Penn National

The sweeteners for the casino industry have found favor with Eric Schippers – the senior vice president for public affairs and government relations at Penn National Gaming. He told the proposals do a good job of mitigating the risk of cannibalization and the math adds up for Penn National. However, he would not be drawn on support throughout the casino industry as a whole. He said:

“Other casinos, the other 11, are going to have to sit down with their business people and accountants too and run the math. Other companies will have to come to their own conclusion.”

Schippers said that his organization´s support for the proposals was subject to the financials remaining as they are when a bill is introduced. He also wants to see the same level of background checks, surveillance and security imposed that casinos are subject to. These measure, Schippers said, would remove any uncertainty of where VGT licenses might wind up and provide protection for players.

Today´s Hearing Could Throw Further Light on the Proposals

The announcement of the new proposals have likely been timed to coincide with the latest hearing of the House Gaming Oversight Committee – who will today hear representations from fifteen speakers about why revenues from the share tax are critical to their areas. The hearing comes under the same “expansion of gambling” heading as when [geolink href=””]online gambling was discussed[/geolink] earlier in the month. However, with a May 26 deadline for the share tax issue to be resolved, there will likely be greater urgency during today´s hearing at the Bayfront Convention Center in Erie.

Jacqueline Packett
Jacqueline Packett