PA Budget Bill Raises Hopes for Online Gambling Regulation

PennsylvaniaThe passage of a budget revenue bill through Pennsylvania´s House of Representatives last week has raised hopes for online gambling regulation in the fall.

Last Wednesday, as a state-wide spending crisis loomed, Pennsylvania´s House of Representatives narrowly passed a budget revenue bill loosely based on House Speaker Mike Turzai´s “[geolink href=””]No-Tax Plan B[/geolink]”.  The bill borrows heavily from “dormant” funds earmarked for special activities such as farmland preservation, but also includes a provision of $225 million from a future expansion of gambling.

The budget revenue bill provides no information about what a future expansion of gambling will look like – whether it will include just online gambling, or also the [geolink href=””]regulation of video gaming terminals[/geolink] – and the bill still has to be passed by the Senate. Nonetheless, the proposed revenues from an expansion of gambling has raised hopes there will be some movement towards online gambling regulation in the fall.

Haven´t We Been Here Before?

This time last year – facing a similar spending crisis – the House and Senate both agreed on a budget revenue bill that included loans from a medical malpractice insurance fund, an increase in taxation on cigarettes, and $100 million from a future expansion of gambling. At the time, a bill to regulate online gambling [geolink href=””]had already passed the House of Representatives[/geolink], but it later died in the Senate.

This time around, both legislative chambers have already passed bills to regulate online gambling – but wildly different ones. The Senate´s proposals impose prohibitively high tax rates on online casinos with the aim of generating around $100 million in revenues. In order to reduce the tax rate, but increase revenues, the House´s “[geolink href=””]Christmas Tree bill[/geolink]” includes the regulation of Video Gaming Terminals.

Pennsylvania´s brick-and-mortar casinos – who would have first refusal of online gambling licenses – don´t like either of the proposals. The Senate´s high tax rates make running an online casino financially untenable, whereas the regulation of Video Gaming Terminals is seen as threat to their brick-and-mortar operations – even though as many as 40,000 terminals already operate illegally throughout the state.

So, Where Do We Go from Here?

The Senate will likely pass the budget revenue bill – or a version of it – with the $225 million provision from an expansion of gambling still included. As history shows, this does not mean either set of proposals to regulate online gambling will be passed, or even discussed. However, being included in the budget bill is better for the prospects of regulated online gambling in Pennsylvania than not being in it.

Pennsylvania´s brick-and-mortar casinos – who last year contributed $3.2 billion to the state´s revenues -will have plenty to say if the regulation of online gambling is further discussed. Last month I suggested it may not be disagreements between the House and the Senate that is hindering the progress of regulated online gambling in Pennsylvania, [geolink href=””]but the casinos the legislators are trying to support[/geolink].

This leaves the way forward for regulated online gambling unclear. While the passage of the budget revenue bill is a step in the right direction for proponents of legislation, and gives them hope for further progress in the fall, how far legislators will be able to take either gambling expansion bill is not known. If they remain unfavorable to Pennsylvania´s casinos, they may be kept off the table altogether.

Anything Agreed Still Has to be Approved by Gov. Wolf

The situation is further complicated by opinions of Governor Tom Wolf. Earlier this year, Governor Wolf stated he would not accept a [geolink href=””]“zero sum” expansion of gambling[/geolink] in Pennsylvania – a likely outcome if the tax rates in the Senate´s proposals are reduced – and, in a [geolink href=””]Facebook Live Q&A session in February[/geolink], he appeared to be in favor of regulating Video Gaming Terminals.

If an online gambling bill is passed – and that is still a big “if” – there is the possibility it could be vetoed by the Governor if it fails to meet his criteria. There is a precedent for this happening before. In 2011 and 2013 Governor Chris Christie vetoed proposals to regulate online gambling in New Jersey – the veto subsequently being lifted when measures were introduced to [geolink href=””]tackle gambling addiction[/geolink].

Unfortunately, Pennsylvania´s problems may not be so simple to resolve.

Jacqueline Packett
Jacqueline Packett