Prospects for Regulated Online Poker in Pennsylvania

PennsylvaniaDespite the passage of a bill to regulate online poker in the House of Representatives, there is no guarantee the proposals will be approved by the Senate.

Back in June, Pennsylvania´s House of Representatives voted 114-85 to back a bill that would regulate fantasy sports betting, interactive gambling, and the placement of slot machines in the state´s primary airports.

The motive behind the bill was not necessarily to protect players´ interests, but to fill a $100 million hole in the state´s budget. Effectively, the bill had to pass in order to avoid a repeat of last year´s budget stalemate – something politicians were keen to avoid in election year!

Even though it was necessary for the bill to pass, it still took four attempts to get HB 2150 accepted by the House – implying a substantial degree of opposition. Many industry observers are concerned HB 2150 will encounter further opposition when the proposals are presented to the Senate later in the year.

The Bones of HB 2150

HB 2150 started off life primarily concerned with regulating Daily Fantasy Sports (DFS).However, because of the need to raise more revenue that could be extracted solely from the DFS market, proposals to regulate online gambling, introduce slot machines at airports, and allow Video Gaming Terminals in bars and restaurants were added to the bill. The proposals to allow Video Gaming Terminals were dropped after fierce lobbying by the casino industry.

As far as online gambling is concerned, operators will have to pay an $8 million licensing fee and 16% tax on their Gross Gaming Revenues. The licensing fees alone should be sufficient to raise the revenues needed to justify the passage of HB 2150, as there should be enough operators looking provide online casinos even if the market is only large enough to support three or four online poker sites. However, there are some significant factors that may contribute to the bill´s failure.

Potential Obstacles to HB 2150

Before the bill becomes law, it has to be passed by the Senate. The Senate reconvenes in two weeks’ time and, as the budget has already been passed, there will be the time to give the HB 2150 the consideration it deserves. Four potential obstacles exist that could delay the bill, or cause it to fail:

  • Opposition to an expansion of gambling.
  • The tax rate imposed.
  • The lack of player protection.
  • An adjustment of other “anticipated revenue streams”.

Opposition to the expansion of gambling was clearly apparent in the House of Representatives, and this is even more likely to be the case when the bill is presented to the Senate. Several anti-gambling lobbies have powerful allies in the Senate and, in December last year, Senate Majority Leader Jake Corman told NBC Philadelphia that an expansion of online gambling “[geolink href=””]won´t happen[/geolink]”.

The tax rate of 16% is also much lower than members of the Senate have previously called for. When Senator Robert Tomlinson co-sponsored a Senate Bill to regulate online gambling in 2015, he called for a tax rate of 54% to match what brick-and-mortar casinos pay, and to prevent brick-and-mortar casinos redirect their customers to their online products to maximize their profitability.

Senators are also rumored to be concerned about a lack of player protection. HB 2150 stipulates that tax revenues should be placed in trust to ensure they are paid in a timely manner to the state. However, no such protection is required for players´ funds – only that they are held in a separate bank account. There is nothing to prevent a “Lock Poker Scenario” and no recourse for players if an online site should fold.

The regulation of online gambling in Pennsylvania was just one of a number of “crisis measures” passed by the House of Representative in June – and online gambling might still be decoupled from HB 2150 if it presents more issues than it resolves. There were several other “anticipated revenue streams” included among the crisis measures (for example, liquor reforms) that could be adjusted to make up any financial shortfall from the failure of HB 2150 (or any part of it) to pass the Senate.

Let the Merry-Go-Round Begin!

Any amendments to HB 2150 made by the Senate have to be passed back to the House of Representatives for its approval. If the amendments are unpalatable (for example, a big increase in the tax rate), the bill could go back and forth indefinitely. In this scenario, it would likely be abandoned and the necessary revenue raised through one of the alternate “anticipated revenue streams”.

Consequently, the prospects for regulated online poker in Pennsylvania are unclear. The bill definitely needs some adjustment to ensure players´ funds are protected and discussions about shared liquidity with New Jersey online operators need to be at an advanced stage before any legislation is enacted. Without these two factors in place, the risk exists that online poker in Pennsylvania – when passed – could go exactly the same way as online poker in other ring-fenced regulated jurisdictions.

Jacqueline Packett
Jacqueline Packett