FROM iGAMING TO DFS TO VGT'S, PENNSYLVANIA MAKES IT LEGAL
by MARK GRUETZE
Mark Gruetze of suburban Pittsburgh, Pa., writes the Player's Advantage gambling column for the Tribune-Review, available at www.triblive/aande/gambling. He has been a skilled recreational player for more than 30 years, focusing on blackjack, video poker, and poker. E-Mail questions or comments to PlayersAdv@outlook.com.
Pennsylvania will start dealing online blackjack, poker and other casino games next year as a far-reaching gaming expansion takes effect. In addition to iGaming, the new law regulates several other forms of gambling, from slots at selected truck stops to online lottery sales. Already the No. 2 state in commercial casino revenue, Pennsylvania hopes to raise money from licensing fees and gaming taxes with these measures:
Legislators had talked about approving Internet gaming for four years; last year, the House twice approved an iGaming bill, but the Senate did not act on it. This year, faced with a $2 billion budget deficit, both houses approved a bill that includes what could be the broadest expansion of gambling by any state that already has casinos. Gov. Tom Wolf signed it into law on Oct. 30.
Internet gaming probably will take six to nine months to set up, as the Gaming Control Board must write regulations for operators, vendors and games.
"More than any of the other types of gaming that were outlined in this expansion, we had expected Internet gaming to be probably part of an expansion," GCB spokesman Doug Harbach said in a phone interview. "We had done some legwork ahead of time in trying to look at regulations, paying attention to how this is being done in other jurisdictions and what technology is out there. We're a little ahead of the curve on that one, but the bottom line is we still have a significant amount of work to do in order to get the regulations put together that would fit Pennsylvania's gaming environment."
The law sets three categories of online gaming: slots, house-banked table games, and poker. For the first 90 days after licenses become available, existing casinos have the exclusive right to apply for a $10 million license allowing them to offer all three categories. When that period ends, existing casinos may apply for a license to select which categories to offer, with licenses costing $4 million per category. When the second period ends, entities licensed in other jurisdictions may apply for a Pennsylvania license costing $4 million per category.
Online supporters criticize the new law's tax rate as too high. It applies the land-based tax rates of 54 percent on gross slot revenue and 16 percent on gross table game revenue to Internet gaming as well. For comparison, New Jersey takes 15 percent of gross online revenue, whether from slots or table games.
Critics say Pennsylvania's 54 percent rate on slot revenue is far too high and could keep online operators away. Legislators said a lower tax rate on slots would encourage operators to steer players from land-based casinos to online. In addition to imposing the 54 percent rate on Internet slot revenue, the bill prohibits land-based casinos from offering iGaming within their facilities.
Players will have to be within Pennsylvania's borders to be able to gamble online, although the law allows for the Gaming Control Board to join compacts with other states that allow iGaming. Only New Jersey, Delaware and Nevada regulate online gaming now, with Nevada limiting it to poker.
Pennsylvania has about as many residents as the other three states combined, and a compact involving the Keystone State would greatly increase the number of poker players able to compete online.
Harbach said the board will protect the integrity of online gaming. "It starts with making sure the regulations are written well (and) will do exactly what we've done with the casinos - to be fair but to be strict in regards to protecting the public." Establishing the rules and choosing the operators will be important decisions, as those steps were in establishing land-based casinos, he said.
"The proof is in the pudding as to how well we have handled the beginning and the growth of the casino market in Pennsylvania, and the Legislature knows we certainly have the wherewithal to be sure we are protecting the public when it comes to new gaming.
When table games were approved in 2010, the board stipulated that all casinos must offer some of the best blackjack rules in the country for games at every betting level. Those include: all naturals pay 3-to-2, late surrender, S17 and DAS. "It's too early to say" whether the online rules will be exactly the same as those in land-based casinos, Harbach said.
Here's a quick look at other elements of Pennsylvania's gaming expansion:
Up to 10 satellite casinos could be located throughout the state, each offering from 300 to 750 slot machines and 30 table games, with the option to ask for 10 more table games after a year. Municipalities have until Dec. 31 to notify the board that they are prohibiting a satellite casino. Licenses for satellite casinos will be auctioned, with a minimum bid of $7.5 million plus $2.5 million more if the operator wants a table game certificate. The board has not detailed the bidding process, but the law says initial auctions will be between Jan. 15 and July 31, 2018, and open to the operators of the state's 10 large casinos in the state. The winning bidder gets the exclusive right to pick an area with a 15-mile radius where the casino will be built. A second auction will begin after that. Satellite casinos may not be within 25 miles of an existing casino, unless it's run by the winning bidder. Regulators have not identified what areas might be in play. "The market will determine that," Harbach said.
Troy Stremming, executive vice president of government relations and public affairs for Pinnacle Entertainment, which operates Meadows Casino south of Pittsburgh, said any operators interested in satellite locations "will play their cards close to the vest" as to where they're looking." He added that Pennsylvania casinos did not lobby for satellite locations, "but if it's going to be the law of the land, then we're all going to be pushed into a position to see if we can find some growth opportunities" that make sense financially.
Casinos may buy a license to provide online gaming tablets to eligible passengers at publicly owned airports. Unlike online gaming, passengers would not have to be a registered player to participate.
The legalization of video gaming terminals outside casinos has long been a point of debate. The law allows up to five terminals at truck stops that have a convenience store, sell 50,000 gallons of diesel fuel a month, occupy a site of at least three acres, and have parking for at least 20 commercial vehicles. They may not be on land owned by the Pennsylvania Turnpike, and counties with an existing casino may prohibit VGTs. The tax rate on VGT revenue totals 52 percent. Machines will contain a random number generator and be connected to the Gaming Control Board computer that monitors wagers and payouts.
Daily Fantasy Sports
Operators pay a $50,000 license fee, and revenue will be taxed at 14 percent. Casinos may operate fantasy contest terminals, but players using them must be at least 21 years old. Outside casinos, the minimum age to play is 18. The law defines "beginner" and "highly experienced" players and requires operators to offer some contests open only to beginners. Games may not use stats of collegiate or high school athletes. The law prohibits the use of unauthorized software that automates a player's picks.
Lottery: The law establishes online sales of existing lottery games plus Internet instant games, but it prohibits replications of casino-style games. Players must be at least 18 years old.
New slot rules: Casinos may add skill-based slots or slots that combine skill and chance. Also, the law allows participation in multistate progressive slot jackpots.
Resort casinos: Under the previous law, gamblers visiting Valley Forge and Lady Luck Nemacolin resort casinos had to spend at least $10 on the grounds before entering the casino area. Now the operators can pay the state a $1 million fee and waive the purchase requirement. Valley Forge has already done that. The law also allows resort casinos to add up to 15 poker tables and offer table game tournaments for a separate $1 million fee. Neither has a poker room now.
Local share assessment: The law reinstates a requirement that each of the state's 10 large casinos pay $10 million a year to the host municipality. The state Supreme Court had ruled that the previous method for determining the payment was unconstitutional and set a deadline for the Legislature to fix it. That was an important factor in reopening the overall gaming law.
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