Happy 2nd anniversary to the Pennsylvania gambling expansion law.
Cue the confetti and cut the cake. To date, it’s generated over $480 million in gambling revenue for the state. That breaks down to $660,000 a day.
PA gambling expansion was a game-changer
Pennsylvania gaming expansion was directly related to the passage of the 2017-2018 state budget. The Pennsylvania Constitution mandates a balanced budget. In order to increase revenues without raising taxes, the legislature, led by the GOP, approved a wide slate of gambling expansion:
- Online casinos
- Online poker
- Mini-casinos
- Truck stop VGTs
- Airport gaming
- Online lottery
- Keno and monitor games
- Sports betting
- Fantasy sports
The first state budget after expansion only expected $100 million from online gambling.
That figure was shattered after the first mini-casino auction in 2018. The sale of five mini-casino licenses generated $128 million alone.
Over the course of two years, the state has netted nearly half a billion dollars from the expansion act. The majority of that money came from hefty upfront licensing fees for sports betting and online casinos. Here is a look at where all of the revenue has come from for Pennsylvania so far:
- Licensing fees: 59%
- Mini-casinos: 27%
- Lottery expansion: 9%
- Taxes on revenue: 5%
Pennsylvania Gaming Control Board (PGCB) spokesperson Douglas Harbach commented on the two-year milestone:
“Our staff has worked diligently to roll out the numerous mandates of the Gaming Expansion Act, simultaneously creating regulations, fulfilling background investigation and licensing requirements, holding public hearings when necessary, and working with casinos and new entities on their plans for new gaming endeavors such as sports wagering, online gambling, satellite casinos, and truck stop VGTs.
With all of these expansion projects paralleling, the demand on our agency has been significant, but has been handled in a manner that will assure success of these new markets. With all of the mentioned new gambling initiatives now launched and in some phase of their individual rollouts, the Commonwealth has begun to see additional gaming revenue that will continue to ramp up in the months and years ahead.”
Sports betting in Pennsylvania
License applicants are required to pay a one-time fee of $10 million for sports betting in Pennsylvania. Also, PA imposes a 36% tax rate on gross revenue for sports betting. It is four times the rate of neighboring New Jersey as well as the highest tax rate in the nation.
November 2018 marked the beginning of legalized sports betting in the state. As brick-and-mortar and online sportsbooks opened for business, tax revenue skyrocketed. September 2019 represented a record-breaking month in Pennsylvania with $194.5 million in wagers placed resulting in $5 million in taxes.
To date, PA’s 12 retail sportsbooks and five mobile sportsbooks handled over $607 million in bets with over $46 million in revenue for sportsbooks.
FanDuel was later to the game than other sites, not going online until July. However, after just six weeks in operation, it became the clear top performer in the state.
Lady Luck the only casino with no online interests
The 90-day window for PA casinos to apply for $10 million comprehensive interactive gaming petitions opened in May 2018. For the first 85 days, there was no interest. A panic set in that there might be few or no applicants.
In the end, seven of PA’s 13 casinos forked over the fee. It allows them to offer online peer-to-peer games like poker, online slots, and online table games.
Another three operators opted to buy separate online slots and table games licenses at $4 million apiece. That left three operators not involved in the online casino game at all. Those are:
- Rivers Pittsburgh
- The Meadows
- Lady Luck Nemacolin
Both Rivers and The Meadows have sister casinos with online casino licenses, so they are still somewhat involved in the industry. Lady Luck is the only casino staying completely away from iGaming.
Online casinos in Pennsylvania
In July 2019, online casinos made their debut in Pennsylvania. Online slots rake in 54% in taxes on revenue and table games are subject to a 16% taxation rate.
Currently, PA has three online casinos and each has a modest online library. Despite heavy interest from players, there is no online poker yet. Over the course of three months, interactive slots earned the state $3.4 million in tax revenue. Interactive table games accounted for over $335,000 in taxes.
Sports betting grabs the headlines, but online casinos deserve more attention. The three casino sites more than quadrupled revenue since their first month. Online betting generated $9.2 million in revenue across five sites, online casinos produced $3.2 million in revenue split amongst three sites.
PlaySugarHouse started out as the leader in the online casino space, but last month it was Hollywood Casino that was the top performer. Hollywood does have the advantage of being the only PA online casino with an iPhone app, which probably explains its surge in performance. However, this industry is very much still in its infancy and it is not clear who will be the top dog in the space.
Mini-casinos in Pennsylvania
Mini-casino auctions pulled in varying bid prices resulting in $130 million auction profit for the state.
| Mini-Casino | Bid Amount | Parent Company/Bidder | Location |
|---|---|---|---|
| Hollywood Casino York | $50,100,000 | Penn National | York in York County |
| Hollywood Morgantown | $7,500,003 | Penn National | Morgantown in Berks County |
| Live! Casino Pittsburgh | $40,100,005 | Stadium Casino LLC | Greensburg in Westmoreland County |
| Parx Shippensburg | $8,111,000 | Parx | Shippensburg in Cumberland County |
| Bally’s Casino | $10,000,101 | Ira Lubert/Bally’s | Unionville in State College, Centre County |
| Mt. Airy Casino Pittsburgh (license application denied) | $21,888,888.88 (Lost $5,472,222.22) | Mt. Airy Casino | Beaver County (Western PA) |
| Total Fees: | $121,283,331.22 |
No mini-casinos have opened yet. Live! Casino Pittsburgh in Westmoreland County is scheduled to open in 2020.
PA Lottery grows post-expansion law
The Pennsylvania Lottery started in 1972 and remains a huge source of funds for older Pennsylvanians. During the 2017-2018 fiscal year, the PA Lottery sold a record of more than $4.2 billion in games. The gaming expansion law allowed for the introduction of three new elements of lottery offerings.
They are:
- Online lottery games
- Keno
- Virtual sports
Based on numbers provided by the PA Lottery in its annual fiscal reports from July 2019, profits from each of the following game types since launch are as follows:
Online lottery: $32.96 million
Keno and virtuals: $11.62 million
Daily fantasy sports in Pennsylvania
Daily fantasy sports was never explicitly illegal in Pennsylvania. The 2017 gambling expansion regulated daily fantasy sports industry with taxation and licensing feed. Ten DFS operators ponied up a $50,000 licensing fee. DFS revenue is taxed at a rate of 15%.
Tax revenue from DFS to date stands at $4.7 million.
Video gaming terminals in Pennsylvania
Video gambling terminals (VGTs) continue to open throughout the Commonwealth. Slot machines are only allowed at approved diesel fuel truck stops. As of Sept. 2019, there are seven locations with five machines each. The first machines went live in mid-August 2019. The first six weeks of VGT revenue yielded $168,849 in tax revenue.
Eventually, there should be more than 60 VGT locations in the state. Perhaps 120 truck stops might meet the qualifying criteria, though not all have applied.
Airport gaming and online poker still grounded
There are certain areas where the gaming expansion law has yet to reach its full impact.
Airport gaming has yet to take flight. In February 2019, the PGCB adopted temporary regulations to allow for interactive gaming via “multi-use computing devices at a qualified airport in an airport gaming area in this Commonwealth.”
As previously mentioned, online poker has yet to make its much-anticipated entrance. PGCB officials insist launch is imminent, but two years in, there is still no launch date on the books.
