Divisive Gambling Expansion Bill Through The Pennsylvania House

Jessica Welman June 10, 2017
Harrisburg state capitol
Regulated online gambling in Pennsylvania is one step closer to reality. The state House passed an elaborate gambling expansion bill this week. However, there is still a ways to go and several battles to fight out before this bill gets passed into law.

How does the House gambling bill differ from the Senate bill?

The problems with the Senate bill generally stemmed from how stringent its options were. Yes, online casinos were in there, but at a 54 percent tax rate. Online poker was in the bill too, but only with an egregiously high $5 million upfront licensing fee. Daily fantasy sports (DFS) were really the only item in the bill without punitively harsh fees.

The House bill, on the other hand, threw in everything but the kitchen sink. While the Senate bill hopes to generate between $100 and $150 million, the House bill could generate between $250 and $300 million.

Here are just some of the bill’s provisions:

  • DFS for ages 18 and up
  • Online gambling (poker and casino) for ages 21 and up
  • 16 percent tax rate on online casinos with an additional three percent local share
  • Up to five video gambling terminals (VGTs) in truck stops and liquor establishments
  • The ability to sell online lottery tickets
  • The ability to offer sports betting if the federal ban on wagering is ever overturned

This incomplete list is just a smattering of the more than 200-page bill. An accurate description for it would be sweeping. In fact, it would be the most expansive gambling legislation since the state legalized casinos.

VGTs were a sticking point in the House debate

The bill passed through the House by a margin of 102-89, but not before a lively debate. The bill’s long list of vocal critics latched on to the VGT addition as the biggest sticking point.

If the legislation is taken at face value, basically anywhere in Pennsylvania with a liquor license could apply for VGTs. This would include not just bars and restaurants, but fire houses and nursing homes as well. A Sheldon Adelson-backed ad against VGTs paints a picture that the machines would create 40,000 new casinos in the state.

The ad is uses a very loose definition of casino, but it is true the bill allows for up to 40,000 of these VGTs within the state. The machines would be taxed at 37 percent with a very small upfront licensing fee of $100 per machine.

Adelson, who owns Sands Bethlehem, is not the only casino operator which opposes VGTs. Most of the 12 casinos in the state avoid the measure. The companies which support it, like Rush Street and Penn National, only do so because they own VGT companies. With the promise of a new revenue stream in PA, they are all for VGTs.

Most other casinos do not like the idea of tavern gambling, but only two casinos are actively campaigning against all of the gambling expansion. Sands and Parx are both casinos with anti-online gambling stances. They are also the two largest casinos in the state.

What comes next for gambling expansion?

The bill is now back in the hands of the Senate. The next step could be a conference committee between the legislature so the two groups can try to meet in the middle of these “not enough” and “way too much” versions of the bills. Ideally they find a middle stance that is just right.

This Goldilocks-esque solution will not be easy to come by though. The House debate indicated how divisive VGTs in particular are going to be. However, the aforementioned gap in what the House bill generates in tax revenue compared to the Senate is an important issue.

The Senate version came up short of budgeted revenue from gambling expansion, so lawmakers need to make up the difference one way or another. VGTs seem like an easy solution, not to mention a solution where more revenue will be going directly back to local governments.

There is a very real possibility VGTs will be a non-starter for the Senate though. Until there is some resolution and agreement on that front, the entirety of the bill is in a precarious position.

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