Pennsylvania moves closer to legalizing online gambling

Pennsylvania's HB 271, a bill that would allow online gambling, passed the Senate today with a 38-12 vote.

The bill passed quickly through legislation on Tuesday, passing the Senate Community, Economic & Recreational Development Committee by a margin of 11-3 and clearing the Senate Appropriations Committee with a vote of 24-2.

The next stop is another vote in the House, likely to be held in June.

HB 271 will legalize online casinos and online poker while allowing wagers on fantasy sports contents and the purchase of online lottery tickets. The bill will also address the Supreme Court decision to remove a tax share fee that provided municipalities in Pennsylvania with $142 million per year. Casinos would pay $10 million annually.

Revenue for online slot machines and table games will be taxed at 54% — the same rate as land-based slot machines in the state — while online poker will be taxed at a rate of 16%. As for fantasy sports, operators will be taxed at 12%.

Proponents say a 54% tax rate is steep and a potential hurdle to getting online operations off the ground. Even trickier is the proposed licensing fee of $5 million, with a $250,000 yearly renewal. These rates may be adjusted during a future vote in the House.

"Extraordinarily high tax rates or license fees could change the narrative significantly, especially for prospective online poker operators, who may find the cost prohibitive and choose to opt out of Pennsylvania," said analyst Robert DellaFave in a recent report on the state's potential online gambling revenue. "Online casino operators, too, would be forced to tighten their belts, resulting in poorer promotions, tighter games and (perhaps) fewer operators."

DellaFave goes on to say that even a 25% tax rate, proposed by Sen. Jay Costa in January, could prove to be too high, reducing retention rates and negatively impacting marketing spend.

"The entire [online] industry thinks it should be 15% but not more than 20%,” Rep. Scott Petri, chairman of the House Gaming Oversight Committee, said to Fox News.

The state stands to make up to $230 million in online casino revenue in the first year of legalization, according to PlayPennsylvania.

For perspective House has 16% tax rate for all iGaming. Senate passed bill is 16% for #poker & 54% for all other iGaming. Work to be done. https://t.co/drBliPL25R
— PokerPlayersAlliance (@ppapoker) May 24, 2017