Pennsylvania online gambling debate continues during legislative hearing

Pennsylvania State Capitol (photo by Ad Meskens)

Pennsylvania's House Gaming Oversight Committee and Senate Community, Economic & Recreational Development Committee held a three-hour hearing featuring 15 witnesses on Tuesday to discuss the fate of online poker in the state.

While many of the speakers were opposed to online gaming — most notably, representatives of Parx Casino & Racing — the fate of the bill is still undecided, and another hearing has been scheduled for 20 March at 10 a.m.

Though Pennsylvania passed two gambling bills last year, neither of them made it to the finish line, leading the state House to introduce House Bill 392 in early February. The 200-page legislation includes provisions for online gambling, daily fantasy sports, a local share tax and a slot license operation fee.

An additional bill that is identical to HB 392 – Senate Bill 477 – was introduced on 6 March, before the joint hearing.

Sen. Lisa Boscola and Sen. Robert Tomlinson were quick to bring up the worry that online gambling could potentially cannibalize land-based casino revenue.

Kevin O'Toole, Executive Director, and Doug Sherman, Chief Counsel of the Pennsylvania Gaming Control Board, pointed out that online and land-based gamblers are quite different, and there has been little to no cannibalization in other jurisdictions where both exist.

Later on, David Satz, Senior Vice President of Government Relations and Development at Caesars Entertainment, urged Senators and Representatives to "avoid scaremongering," which appears to go hand-in-hand with the legalization of online gambling. He went on to say that having a regulated market offers more consumer protections and generates tax revenue for the state.

"The regulations do work," he said. And in his written testimony, Satz provided the information that "80% of online players [in New Jersey] are new customers; 42% who were TR customers were inactive customers who re-activated after signing up online.”

According to PlayPennsylvania, first-year revenue from online gambling could reach $230 million, increasing to $364 million annually. Most of this would come from new customers.

With the question of enforcing geolocation looming, Anna Sainsbury, CEO of GeoComply, took some time to show off the company's geolocation technology, which has proved to be precise. Sen. Tomlinson remarked that, perhaps, the company gathered too much information, despite previously voicing concern that out-of-state players may be able to access online games illegally.

A common thread of worry throughout the hearing was the issue of tax rate percentages. Sen. Tomlinson posited that, because of the differing tax rates between online and land-based casinos (14% to 54%), business will be inclined to push customers toward online offerings in order to save some money.

Satz commented, "Our brick-and-mortar casinos, we're in the business of providing entertainment, and the vast, vast majority of our customers . . . come to us for entertainment. They come for the social elements, they come for our restaurants, they come for our spas. . . . The person who is coming on for the internet isn't getting that. It's the customer and what they want that ultimately is going to drive whether they want to come to the casino or they want to go play [on the internet]."

John Pappas, Executive Director of the Poker Players Alliance, said, "As a player organization, the Poker Players Alliance takes consumer protections very seriously. I would argue that states like Nevada, New Jersey and Delaware have created a far more reasonable and effective approach to consumer protections than those who would simply stick their heads in the sand."

His concluding question was a relevant one: "Will you support legislation to provide Pennsylvania players and taxpayers with a safe and well-regulated place to play poker and other games on the internet, or will you leave them with an unprotected market vulnerable to fraud?"

As for land-based casino testimonies, Parx Casino stated in no uncertain terms that it is opposed to the legalization of online gambling. Chief Executive Officer Anthony Ricci cited the casino's healthy revenue stream – it seems there is no desire to change to status quo.

SugarHouse Casino, which already operates an online casino in New Jersey, was more supportive. General Manager Wendy Hamilton noted that online casinos can be a business builder, and that "these are the facts," referring to earlier statistics. "Multi-channel engagement empowered the brand," she said.

Interestingly, online SugarHouse players are eight years younger on average than land-based SugarHouse players, suggesting that online gaming is an effective way to capture the attention of the millennial market.