Pennsylvania Sports Betting Inches Closer With Initial Regulations

Before the Supreme Court axed PASPA on May 14, the 1992 federal law that had banned full-fledged sports betting outside Nevada, Pennsylvania had positioned itself to become one of the first non-Nevada states to roll out legal sports wagering. That’s because 2017 brought the passage of the gaming bill HB 271, which included language legalizing Pennsylvania sports betting, contingent upon what the Supreme Court has now done.

While there’s much more work to do on the regulation front, it has now started in earnest on the expansive bill that requires regulations for iGaming, among other things. On Wednesday, the Gaming Control Board set forth temporary regulations for PA sports betting, which marks the first concrete step on that front.

“We understand that there are a lot of entities that would like to get this underway as soon as possible, but at the same time, our main function here is to protect the public,” said Gaming Control Board Spokesman Doug Harbach on Wednesday, reports the Bucks County Courier-Times. “We’re going to make sure all regulations are tied up before [sports betting] gets launched.”

PA Sports Betting Initial Regulations Are Here, Applications Invited, With Much More Needed Before First Wager Gets Taken

The new temporary regulations (you can view here) are fairly limited in scope, creating relevant definitions and, mainly, setting forth the process for slot machine licensees (the state’s 12 commercial casinos) to apply for a sports wagering certificate. The board will review and may approve the applications, but the licensee would have to wait for full, permanent regulations before taking a wager.

Examples of some points applicants must address:

(1) A statement identifying whether the sports wagering petitioner intends to offer land-based sports wagering, mobile sports wagering, interactive sports wagering or a combination thereof;

(2) An updated hiring plan and estimated number of full-time and part-time employment positions that will be created as a result of sports wagering if a sports wagering certificate is issued; and

(3) Information concerning the terms of any agreement with a sports wagering operator.

That license or certificate won’t come cheap: it’s $10 million plus a $250,000 renewal fee every three years. The license would permit operators to offer wagering on-premises as well as online.

Timeline and Hurdles

Harbach has said previously what a big regulations-writing lift HB 271 will require, of which sports betting regulations are just one part. The process probably will take the whole summer, at least, but Harbach did not offer any timetable. Potential licensees now have the opportunity to respond to the board with comments about the temporary regulations.

As they have already, the board will surely hear about the mind-boggling 36 percent tax rate (34 percent from the state plus a 2 percent local tax) that HB 271 would apply to sports wagering revenue. That’s more than five times Nevada’s tax rate of 6.75 and nearly quadruple the 10 percent rate that neighboring West Virginia will assess on operators.

“Certainly at a 34 percent tax rate it should bring in some additional significant revenue to the commonwealth,” Harbach told Philadelphia Magazine in mid-May.

While this is true, potential operators are looking around the country seeing a tax rate completely out of the ballpark and the near impossibility of making profit at such a high rate. Operators might unify in opposition, but perhaps one casino wants to get right down to business and eats it while pressing for a change.

So far it’s unclear if HB 271’s sponsors or others in the legislature will offer an amendment to additional legislation to address that tax rate, which we surmise was established without the benefit of much due diligence about the sports betting industry and operations. The Pennsylvania legislature is in session until November 30.

“There is a huge black market that pays zero tax,” Greg Carlin, CEO of Rush Street Gaming, whose company operates two casinos in Pennsylvania, told USA Today. “If legal sports betting is going to be a regulated and successful business, the tax rates can’t be so high that it makes it impossible to compete with the black market.”