Pennsylvania Set To Introduce Online Poker-only Bill

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Tuesday, June 3rd, 2014 | Written by Stephen Smith

Pennsylvania State Sen. Edwin Erickson (photo) has announced he intends to introduce a new internet gambling bill, State Bill 1386, within the next few weeks and just like Nevada the bill is designed to allow poker-only within state boundaries. The Senator’s move comes after a feasibility study commissioned by Pennsylvania lawmakers was presented to the Pennsylvania Legislative Budget and Finance Committee last month, suggesting online poker could generate around $129 million each year in online poker revenues.

As State Sen. Edwin Erickson publicly stated this week: “In the next few weeks I intend to introduce Senate Bill 1386, legislation that would authorize Interactive Gaming in the form of online poker. A recent study from the Legislative Budget and Finance Committee found that Internet Gaming is a large new source of revenue that the Commonwealth could explore. This means more revenue to assist in the reduction of real estate taxes.”

The Econsult feasibility study

Interestingly, the feasibility study originally examined six online gambling options for the state including casino games, poker, sports betting, and fantasy sports, with casino games predicted to generate $178 million in annual gambling revenues and poker a further $129 million. Pennsylvania was then expected to collect $68 million in tax revenues by the end of the first year, increasing to $113 million by year 2.

Nevertheless, the Keystone State seems to have dismissed all other options in favour of an online poker-only approach, with Senator Erickson explaining that poker “is unlike banking games in many respects that make it best for the introduction of interactive gaming. Poker operators are not participants in the games and are indifferent as to the outcome.”

Poker only approach

Senator Erickson’s decision to limit online gambling to just poker comes despite the fact the study entitled ‘Current Condition and Future Viability of Casino Gaming in Pennsylvania’ had envisioned no threat of cannibalization to Pennsylvania’s land based casinos coming from online casino games. In addition, the study’s prediction of $129 million per year in online poker revenues may seem a little optimistic in view of neighbouring New Jersey’s experience so far, which in April generated $11,428,737 in igaming revenues, a mere $2.6 million of which was derived from poker.

Nevertheless, Erickson’s optimistic assessment may in part be influenced by the fact that New Jersey has recently enjoyed a measure of success chasing major offshore online poker operators from its regulated online poker market, and as Erickson explains, “many Pennsylvania residents participate in illegal and unregulated poker sites. Establishing a strong regulatory framework under the Gaming Control Board will assist in shutting down these illegal sites and enhance consumer protection for our gaming residents.”

Key points to Senate Bill 1386

One of the key aspects of Erickson’s bill is that applicants will have to pay a whopping $5 million fee to receive an online poker license. However, the envisioned 14% tax rate on gross gaming revenues (GGR) will be less than the rate currently set in New Jersey and will also lower than the figure of 20% recommended by the Econsult study.

A ‘bad actor’ clause has also been added excluding those companies which “violated” the 2006 UIGEA from obtaining a license in Pennsylvania.

Obstacles facing SB 1386

Although Erickson’s bill seems to enjoy the backing of the Senate, SB 1386 is likely to face stiffer resistance in the House. Furthermore, the bill will also need to be approved by Governor Tom Corbett, who may not be so eager to become embroiled in such a controversial issues ahead of a tough re-election battle.

Pennsylvania facing $1.2bn budget deficit problem

Nevertheless, Pennsylvania is currently facing a $1.2 billion budget deficit and so practicalities may win out in the end. Recently, the Independent Fiscal Office highlighted the importance of the state examining all potential revenue streams in order to avoid future problems, with Sharon Ward, director of the Pennsylvania Budget and Policy Center, commenting:

“The only way you can close a deficit of that size is with budget cuts in areas such as health care or education, or with revenue increases.”

Originally Pennsylvania had hoped its casino industry might have been enough to balance its books, but similar to other gambling jurisdictions, the state has seen its gambling revenues brought lower on account of increasing competition from neighbouring states. Casing point, last year Pennsylvania experienced its first ever fall in revenues, with the state’s 12 casinos down by 1.4% to $3.1 billion.