If Passed, HB 649 Would Tax Online Gaming Revenues at 14%
State Representative John Payne, a Republican from Dauphin, has introduced a bill that would bring legal online gambling to the state of Pennsylvania. Rep. Payne’s bill, which was cosponsored by 16 other lawmakers in the Pennsylvania House of Representatives, is labeled House Bill 649.
The complete text of the bill has not yet been published, though an excerpted version has been uploaded to the General Assembly’s website.
John Payne’s Memo
John Payne sent a memo to the other members of the legislature with the information he wanted them to know about his bill. Payne’s statement read, “Developments in technology and recent legal decisions have created an opportunity to legalize interactive gaming as a means to further enhance and complement the benefits delivered by casino gaming, licensed facilities and the communities in which they operate. [I-]Gaming has already been authorized in nearby states that directly compete with our current licensed casinos. Many Pennsylvania residents participate in illegal and unregulated gaming 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.”
In specific, Rep. Payne said his bill would do three things. One, his bill would “Require all internet gaming to be conducted under the current gaming licensees.”
Two, HB 649 requires a licensing fee of $5 million per license, which is larger than in most states. Three, Payne’s bill would “Tax all gross interactive gaming revenue at 14%“.
Matching Other States’ Efforts
John Payne refers to Delaware and New Jersey in his letter to the other representatives. In discussing such legislation, he wants to match those states’ efforts in the gaming sector. Atlantic City is declining in large part to the mass of Pennsylvanians who stay at home to gamble in racinos or at Philadelphia-area casinos like the Bethlehem Sands. 10 years ago, those gamblers were visiting Atlantic City for their gaming fun.
Market saturation is a major issue for gaming operators and the governments which regulate such activities, because those states have gotten used to the big revenues supplied by the brick-and-mortar casino industries. But as the market is filled up with more casinos, states like Pennsylvania could see a decline in revenues. Already, Pennsylvania’s slot machine industry, which comprises upward of 70% of all casino revenues, have shown evidence of general decline.
In those circumstances, Pennsylvania’s legislature might decide to shore up their gaming industry by offering licensed online casinos and poker sites. The state faces a major budget deficit. While online gaming revenues would not make up the difference, they could be a part of a multifaceted solution to the problem.
No Mention of Interstate Gaming Compact
Rep. John Payne makes no mention of an interstate poker compact in House Bill 649. Because Pennsylvania has the 6th-largest population among US states (12.8 million people), it should be able to sustain an online gaming community without joining an interstate gaming compact. Many states cannot do so, though New Jersey’s 9 million person population has shown a healthy return (though less than predicted).
No Bad Actor Clauses (Yet)
Also, no mention has been made yet about “bad actor” statutes in HB 694. Since the full text of the proposed law has not been released yet, it is still up in the air whether a poker company like PokerStars, considered by some to be a bad actor in the gaming industry (due to the Black Friday scandal), would be allowed to operate in Pennsylvania. Previous bills by other Pennsylvania lawmakers would have banned PokerStars from the Keystone State.
US Legal Online Gambling
The Pennsylvania initiative is part of a trend across the United States towards legalizing online gambling. Already, New Jersey, Delaware, and Nevada have licensed and regulated iGaming. Mississippi and Washington have debated it this year. California, Indiana, and Pennsylvania also have bills being discussed.
Forbes has predicted the United States will have 7 states which have legalized online gambling by 2017. According to their predictions, California will be the next state to legalize, and the only one with a change for regulated iCasinos by the end of this year. By 2020, though, it is predicted up to 20 states might legalize online gambling, while the nationwide industry might net over $5 billion in revenues.
