Governor’s Signature Makes Pennsylvania Fourth State to Legalize and Regulate iGaming Industry

Following a whirlwind of legislative action last week, Pennsylvania Governor Tom Wolf has signed a comprehensive gambling expansion package which legalizes and regulates online gambling into law.

Wolf’s signature officially made Pennsylvania the fourth American state to regulate the iGaming industry – joining Nevada, New Jersey, and Delaware four years after those states made the move.

Along with expanding the state’s land-based gambling industry, House Bill 271 legalizes every major form of online gambling, including poker, casino table games, virtual slot machines, daily fantasy sports (DFS), and lottery ticket sales.

The gambling expansion package was originally passed by both the full Pennsylvania Senate in May, with the House providing its assent in June – but HB-271 wound up being shelved amidst the state’s looming $2.2 billion budget deficit crisis.

Wolf, a Democrat, had originally called for $100 million of the state budget to be generated by iGaming revenues. That figure swelled to $250 million by June 30, when legislators finally passed a full $32 billion budget proposal. A divide between the Republican-controlled House over tax rates and other features of HB-271’s implementation led to a legislative stalemate, one which seemed to cast the bill’s future viability into doubt.

That all changed on October 25, however, when the Senate Rules Committee voted 17-1 in favor of forwarding HB-271, as amended, through to the full Senate. A vote of 31-19 secured Senate passage that same day, and on October 26 the full House voted 109-72 to bring the bill to Wolf’s desk.

On October 30, Wolf confirmed to reporters that HB-271 had been signed as part of a comprehensive effort to balance Pennsylvania’s budget:

“There’s been a lot of pressure from a lot of places in the commonwealth to actually expand this and we do need some recurring revenue.

Again, the goal has been all along to do what’s prudent, not cannibalize existing gambling revenue coming to the state, and I think what we’re settling on will actually do that.”

Speaking with The Philadelphia Inquirer, House Minority Leader Frank Dermody (D-Allegheny) shed light on the touch and go negotiations which went into HB-271’s eventual passage:

“I would prefer to do it other ways, but this is what we can get done, and we got it done.

I’ve got to believe that there’s a limit as to how much we’re going to achieve from gaming, and I don’t know whether we’ve reached that or not. I guess we’re going to see.”

With a fourth U.S. state set to offer regulated online gambling, iGaming industry activists roundly celebrated the announcement.

John Pappas, who serves as executive director for the Poker Player’s Alliance, praised Pennsylvania lawmakers for paving the way toward another regulated online market:

“Pennsylvania made the right decision today.

This is a major victory for consumers who, for years, have asked the state to step up and provide meaningful protections.

The iGaming law will also help create new growth opportunities for the Commonwealth’s bricks and mortar casinos while providing needed revenue for the state budget.”

Using a template provided by New Jersey’s thriving iGaming industry, HB-271 allows any of the state’s 12 land-based casino operators to pay $10 million for an iGaming license. Any licenses issued within the first 90 days of the application period would cover online poker, table games, and slots inclusively. After that, operators can pay $4 million each to secure individual licenses for poker, table games, and/or slots.

That choice may prove pivotal as Pennsylvania works out the proverbial kinks, one of which is the exorbitant tax rate applied to online slot revenue. While poker and table game revenue will be taxed at the iGaming industry standard of 16 percent, slot revenue carries the same 54 percent tax applied to brick and mortar casinos – a rate most experts warn will be untenable.

In a white paper entitled “Analysis: Pennsylvania Moves to Regulate Online Gambling” – which was published in conjunction by Online Poker Report and PlayPennsylvania – analyst Chris Grove forecasts $154 million in iGaming revenue from the industry’s first year. Grove predicts that figure will grow to $275 million annually within five years.