Proposed legislation that would legalize online poker in Pennsylvania will be reconsidered by state legislators on Wednesday, October 21st.
Previously viewed as a political nonstarter in the Republican-led General Assembly, HB649 – the bill introduced by Rep. John Payne (R-Dauphin County) in February – has been reconsidered in light of the state’s ongoing budget impasse. With both sides refusing to budge on key tax cuts during a debate over Pennsylvania’s $2 billion budget deficit, a debate which has spanned more than 100 days now, several key Republican representatives have reevaluated their stance on the bill.
As both the chairman of the House Gaming Oversight Committee and chief sponsor of HB649, Rep. Payne has been vocal in championing the potential financial benefits he expects the state to derive from the legalization of online poker and other gaming venues (including land-based slot machines). According to Rep. Payne’s estimates, the state could be poised to increase revenue by $120 million in just the first year, with the bill’s full assortment of gaming-based provisions and licensing agreements eventually reaping more than $700 in annual revenue.
The purpose of HB649 is stated as “providing for authorized interactive gaming and for duties of Pennsylvania Gaming Control Board and Department of Health; and imposing an interactive gaming tax and prescribing penalties.” According to Rep. Payne, authorized interactive gaming would include both online poker and online casino gaming, which includes games of skill like blackjack along with games of chance like roulette.
As stated in his introduction of the bill, Rep. Payne’s motivations for legalizing online gaming in Pennsylvania are morally protective as well as fiscally pragmatic. “Right now millions of Americans, including Pennsylvanians, participate in illegal online gaming where no regulation currently exists,” said Payne in his statement. “By enacting effective state policy, we can help curb the illegal market while ensuring strong safeguards are in place to protect consumers.”
But as Pennsylvania nears the fourth month of protracted legislative gridlock, the result of a crippling budget deficit of more than $2 billion, Payne has not hesitated in revealing his overriding reason for sponsoring HB649. By charging a licensing fee that starts at $5 million, and taxing gross gaming revenue at a rate of 14% – figures which match those instituted recently by regional neighbors New Jersey and Delaware after their own online gaming regulations successfully passed – Rep. Payne is confident that his revenue projections will be met or exceeded.
Ramifications for Pennsylvania’s Poker Community
In the years following a federal intervention which banned the game in 2011, the reintroduction of online poker as a regulated and fully legal pursuit on American soil has occurred only on a state by state basis. Along with New Jersey and Delaware, Nevada is the only other state to legalize and regulate the industry, but online poker legislation is currently being proposed in California, Illinois, Massachusetts, New York, and Washington.
For poker players living in Pennsylvania who have been waiting for the legalization of online play, recent developments concerning HB649 have been viewed as an encouraging sign. This is especially true when the political maneuvering that has taken place behind the scenes is fully considered.
Opponents of online gaming’s return to Pennsylvania have voiced their opposition to HR649’s sudden revitalization. A key point of contention comes from the fact that the House Gaming Oversight Committee – which is chaired by bill sponsor Rep. Payne – was recently reconfigured with the addition of four new members, all of whom have expressed their support for online gaming. “It appears the skids might be greased,” said Michael Geer, president of the Pennsylvania Family Institute, an organization working to oppose online gaming in the state.
According to Geer, the committee appointments appear to be engineered by Republican legislators who support the regulation, and taxation, of a statewide online gaming industry. But Stephen Miskin, spokesman for the House Republicans, recently affirmed that “our caucus is stacked with members supporting anything other than higher taxes on working Pennsylvanians,” while the timing of the appointments should be viewed as “happenstance.”
Pennsylvania is a state which already permits land-based casinos to operate within its borders, taxing all slot machine revenue at a rate of 55%, and all table game revenue at 14%. Under the proposed bill, online gaming revenue would be taxed in similar fashion at 59% and 14%, respectively. The proposed 14% tax rate on gross gaming revenue is slightly lower than the 15% fee imposed by New Jersey.
Another key component of HR649 that poker players will take note of is the bill’s lack of the so-called “bad actor” clause. Unlike Nevada’s online poker legislation, which written to prohibit any online gaming entity that conducted business after the Unlawful Internet Gambling Enforcement Act (UIGEA) was authorized by Congress in 2006, Pennsylvania’s version has no “bad actor” provisions in place. This absence paves the way for industry titans like PokerStars resume operations in another American jurisdiction should HR649 be passed into Pennsylvania law.
PokerStars has developed an ironclad reputation among poker players and legislators alike in recent years, standing as the only online poker entity to fully restore player funds in the scandal-laden days following the industry’s “Black Friday” in 2011. Although the company has been branded as a “bad actor” by Nevada and other states as a result of its choice to operate following the passage of the UIGEA, PokerStars continues to successfully serve millions of customers around the world. PokerStars recently received the right to resume operations in New Jersey, a move that most industry experts believe will provide that state’s online gaming industry a valuable boost in business.