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Pennsylvania State Senator Renews Push Toward Online Gambling Legislation

Throughout the latter half of 2016 the state of Pennsylvania was seemingly poised to become the fourth state to pass online gambling legislation, joining Nevada, New Jersey, and Delaware.

An iGaming bill was passed by the state’s House of Representatives in June and forwarded on to the Senate for an expected approval. Progress stalled within that legislative body, however, and House Bill 1887 was unceremoniously shelved until 2017.

On January 2 of this year, state senator Jay Costa posted a memorandum of co-sponsorship to his fellow members of the Pennsylvania Senate, informing them of his intention to introduce an omnibus iGaming bill during the current legislative session.

Within the memorandum, Sen. Costa outlined the structure and purpose of his planned bill, which will be modeled on the template provided by last year’s nearly passed HB-1887:

“In the near future, I plan to introduce legislation amending the Pennsylvania Race Horse Development and Gaming Act to allow the Commonwealth’s gaming industry to continue to evolve and remain competitive in a responsible manner, respond to the Pennsylvania Supreme Court’s September 2016 ruling that declared the slot machine local share provisions of the Act unconstitutional, and generate an estimated $137 million in revenue for the FY 16-17 budget.”

Sen. Costa’s proposed bill would regulate the online casino, poker, and daily fantasy sports (DFS) industries. The gaming license required to become an online casino operator would come at the cost of $10 million, and only brick and mortar casinos in Pennsylvania are eligible to apply. Additionally, any vendor contracting with a local casino to “host” their online casino platform will be charged a licensing fee of $5 million.

As for DFS operators, the licensing fee for that sector of the market would be $2.5 million under Sen. Costa’s bill. These licensing fees will be deposited directly into the state’s General Fund.

All online gaming revenue generated by licensed operators would also be taxed at a rate of 25 percent, with 15 percent directed to the state’s Property Tax Relief Fund, and 10 percent to the Commonwealth Financing Authority.

The first fund is aimed at reducing property tax rates for Pennsylvania taxpayers, while the second provides capital for economic development projects in the counties where land-based casino license-holders are physically located.

Sen. Costa’s memorandum also provided revenue estimates for the industry as it would exist under his bill’s provisions. Within the forecasts, Sen. Costa allows for the dispensation of only a portion of the allotted licenses to be awarded by the state, predicting that 10 online casino licenses will be doled out from the dozen available for example.

According to those estimates, those 10 newly licensed iGaming enterprises would contribute $100 million in revenue to the state’s General Fund, while five of 10 possible iGaming vendor fees ($5 million per) would add another $25 million to the state coffers. The DFS industry would contribute another $5 million via a pair of licenses – likely awarded to DraftKings and FanDuel – at $2.5 million each.

Sen. Costa did not provide a proposed schedule for formally introducing the bill, but the posting of a memorandum of co-sponsorship is the first component of the legislative process.

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