High tax rate is one of the problems with PA sports betting provisions
Legal Sports Report

Pennsylvania Is Close To Enacting A Sports Betting Law: What You Need To Know

PA sports betting questions
Pennsylvania is close to having a sports betting law on the books after Thursday.

The House approved a wide-ranging gaming expansion that also regulates daily fantasy sports and allows for online poker and gambling.

But the legislation’s sports betting provisions, in some ways, are the most intriguing part of the puzzle. And sports betting is not going to happen overnight.

How close is sports betting in PA?

The bill does set up Pennsylvania to regulate and legalize sports betting. But there are lots of caveats here.

First off, the bill still needs Gov. Tom Wolf to sign it for it to become law. While that is expected to happen, it’s not a given.

Second, the bill requires a change in the federal law; single-game wagering is currently banned in all states outside of Nevada via PASPA. That could come soon, if the right verdict comes down from the US Supreme Court in the New Jersey sports betting case. That could open up sports wagering in other states as soon as the middle of 2018.

The other possible route would be a change in the law coming from Congress, but that likely would take longer.

So those two dominoes need to fall first. Pennsylvania also needs to create a regulatory system for sports betting. And seeing as the Pennsylvania Gaming Control Board will have lots of balls in the air already, sports betting is likely going to take a back seat for awhile.

The PGCB will be taking up DFS, online gambling, video gaming terminals and much more in a short period of time, as part of the gaming expansion. So a 2018 rollout might be optimistic, even if everything breaks perfectly.

What’s in the PA sports betting bill?

If you want to read the language for yourself, here it is:

 

PA Sports Section

The bill mostly deals with the top level of licensure and suitability for sports betting operators. But here is what we do know about how sports betting would look in PA:

  • Current casino licensees would be able to offer sports wagering, if they pay for a new license specifically for sports betting.
  • Any licensee wishing to offer sports betting must pay a one-time fee of $10 million.
  • Gross revenue would be taxed at a rate of 34 percent, plus another two percent for a local share assessment.
  • Operators could offer wagering on both professional and collegiate sports.

Isn’t that a high tax rate?

The state is trying to tax sports betting revenue in the state at a rate of 36 percent. That would be far higher than any other jurisdiction in the world.

Of course, Pennsylvania would argue it taxes gaming higher than everyone else, already, and things work just fine. That includes slot machines at 54 percent of gross revenue and soon to be online slots at that same rate. The state might quickly find out that rate is entirely unworkable for iGaming.

But sports betting is a different beast, and is already a low-margin product at best — somewhere between four and ten percent of handle, if being run properly, in any given month.

Taxing the crap out of a product that casinos barely profit off of — at least in a direct way — is perhaps not the best way to go about things. (Sports betting functions best as a product that gets people in the doors and using other amenities/gaming at a casino.)

Nevada, the only US state with legal wagering, taxes all gross gaming revenue (sports included) at a rate of 6.75 percentKentucky also has legislation that would tax handle at a rate of 20 percent, which is bordering on ludicrous.

Yes, Pennsylvania operators will likely pay the $10 million licensing fee and grumble about the tax rate. But PA lawmakers should eventually rethink the tax rate so that operators aren’t feeding their already slim margins on sports wagering to the state.

Is anyone else close to legalizing sports betting

Other than New Jersey, no one is really ready to launch sports betting if the federal ban is struck down as unconstitutional. A new law would put Pennsylvania in prime position, after it appeared it might kick the can down the road on sports wagering.

While Connecticut and Mississippi have both started down the road toward legal sports betting, they would still have more work to do to go live.

The legalization of sports betting would give Pennsylvania a leg up over other regional casinos that can’t offer it, yet: That includes Maryland, West Virginia, Ohio and New York.

Other states in the East with casinos and horse racing tracks should certainly think twice before ceding the sports betting market to PA and NJ.

Sign Up For The Grove Report – US Online Gambling Industry Insights Delivered To Your Inbox:
Dustin Gouker
- Dustin Gouker has been a sports journalist for more than 15 years, working as a reporter, editor and designer -- including stops at The Washington Post and the D.C. Examiner.