Temporary Pennsylvania Sports Betting Regulations Are Going Awry

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PA sports betting regulations

The introduction of legal online gambling and now sports betting in Pennsylvania is a popular and welcome development for the state’s citizens, gaming industry and players. The regulatory environment that the new law and Pennsylvania Gaming Control Board (PGCB) are mandating is not working out quite so well.

Entrenched corporate interests and lobbyists look to be having an impact on the shape of the regulations and licensing conditions that is not necessarily positive.

Skins were in, now they’re out

Most recently, the latest Title 58 Temporary Rulemakings for PA sports betting have explicitly limited casino license holders to offer only one internet or mobile website/skin, which must be branded so as to include the licensee casino’s name.

“(b) Sports wagering conducted in this Commonwealth by a sports wagering certificate holder or a sports wagering operator licensee on behalf of a sports wagering certificate holder may only be offered to players as follows:

(v) Through a single interactive website or mobile application that clearly and prominently displays the name of the sports wagering certificate holder.”

This is different from the earlier published intent for online casinos:

“There is no limitation to the number of skins that a slot machine licensee may employ to deliver games, but every ‘skin’ that a casino offers must be branded in a manner that makes it clear that it is offered on behalf of the slot machine licensee consistent with language of the act.”

If licence holders can’t partner with multiple online sports betting suppliers, there will be less competition in the market, and casinos will have less ability to target different market demographics.

Penn National doesn’t like skins or competition

This is consistent with what Pennsylvania’s largest casino operator wants.

Penn National owns the Hollywood Casino near Harrisburg and will own the Meadows Casino close to Pittsburgh, once PN’s acquisition of Pinnacle Entertainment closes. It has also bought two of the new PA mini casino licenses in the PGCB auctions.

A couple of weeks ago Penn National set a letter to the PGCB in which it stated:

“The failure to prohibit ‘skins’ with respect to online/mobile sports wagering would present significant new competition to the incumbent casino operators and result in overall saturation of the marketplace, as is occurring in the online gaming marketplace in New Jersey.”

To which the only response from the PGCB should have been “so what?”

This is the United States. Competition is a good thing, it is the best way of ensuring that customers get the best product at the best price. It stimulates the innovation that creates wealth and forces businesses to invest in their employees to ensure that customer service is at the highest possible level.

Market saturation? Isn’t that the optimal end point of the whole purpose of the new laws, that the demand for gambling is 100 percent satisfied by the regulated sector so that players don’t have to look for what they want on black market offshore sites?

New Jersey loves its competition and “saturated” market

Do not look to New Jersey for an example of any “damage” caused by skins. New Jersey tax revenues have been soaring for those who can succeed in the market.

The Golden Nugget now has around 35 percent of the NJ online casino market, while online poker is carved up between PokerStars and 888/WSOP with around 40 percent each, and PartyPoker/Borgata trying hard to improve its third-place market share.

And did Penn National not notice that two new casinos have opened in this supposedly saturated market? OK, when Penn wrote its letter the casino openings were still in planning, but everyone in the industry knew they were going to happen.

Both the new Ocean Resort Casino and Hard Rock Atlantic City are launching their own online sports betting and casino apps, so they seem undeterred by the idea that the New Jersey market is “saturated.”

Outside of Penn National’s self-interest, New Jersey looks like one of the most successful and well-regulated markets in the world.

Pennsylvania could take a few more pointers from New Jersey.

The license acquisition process means that competition is already going to be restricted in the state.

So far five Category 4 casino licenses have been issued at auction under the new law. The winning bidders at each auction were:

Spot the trend. Outrageously high prices for the first bidders, with prices dropping like a stone in subsequent auctions.

Most importantly, the April 18 auction saw no bids for a Category 4 casino license at all.

To the best of LSR‘s knowledge, not one casino has yet applied for an online casino license.

Penn National itself complained about the costs

In a letter to the PGCB, here’s what Penn National wrote:

“While the existing sports wagering licensing fee and tax rate are outside the PGCB’s purview, PNG first notes that the $10 million license fee and 36% tax rate established in the Gaming Expansion Legislation are the highest in the world and may make it impossible for a casino operator to make any return on its investment of capital.”

New Jersey’s taxes for online gambling total 20 percent, with the new sports betting in the state taxed at even less. Placing a bet on pro sports at casinos and racetracks is taxed rates ranging from eight percent to just over 14 percent.

There is no point complaining about the amount of lobbying influence in the US legal and regulatory systems. It’s a fact of life, so to be fair to Penn National, the company is doing what it can to act in its own best interests, which is perfectly legitimate.

The good news for Pennsylvania sports bettors who want to see several operators competing for their business is that these regulations are only temporary. The PGCB states:

“While this temporary rulemaking will be effective upon publication, the Board is seeking comments from the public and affected parties as to how this temporary regulation might be improved.”