When Did Pennsylvania Legalize Gambling

PGRI re-posted an article released by the Competitive Enterprise Institute on its blog detailing the successful legalization of online gambling in Pennsylvania. This past Monday, October 30, Pennsylvania Governor Tom Wolf signed a bill legalizing Internet gambling throughout the state. The move makes the Keystone State the fourth in the nation. Act 71 was also known as the Pennsylvania Horse Race Development and Gaming Act, which brought slot machines and casino gambling to the state. Additionally, the Act did three major things that laid the groundwork for gambling within the state: established the Pennsylvania Gaming Control Board, legalized casinos, and legalized racetracks. Pennsylvania passed a bill regulating both sports betting and online casinos. A number of casinos now offer retail sports betting, with online betting apps launching on May 31, 2019. All of the major bases are covered in terms of markets, ranging from the major professional leagues all. As of 2020, Nevada and Louisiana are the only two states in which casino-style gambling is legal statewide, with both state and local governments imposing licensing and zoning restrictions. All other states that allow casino-style gambling restrict it to small geographic areas (e.g., Atlantic City, New Jersey or Tunica, Mississippi ), or to.

The Pennsylvania gambling expansion law passed largely because the state desperately needed a new source of tax revenue. One of the biggest sources of that revenue was upfront licensing fees for all the new types of gambling.

Even with the potential for big returns, the first state budget after expansion only expected $100 million from online gambling. That is a figure Pennsylvania surpassed after the first mini-casino auction.

Gambling streams are now blossoming in the Commonwealth, bringing in significant revenue for the state and local entities. How much so far?

Last updated: Feb. 20, 2021

How does that number break down? Let’s look at how much each category brought in:

Sports betting revenue starts rolling in

Sports betting in PA started out with retail only. Since the addition of online sportsbooks, revenue has soared. The majority of sports wagering in PA now happens online and the Pennsylvania market is third only behind New Jersey and Nevada in terms of volume of monthly wagers.

Consequently, the state’s tax revenue has experienced large gains since online betting was added to the mix.

Here is a look at the tax revenue (state and local) from sports betting so far:

January 2021: $12,229,342
December 2020: $12,261,434
November 2020: $13,446,089
October 2020: $13,239,693
September 2020: $2,257,158
August 2020: $6,578,667
July 2020: $2,933,093
June 2020: $2,397,657
May 2020: $1,738,436
April 2020: $1,038,049
March 2020: $2,480,132
February 2020: $1,700,011
January 2020: $8,222,829
December 2019: $4,094,893
November 2019: $5,299,449
October 2019: $5,381,370
September 2019: $5,062,216
August 2019: $2,201,406
July 2019: $1,026,769
June 2019: $979,302
May 2019: $1,030,267
April 2019: $1,519,733
March 2019: $1,986,962
February 2019: $700,853.95
January 2019: $938,597.00
December 2018: $722,356.00
November 2018: $183,238.77

Online casino taxes now a PA revenue stream

With the launch of online casino sites, the state got another tax revenue stream. In 2020, online casino proved a vital revenue source for PA with land-based casinos and major sports affected by pandemic precautions and closures. With online slot revenue taxed 54%, the state gets even more than the site when it comes to profit.

Table games provide a good chunk as well, with a 16% taxation rate (same as online poker).

Here is a look at slot and table games breakdown by month:

January 2021
Slot tax: $27,544,289
Table games tax: $4,268,734
Total online casino tax: $31,813,023

December 2020
Slot tax: $24,973,249
Table games tax: $3,621,244
Total online casino tax: $28,594,493

November 2020
Slot tax: $21,272,654
Table games tax: $2,875,595
Total online casino tax: $24,148,249

October 2020
Slot tax: $21,788,756
Table games tax: $2,718,140
Total online casino tax: $24,506,896

September 2020
Slot tax: $21,565,077
Table games tax: $2,356,890
Total online casino tax: $23,921,967

August 2020
Slot tax: $21,400,525
Table games tax: $2,173,236
Total online casino tax: $23,573,761

July 2020
Slot tax: $21,300,706
Table games tax: $1,907,184
Total online casino tax: $23,207,890

June 2020
Slot tax: $19,858,788
Table games tax: $1,606,208
Total online casino tax: $21,464,996

May 2020
Slot tax: $21,259,600
Table games tax: $1,987,122
Total online casino tax: $23,246,722

April 2020
Slot tax: $14,755,476
Table games tax: $1,678,339
Total online casino tax: $16,433,816

March 2020
Slot tax: $6,669,348
Table games tax: $1,405,145
Total online casino tax: $8,074,493

February 2020
Slot tax: $5,202,349
Table games tax: $1,284,237
Total online casino tax: $6,486,586

January 2020
Slot tax: $3,883,784
Table games tax: $737,293
Total online casino tax: $4,621,067

December 2019
Slot tax: $3,008,116
Table games tax: $412,956
Total online casino tax: $3,421,072

November 2019
Slot tax: $2,750,645
Table games tax: $415,445
Total online casino tax: $3,166,090

October 2019
Slot tax: $2,147,692
Table games tax: $154,517
Total online casino tax: $2,302,209

September 2019
Slot tax: $1,746,962
Table games tax:$144,039
Total online casino tax: $1,891,001

August 2019
Slot tax: $1,643,397
Table games tax: $191,601
Total online casino tax: $1,835,058

July 2019
Slot tax: $279,564
Table games tax: $47,135
Total online casino tax: $326,700

Online poker joins online slots and table games

Mount Airy launched the first online poker room with PokerStars PA going live Nov. 5, 2019. So far, it is the only operator live in the state, though more operators are expected to join the market in the coming months.

Here is a look at revenue and tax revenue by month for online poker in PA, plus total tax revenue to date.

January 2021
Online poker revenue: $2,725,600
Online poker tax: $433,306

December 2020
Online poker revenue: $2,729,729
Online poker tax: $428,103

November 2020
Online poker revenue: $2,409,235
Online poker tax: $374,849

October 2020
Online poker revenue: $2,422,505
Online poker tax: $387,601

September 2020
Online poker revenue: $2,376,045
Online poker tax: $380,167

August 2020
Online poker revenue: $2,729,199
Online poker tax: $436,672

July 2020
Online poker revenue: $2,986,498
Online poker tax: $477,840

June 2020
Online poker revenue: $3,240,917
Online poker tax: $509,590

May 2020
Online poker revenue: $4,596,418
Online poker tax: $729,851

April 2020
Online poker revenue: $5,253,304
Online poker tax: $837,550

March 2020
Online poker revenue: $3,133,019
Online poker tax: $500,384

February 2020
Online poker revenue: $1,830,356
Online poker tax: $290,752

January 2020
Online poker revenue: $2,157,266
Online poker tax: $345,162

December 2019
Online poker revenue: $2,473,137
Online poker tax: $395,702

November 2019
Online poker revenue: $1,965,494
Online poker tax: $314,479

Mini-casino auction profits

VGT tax revenue

January 2021: $1,165,207
December 2020: $417,518
November 2020: $1,174,884
October 2020: $1,256,413
September 2020: $1,239,548
August 2020: $895,509
July 2020: $1,075,974
June 2020: $560,261
May 2020: $0
April 2020: $0
March 2020: $485,682
February 2020: $697,806
January 2020: $579,914
December 2019: $457,159
November 2019: $342,830
October 2019: $242,522
August/September 2019: $168,849

Lottery expansion nears $45 million in revenue in first year-plus

PA Lottery was part of the gambling expansion bill as well. The laws allowed for the introduction of three new elements of lottery offerings. Those are:

• Virtual sports

Keno rolled out May 1, 2018, followed by online lottery games on May 22, 2018. Xpress Sports, the virtual sports element, went live in August.

Based on numbers provided by the PA Lottery in its annual fiscal reports, profits from each of the following game types from launch through July 2019 were as follows:

Online lottery: $32.96 million
Keno and virtuals: $11.62 million

Draw tickets such as Mega Millions and Powerball are now available for purchase online through the iLottery too, as of January 2020. In May, 2020 the PA lottery reported that online sales had crossed $1 billion since launching less than two years prior. Exact revenue figures for the fiscal year are forthcoming.

Daily fantasy sports revenue

While daily fantasy sports (DFS) was not explicitly illegal in Pennsylvania, the 2017 gambling expansion regulated the industry. With that regulation comes taxation and licensing fees.

Ten fantasy sports operators needed to each pay a $50,000 licensing fee. Their revenue is taxed at a rate of 15 percent. Here is a look at each month’s tax revenue from DFS as well as the total amount of tax revenue to date:

• January 2021: $436,273
• December 2020: $451,762
• November 2020: $452,259
• October 2020: $480,451
• September 2020: $485,124
• August 2020: $320,174
• July 2020: $138,861
• June 2020: $97,087
• May 2020: $47,826
• April 2020: $25,088
• March 2020: $108,591
• February 2020: $255,366
• January 2020: $309,716
• December 2019: $515,343
• November 2019: $447,174
• October 2019: $489,654
• September 2019: $439,357
• August 2019: $208,295
• July 2019: $186,730
• June 2019: $238,847
• May 2019: $270,458
• April 2019: $277,883
• March 2019: $245,226.70
• February 2019: $244,376.75
• January 2019: $317,475
• December 2018: $429,075.51
• November 2018: $486,174.15
• October 2018: $435,429.45
• September 2018: $320,057.10
• August 2018: $141,543.03
• July 2018: $131,727.75
• June 2018: $152,679.34
• May 2018: $199,755.94

Lady Luck Nemacolin lone sports betting holdout

In August 2018 Pennsylvania finally got its first official sports betting applicant. Penn Nationalfiled its petition, breaking the weeks of inactivity that had many worrying that nobody would bite.

A total of 12 of the 13 eligible casinos submitted applications for the $10 million license. The lone holdout is Lady Luck Nemacolin. Late in 2020, Penn National acquired a second $10 million sports betting license (for the forthcoming Hollywood Casino Morgantown property) to partner with the BetMGM online sportsbook.

There are currently 13 retail sportsbooks spread across the state (with Oaks now permanently closed), and more than ten online sports betting apps.

Interactive gaming petitions generate $94 million

The 90-day window for PA casinos to apply for $10 million comprehensive interactive gaming petitions opened in mid-May, 2019. For the first 85 days, there was no news — a panic set in that there might be few or no applicants.

In the end, though, a majority of the 13 casinos ponied up the fee, which allows them to offer online peer-to-peer games like poker, online slots, and online table games. The seven casinos who filed for petitions and received approval are:

Once the all-in-one license application period ended, PA casinos could still purchase a la ca carte licenses for each of the three categories. Presque Isle Downs owner Churchill Downs spent $8 million applying for online poker and online slots. In an unusual move, Mohegan Sun Pocono paid a $2 million premium to apply for all three licenses for $12 million.

Rivers Pittsburgh surprisingly rescinded its interactive application. Rush Street Gaming owns both Rivers casinos (and the SugarHouse brand), so the Rivers Philadelphia license supports online casino products for both venues. That opens up three more licenses, bringing the total to 10.

Stadium Casino rescinded its peer-to-peer application but retained its online slots and table games licenses so that it would pay $8 million in licensing fees.

Mohegan Sun Pocono informed PGCB that it would not seek to offer online poker either, so it too had to pay $8 million.

The Meadows and Lady Luck Nemacolin opted not to apply for any interactive gaming licenses. The Meadows is owned by Penn National, who already applied for a comprehensive license. Lady Luck Nemacolin is managed by Churchill Downs now, and defers to Presque Isle on the online gaming front.

Where does that leave these leftover licenses? The next step was to open up the applications to entities outside of Pennsylvania. The two applicants in that category were MGM Resorts and Golden Nugget Atlantic City.

MGM eventually applied as a full operator, partnering with Hollywood for online casino and Hollywood Morgantown for sports betting. They are also expected to launch online poker under BetMGM/partypoker brand. Golden Nugget only applied for online casino and sports betting.

Law generates $51 million for PA in a matter of hours

In 2017, the state received two payments in the days immediately following the passage of the law. One was a $1 million payment from Valley Forge Casino to remove the amenity fee requirement on the Category 3 property. The other was a $50 million payment by Stadium Casino LLC for its Category 2 casino license. The group is in the process of building a casino in the Stadium Park area of Philadelphia.

In June of 2018, the Stadium Casino project paid the state an additional $24,750,000 for the right to offer table games at the property when it opens, bringing the total licensing brought in from the group to $74.75 million.

Other sources of revenue from the law include:

On Oct. 31, Valley Forge also took advantage of another change in the law. For $2.5 million, the resort casinos could up the number of slot machines on property. After a year of gaming revenue growth, the casino decided it was time to expand.

After nearly a year and a half of the law being in effect, Lady Luck Nemacolin elected to pay the $1 million to eliminate its $10 Category 3 amenity fee, leaving the state with no more casinos charging for entry.

Pennsylvania’s regulated gambling industry dates back to 1959 when the state legalized horse racing, but it was the legalization of slot machines in 2004 and table games in 2010 that turned Pennsylvania into a true gaming state.

Despite its very short history as a gaming state, Pennsylvania has emerged as the second largest casino market in the country, trailing only the casino juggernaut that is Nevada in gross gaming revenue.

However, stagnant revenues and increased competition from neighboring states has Pennsylvania once again considering further expansion possibilities.

Horse racing in Pennsylvania

In 1959, the Pennsylvania legislature passed the Race Horse Industry Reform Act. The bill legalized horse racing in the state, but it would take several years before dedicated horse racing tracks started popping up in the state. The oldest track still in operation is Meadows Racetrack and Casino, which first opened in 1963.

Horse racing in Pennsylvania had very deep roots (Stephen Foster’s ode to betting on the ponies, Camptown Races, was set in Pennsylvania) as horse racing thrived in the state throughout the 1700’s and 1800’s, even when prohibited by the legislature. But horse racing was eventually forced to throw up its hands in disgust at the state’s restrictions (limited to racing at fairs and other odd venues) in the 1900’s, and most Pennsylvania stables simply raced their thoroughbreds out of state.

By legalizing thoroughbred racing, the state kept that purse money in-state and was able to capitalize on the tax revenue the racing industry generated.

Slot machines in Pennsylvania

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In 2002, gubernatorial candidate Ed Rendell made gaming expansion a centerpiece of his campaign. Rendell’s plan was to legalize slot machines and allow the state’s racetracks to apply for slot licenses, as well as creating a new license category for standalone slot casinos. Under Rendell’s plan, the revenue generated from the slot machines would go almost entirely towards easing property tax burdens and school funding, both of which were mounting concerns in the state.

The legislature passed a version of Rendell’s plan in 2004, which Rendell happily signed. Under the bill, up to seven racetracks could apply for slot licenses, and the state would create five stand-alone slot casino licenses, and three resort casino licenses.

Rendell noted at the time that slot machines wouldn’t be a panacea, but the revenue generated from slot machines (estimated at the time to be $3 billion a year) would tally about $1 billion a year for the state, on top of the one-time licensing fees the state would collect from potential casinos.

Table games in Pennsylvania

The revenue from the slot machines was certainly helpful, and did offer a modicum of tax relief, but Rendell’s warning that slot machines wouldn’t be a panacea was realized within a few years, likely hastened by the economic collapse of 2008, and by 2010 the Pennsylvania legislature was looking at further gaming expansion to help close their growing budget deficit and rising property taxes.

The simplest and quickest fix would be the legalization of table games, and in 2010 the Pennsylvania legislature passed a bill that would allow the state’s existing casinos to add table games. Governor Rendell, the driving force behind slot expansion earlier in the decade, wasn’t a proponent of table games, but he did the sign the bill, making sure to tell reporters at the time that he had mixed feelings about it.

Rendell’s misgivings proved unfounded, as table games were seamlessly added to Pennsylvania’s existing casinos, and Pennsylvania has become the second largest gaming state thanks to the $3 billion in gross gaming revenue the state’s 12 casinos generate each year.

Online gambling in Pennsylvania

In 2013, led by State Senator Tina Davis, Pennsylvania started looking into online gambling, but it wasn’t until 2015 that iGaming talk really heated up.

Legalizing Online Gambling

Representative John Payne, the Chairman of the House Gaming Oversight Committee, led the charge for iGaming legalization in 2015. Payne hosted a series of hearings on the subject and crafted HB 649, a bill that would legalize online gambling in the Keystone State.

The Pennsylvania Senate also explored iGaming expansion and crafted a bill of its own, SB 900. The Senate bill included other potential gaming reforms but wasn’t as industry-friendly as Payne’s bill.

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Right now, there is still some hope that online gaming expansion will work its way into the 2015 state budget.

Future expansion

In addition to online gambling, the legislature also explored several other gaming reforms they felt could support the casino industry while also increasing state revenue.

Among the gaming reform measures the legislature has discussed are:

1. Legalizing and regulating skill-based games.
2. Adding slot machines to off-track betting terminals.
3. Removing some restrictions on category 3 (resort casinos) license holders.

When Did Pennsylvania Legalize Gambling Laws

What will the future hold for gambling in Pennsylvania. It appears that more options — including online gambling — are in the cards. How quickly we see new gambling opportunities open up remains to be seen.

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Photo by Steve Elgersma used under license CC BY-NC-ND 2.0