How Will PA’s Newly Legal Online Gambling Industry Compare to the NJ Model?

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Over the past several years, Pennsylvania’s General Assembly has seen a number of online gambling bills come and go. As the industry grew in New Jersey, it was thought that the Keystone State, which boasts the second biggest gambling market in the US, would soon pass iGaming legislation of its own. But the details proved difficult to iron out, with competing interests sinking legislation year after year. That all changed on Thursday morning, however, when PA lawmakers reached a consensus and finally legalized Internet gambling along with daily fantasy sports (DFS).

The enticing revenues posted by NJ online casinos was without a doubt a factor in helping that legislation along. New Jersey has also served as an example and provided a roadmap for Pennsylvania, which will structure its iGaming industry much like the Garden State has structured its own. Here’s where the two states converge and where they will differ.

Who’s allowed to participate?

In both PA and NJ, only brick-and-mortar casinos already licensed can apply for an online gambling permit. In the Commonwealth, that means 12 casinos will have the chance to acquire a license. Once approved, PA casinos will be allowed to partner with outside gambling software providers, similar to the relationship between GVC and NJ’s Borgata Casino, for example.

Which games are available?

Both states allow operators to offer online slots, table games and peer to peer poker sites. DFS operators are also able to set up shop in the two states, provided they partner with a licensed casino.

PA a potential boon to US online poker

Earlier this month, Gov. Chris Christie announced a deal between NJ, Nevada and Delaware to share online poker player pools, thus creating the potential for a much more vibrant and sustainable online poker community. Pennsylvania, which has a population bigger than those three states combined, will surely buy into the same compact, potentially doubling existing player pools.

Cross-border partnerships

Expect many of the companies which have current relationships in NJ to forge partnerships with the same companies in Pennsylvania. 888 provides the platform for several Caesars Entertainment Corp. entities in the Garden State, so it’s likely we’ll see Harrah’s Philadelphia continue that partnership in PA.

Others, like SugarHouse Casino, which operates in New Jersey using in-house software in a partnership with Golden Nugget, will be providing its own platform in PA and use its own casino license.

Taxation and licensing fees

One area where PA and NJ iGaming differ wildly is in regards to tax rates and licensing fees. In New Jersey, operators can snag an interactive gaming license for $400,000, while in Pennsylvania the cost will be an eye watering $10 million. The $10 million figure will allow casinos to offer three categories of games: online slots, table games and poker. If they prefer, they can choose a piecemeal approach, and buy individual licenses for $4 million.

Pennsylvania’s brick-and-mortar casinos are taxed at an extremely high rate in comparison with NJ. Garden State properties pay 9.25 percent tax on all games across the board, while Commonwealth casinos pay 55 percent for slots and 16 percent for table games.

Excessive PA online slots tax a blow

The state’s high land-based tax rate is what purportedly led PA lawmakers to make a seemingly huge mistake, which could cripple its online gambling industry before it even gets off the ground. NJ taxes its iGaming operators at a rate of 17.5 percent for all games, while the PA bill calls for the same 55 percent rate for online slots. Table games and poker remain at 16 percent.

Slots being the biggest money makers in online gambling, the excessive tax will stymie the industry and possibly even cause some operators to stay out entirely, leaving less revenue for the state. In its shortsighted attempt to grab such a huge chunk of slot revenues, the state may well be shooting itself in the foot.

DFS, which is taxed at 10.5 percent in New Jersey gets off relatively easy in Pennsylvania, however, where operators will pay a modest 15 percent.

NJ vs PA taxes and fees

Here’s a look at the difference in taxes and fees for the two states:

 New JerseyPennsylvania
iGaming License Fee$400,000$10,000,000
iGaming Annual Fee$250,000-
iGaming Tax Rate17.5%55% Slots/16% Table Games /16% Poker
B&M Casino Tax Rate9.25%55% Slots/16% Table Games
DFS Tax Rate10.5%15%
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Bill Grinstead

Bill has over a decade of experience working in diverse aspects of the online gambling space. He is currently focused on legal, US online gaming, which he has reported on since the industry first became regulated in the country.

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