Nine Pennsylvania Gambling Establishments Pursue Online Poker Permits
Pennsylvania casinos have taken the plunge in the digital gaming scene, following the legalization of online poker last fall. The industry is finally starting to gain momentum, with casinos scrambling to apply for interactive gaming licenses.
The initial deadline for casino applications was just a week ago, and it initially seemed as though only a handful, if any, would file petitions. But surprise, surprise—nine out of the state's twelve casinos not only applied for poker licenses, but went all in, applying for all three gaming licenses available: internet poker, internet table games, and internet slots.
In Pennsylvania, the land-based casinos have the edge when it comes to obtaining these licenses. The fees for each license? A cool $4 million a pop. But for those brave souls who dared to apply for all three by July 16th, the cost was set at a whopping $10 million combined.
Out of the nine casinos that went for the triple crown, Parx Casino, Mount Airy Casino Resort, Live! Hotel and Casino (set to open later in 2018), Sands Casino Resort Bethlehem, Hollywood Casino at Penn National Race Course, Valley Forge Casino Resort, Harrah's Philadelphia Casino & Racetrack, Rivers Casino, and Sugarhouse Casino were the lucky ones to make the cut before the deadline.
With the promise of potential interactive gaming licenses, it's safe to assume that all, or at least most, of these casinos will be receiving them. One name that caught our attention on this list is Sands Bethlehem, owned by the Las Vegas Sands Corp. Their CEO and founder, Sheldon Adelson, has been known for his efforts to stamp out online poker in the U.S. Given Adelson's stance, it's quite an interesting move for Sands to venture into the online poker scene. But here's the kicker—Sands was sold to Wind Creek Hospitality in March for $1.3 billion. The deal hasn't closed yet, but Sands has already applied for the licenses for Wind Creek, ensuring they'll be ready to roll when the deal goes through.
As for the other three casinos, they've still got a chance to submit their licensing petitions, but they'll have to fork over the full $12 million if they want all three licenses. If there are any licenses left after August 14th, outside operators will be able to throw their hats in the ring.
What makes this situation particularly intriguing is that so many casinos are after all three licenses. Not only are the application fees hefty, but the taxes on internet slot revenue are downright crazy. Operators will have to shoulder a whopping 54% of the gross gaming revenue from slots, along with a 2% local tax. That's a big chunk of change, especially when you consider that online casinos have no restaurant, shop, or hotel revenues to pad their profits.
Despite the steep tax on slots, the taxes on online poker and table games are a tad more reasonable, coming in at 14% plus the 2% local tax.
But there's a strategy behind this madness. By operating all three verticals (casino, poker, sports betting), casinos create a one-stop gambling platform, reducing customer acquisition costs and maximizing the lifetime value of each customer. Casinos also benefit from regulatory compliance, as licensed operators avoid the risks associated with offshore platforms. Additionally, high-volume operators can more effectively absorb slot taxes through revenue diversification, such as by offering table games, which are taxed at 16%, and poker/sports betting, which come with lower tax rates.
The recent expansion of the Multi-State Internet Gaming Agreement (MSIGA) further incentivizes licenses by unlocking interstate revenue streams, making the high slot tax a calculated trade-off for long-term market control. This agreement allows shared liquidity for online poker across states, significantly increasing tournament prize pools and player retention—a sweet deal if you ask me.
- Despite Sheldon Adelson's known opposition to online poker, his company, Las Vegas Sands Corp, has applied for interactive gaming licenses in Pennsylvania, which includes online poker.
- Nine out of twelve Pennsylvania casinos applied for all three gaming licenses available: internet poker, internet table games, and internet slots, each with a fee of $4 million.
- If other casinos wish to apply for all three licenses by the next deadline, they will need to pay a combined $12 million in fees.
- The tax on internet slot revenue in Pennsylvania is 54%, a significant chunk compared to the 14% plus 2% local tax on online poker and table games.
- The strategic move for casinos to operate all three verticals (casino, poker, sports betting) creates a one-stop gambling platform, potentially reducing customer acquisition costs and maximizing the lifetime value of each customer.
