Current Legality of Online Sportsbooks in Pennsylvania

Pennsylvania

Legislative and Regulatory Developments

Pennsylvania legalized sports betting in advance of the Supreme Court’s decision in Murphy vs. National Collegiate Athletic Association, which struck down the federal law banning sports betting as unconstitutional. The Pennsylvania legislation undertook a large expansion of legalized gambling in the state, also allowing online casinos. Online sports operators must partner with an existing land-based casino in Pennsylvania in order to offer sports betting.

Implementation of the legislation has fallen to the Pennsylvania Gaming Control Board. The PGCB issued temporary regulations in July for sports wagering. These regulations do not become effective permanently until 2019, but in the interim, have been very controversial. Operators have complained about the number of partnerships available. Penn National wants partnerships banned entirely, while other operators want the ability to enter into more than one partnership. One thing that everyone can agree on is that the licensing fees and tax rates are astronomically high.

Given the large population of Pennsylvania, the estimates for the size of the online wagering market is extremely high. Still whether this market actually materializes depends on whether casino operators decide to take the plunge into a heavily taxed market. The high fees and taxes may curtail sportsbook operators’ ability to compete with both the black market and offshore betting entities. There is speculation that the legislature may be forced to revise the tax rates and licensing fees to attract operators.

Another factor that impacts the Pennsylvania market is the stiff competition from neighboring states. New Jersey, Delaware and West Virginia have all moved forward with physical sportsbooks and Pennsylvania players have the ability to visit those locations to wager. If casinos in those states have higher operating margins, they may be better able to offer promotions to lure Pennsylvania customers.

What’s the Outlook for the Pennsylvania Online Sportsbook?

OperatorOnline Sports BettingPartnerships/AcquisitionsLocation
Hollywood Casino at Penn NationalQ1 2019William HillGrantville, PA
Parx Casino SportsbookQ1 2019GANBensalem, PA
South Philadelphia Turf ClubN/AGANPhiladelphia, PA
Rivers CasinoQ1 2019N/APittsburgh, PA
SugarHouse CasinoQ1 2019RSIPhiladelphia, PA
Harrah's Philadelphia Q1 2019888, SGPhiladelphia, PA
Valley Forge CasinoN/AFanDuel, IGTKing of Prussia, PA
Churchill DownsN/ASB TechFarmington, PA

Pennsylvanians are primed for the expansion of betting opportunities in the state. The state actually made sports betting legal prior to the US Supreme Court decision that lifted the federal ban. July’s regulations legislated by the Pennsylvania Gaming Control Board will begin to take effect in early 2019.

Portions of this legislation are already creating disagreements. Pennsylvania does indeed appreciate the wealth of revenue that is coming from legal sports betting. The licensing fees and current tax structure are bold examples of this fact. The state has made a wider door for partnerships than many sportsbook providers are comfortable with. At this point, every potential sportsbook must link with a brick and mortar casino in the state. They must also pony-up the licensing fee of $10 million. Some feel this healthy requirement just to ante-up, plus a 36% tax rate, will add buoyancy to keeping the black market and offshore bookmakers afloat.

Penn National was the first to apply for a license. They are also a voice of discontent concerning the number of partnerships proposed and how they are established. This idea of linking to a physical casino is also problematic for Pennsylvania lawmakers. If Pennsylvania places too much a financial burden on casinos, these costs will drive up operating costs.

States like New Jersey, who is already open for sports betting business, plus West Virginia and Delaware, are all close enough for a short road trip. Once inside these borders, bettors can take advantage of prime bonuses and promotions offered by these more financially affluent sportsbook venues.

Right now, both FanDuel and DraftKings are hoping to circumnavigate the legal landscape in Pennsylvania to open versions of their sportsbook. Penn National has already forked over the licensing fee, and Parx Online Sportsbook operating entity, Greenwood Gaming added their name to the list.

Churchill Downs Incorporated is on board in New Jersey and added their name to the list in Pennsylvania as well. Penn National’s fees are already in the bank, and SugarHouse, a casino that already calls Pennsylvania home, is operating in New Jersey. The idea is to generate the capital necessary to add their name to the list of available sportsbooks in their home state.

This is an overview of how things are shaping up for Pennsylvania sports fans who are looking forward to being able to bet legally in their state. While you as a fan are rightfully excited, the accountants for the state’s budget committees are equally ecstatic.

Conservative estimates assess the value of license fees alone to generate over $100 million in revenue for The Commonwealth. As the financial windfall of sports betting begins to sink in, look for the opportunities for sportsbooks to explode.

Potential Operators and Partnerships

Much of the discussion of the Pennsylvania online sports betting market is theoretical at this point since operators have been taking their time to apply for licenses. Companies are still lining up partnerships. The high fees for license applications along with the steep tax rate may serve to restrict participation in the Pennsylvania online sports gambling market to the largest casinos with the deepest pockets. In fact, it took three months after the application process was opened for Pennsylvania sportsbooks for a casino to apply for a license. This was in contrast to neighboring New Jersey which saw immediate entry and competition.

In contrast to New Jersey, which permits three partners, casinos in Pennsylvania are allowed to partner with one entity to establish a sportsbook. The fee to submit a licensing application is very steep at $10 million per application. This equates to potentially several years of revenue up front if all of the Pennsylvania casinos apply for licenses. In addition, the tax rate for sportsbooks is 36 percent which is three to four times the tax rate for sportsbooks in neighboring New Jersey.

Still, Pennsylvania offers a large amount of opportunity for those casino operators who have the required deep pockets to enter the market. Pennsylvania has the highest population of any state that has thus far legalized sports gambling and that fact alone creates large profit potential, notwithstanding the high tax rates. There are still questions as to how many operators will submit applications for licenses. Another obstacle has been virtual sports betting that is offered in the state, which potential operators disfavor as competition.

Accordingly, Pennsylvania casinos have taken a wait-and-see approach towards getting into the sports wagering marketplace. It is expected that casino operators will eventually offered mobile betting. After three months, on August 20, Penn National applied for a sportsbook license to offer both physical and online sports wagering, becoming the first to do so in the state. Penn National intends to partner with European giant William Hill. The partnership intends to begin operations in the late fall pending approval from the PGCB.

In addition, Parx Casino intends to follow through with previously announced plans to seek a license. Parx will partner with technology company GAN to offer both in-person betting and online wagering. Customers will be able to use a shared wallet between Parx’s sportsbooks and other casino operations.

Other casinos are expected to follow suit, but the high fees and taxes are placing a damper on operations. SugarHouse, a Pennsylvania-based casino, recently opened operations in New Jersey. If this venture is successful, it may provide the impetus for the company to initiate sports wagering in its home state.

Eligibility

Anyone age 21 or over may wager on sports in Pennsylvania. In order to use an online sportsbook, one has to be physically located in Pennsylvania at the time of placing the wager. In other words, one cannot wager on a Pennsylvania mobile betting app when they are outside of state lines. As with other gambling apps, the sites are equipped with locating software that can discern from where a player’s entry originates.

Impact on Pennsylvania

In the event that sports wagering eventually succeeds in Pennsylvania, it will have a large impact on the state’s finances because of the high taxes and licensing fees. If all casinos ultimately apply for licenses, it will mean a $100 million plus boost for Pennsylvania’s bottom line at the outset. In addition, it will enable Pennsylvania’s gaming industry to keep pace with its neighboring states, nearly all of whom have acted to expand their gambling offerings. If casinos do not fully act to offer online betting, Pennsylvanians’ gambling dollars will migrate to New Jersey, Delaware and West Virginia.

Another benefit of sports betting in Pennsylvania is that it may bring activity into the open that is currently occuring in the shadows. Legalized online sportsbooks in the state will make the activity subject to taxation and will enable the state to receive its share of the betting pie that otherwise occurs outside of its reach. With all of the options that are currently available to sports bettors, they will be wagering, and it is better to legalize what can be taxed.

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Sam Shefrin is the founder of Lineups.com, Inc. Before Lineups, he started Daily Fantasy Cafe, Inc. in 2014. Armed with a passion for sports and every Atlanta team, his journey continues with the goal of making Lineups a premier sports analytics destination. He has been quoted on Forbes.com for industry insight and his websites featured on NBATV, Yahoo! Sports, Fantasy Pros, Bleacher Report and SB Nation.