Pennsylvania is one of the more progressive states for gambling. They have a legalized online lottery, they had legalized sports betting within the first year of the PASPA ruling, and they also are launching online poker and casino games in the near future. One major reason Pennsylvania is so lenient with gambling expansions, the taxes. Pennsylvania has some of the highest, if not the highest, taxes in the country when it comes to gambling. There are multiple reasons as to why some major operators are still absent in Pennsylvania, but the taxes are a big issue for most.
DraftKings Still Looking For PA Entry
DraftKings partnered up with Caesars Entertainment in February of 2019. The deal will help DraftKings make its way into a number of states will legalized sports betting and online gaming. Pennsylvania, however, is not one of those states. Why not? That is because Pennsylvania has a “single skin” law associated with sports betting. This means that a casino can only operate with one sportsbook app under their license. Caesars Entertainment has Harrah’s Philadelphia as their property and they have already confirmed that they will be using the Caesars as their sportsbook, not the DraftKings brand.
DraftKings has recently applied for two different Pennsylvania gambling licenses. One as a sports betting operator and the other as an interactive gaming operator. These aren’t the licenses that the casinos paid $10 million for, but are the ones that partners of casinos apply for (like Kambi or SBTech). With the rumors of DraftKings acquiring SBTech, there could be a chance DraftKings could enter into Pennsylvania through Presque Isle Downs. There is no timeline at the moment, but expect for DraftKings to do whatever it takes to be operating in Pennsylvania for the start of the 2019 NFL season.
PointsBet is a popular Australian-based sportsbook that offers both traditional betting as well as their “points betting” style. They are already operational in New Jersey and are expanding across the country as more and more states legalize sports betting. Pennsylvania is one of the states that won’t be seeing PointsBet anytime soon, possibly ever.
PointsBet US CEO Johnny Aitken said that the taxes in Pennsylvania are not worth entering into the state. The $10 million licensing fee isn’t the issue, but the nearly 40 percent in total taxes makes it hard for them to enter.
Taxes and Fees for Pennsylvania Sportsbooks
Pennsylvania is one of the biggest markets for gambling in the country. Gaming operators would love nothing more than to enter a market with the potential that Pennsylvania has. If they want in, they will have to pay the price, and then some.
For starters, any operator looking for a sports betting license in the Keystone State has to pay $10 million upfront for a licensing application. This is before the application is even considered and if your application is declined, you get no refund and are out $10 million. Once an operator gets licensing, the money they will be paying to the state of Pennsylvania doesn’t stop. Pennsylvania sports betting taxes are some of the highest in the country at 36 percent (in Rhode Island 51% of revenue goes to the state as part of a revenue-sharing model). Add in local and federal taxes and you get the nearly 40 percent that Aitken is concerned about.
In Nevada, sportsbooks have traditionally had a hold percentage of around five percent. This means that for every $100 in sports betting handle, sportsbooks make about $5. If that were to hold true in Pennsylvania, that means nearly $2 of every $100 in handle would be going to the state, leaving a $3 profit per $100 for sportsbooks. Add in overhead costs as well as marketing and advertising, and that profit drops even lower. Turning a profit in Pennsylvania isn’t an easy gig for sportsbooks, only the strongest will survive.
A Pennsylvania FanDuel Sportsbook is already existent at the Valley Forge Casino. They run the retail sportsbook and are going to help with their online sports betting app. The first online sportsbook launched at the end of May 2019 (PlaySugarHouse), yet FanDuel is still waiting to launch, but why? Well, nobody seems to know for sure. They were expected to launch sometime in June, but it is now mid-July and we are still waiting. The Pennsylvania Gaming Control Board held a meeting on July 10th and only the Parx Casino and Hollywood Casino appear to be ready to launch for the July 15th date. The thought was that maybe FanDuel and Valley Forge were waiting to launch the sportsbook at the same time as their online casino, but it appears their casino isn’t ready just yet either. However, we do expect FanDuel to be in Pennsylvania by the start of the 2019 NFL season, possibly even as early as the August or the end of July.