United States: KMT’s David Klein Considers Pennsylvania’s New Online Gambling Bill
Odds improve for online gaming
Regulate or delegate — that’s the question facing Pennsylvania legislators as bills to legalize online gambling gain traction.
A new bill in the state Senate — SB 900, allows the state, among other things, to license operators to conduct Internet gaming. It’s a practice many say goes on illegally here with no benefit to the state or protection for its residents.
A similar bill in the House — HB 1235 — is already in front of its Gaming Oversight Committee, which has been taking testimony and will determine if the bill will be heard and voted on by the House.
Under HB 1235, online gaming goes beyond Internet poker to include all gambling already authorized by the state — table games, slot machines and any other game approved by the Pennsylvania Gaming Control Board, according to David Klein, managing partner of Klein Moynihan Turco, a law firm that represents gaming, fantasy sports and businesses that run online games of chance and sweepstakes.
The motivation is two-fold; revenue generation and regulation, state Rep. Rosemary Brown, R-189, said.
As it stands, Pennsylvanians already engage in online gaming, whether it is from another state or an offshore entity. It’s illegal but nearly impossible to prevent.
“It’s going to happen anyway, whether Pennsylvania taxes and regulates it or not,” Klein said. “They should regulate and control it. The citizens do it anyway”
Several local representatives echoed that sentiment.
“I know it’s going on right now, and this way the state would have some control of it,” State Rep. Jack Rader, D-176, conceded. He’s against gambling overall, but said he’d have to see the final bill before taking a position.
State Rep. Dave Parker, R-115, is against an expansion of the gaming laws. He sits on the House Gaming Oversight Committee. Yet what he’s learned might move him off that stance.
“We have heard testimony that online gaming is already happening, but illegally,” he said. The committee learned, via New Jersey gaming practices, how participation can be limited to only those physically in the state.
There are still plenty of issues to work out. Chief among them are the licensing fee and state tax rate on gaming proceeds.
Under the House bill, it would cost an operator $5 million for an online gaming “authorization fee” and $500,000 to renew it every three years. Net revenues would be taxed at 28 percent.
The Senate bill puts the “permit” fee at $10 million, the five-year renewal fee at $1 million and a whopping 54 percent tax on revenues.
That rate is comparable to the state’s tax of about 55 percent on slots revenues, but slots require brick-and-motor destinations with their accompanying overhead. That means online operators stand to profit more from their gaming revenues.
Klein believes the upfront licensing fees alone could amount to more than $100 million.
Brown said online gaming legislation has other benefits.
“You can look at a piece of this as a consumer protection measure,” she said. “I think there are people choosing to gamble with these illegal offshore (entities), and this way, it would be pretty strictly regulated by the Commonwealth.”
Some aspects of online gaming give Brown pause. One concern is minors having access to online gambling accounts. But with technology getting stronger, she said, the activity of minors can be better controlled in a regulated environment.
Another worry Brown has is where the revenues from online gaming will go. Slots legislation, the first gaming bill passed by the state, was promoted as a property tax reduction vehicle. While a portion of the slots revenues goes towards reducing property taxes, taxpayers have been generally disappointed with the relief it has provided. Table games revenues go into the state’s general fund.
“How the money is used is just as important as whether Internet gaming is approved,” she said.
