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    Pennsylvania Online Gaming Bill Looks Great, Until We Get to Fees and Taxes

    Posted by Griffin Finan May 8, 2013

    Proposed iGaming legislation in the country’s second largest gaming state would allow most casino games, but exorbitant licensing costs will be an issue.

    On April 22nd, House Bill 1235 was introduced in the Pennsylvania House of Representatives by Representative Tina Davis, which would legalize online gambling in the state. The bill was referred to the House Committee on Gaming Oversight.

    The proposed bill would amend the Pennsylvania Gaming Act to authorize a wide range of online games, including casino table games, poker, slot machines, or any other game approved by the Pennsylvania Gaming Control Board. The bill would allow for Pennsylvania to participate in interstate gaming compacts with other states and foreign jurisdictions, as long as the agreement is not inconsistent with federal law.

    The text of the bill as it currently stands may make the market unattractive to companies in the online gaming sector due to remarkably high application fees and tax rates. Under the bill, the license application fee would be a steep $5 million and the tax rate is an astronomical 28%. Neighboring states, New Jersey and Delaware, have both legalized online gaming within their borders without prohibitive fees and tax rates. For comparison purposes, New Jersey’s licensing scheme requires a $400,000 initial application fee and a tax rate of 15%.

    An additional issue in the Pennsylvania bill is that internet gaming licenses will be issued only to entities that hold an existing slot machine license in the state. Companies that are interested in participating in the Pennsylvania online gaming market, but do not currently have a slot machine license in the state, would face significant hurdles to enter the market.

    The fees proposed are actually an improvement from what was originally proposed by Rep. Davis. In a memo written by Rep. Davis in January announcing her intentions to introduce legislation amending Pennsylvania’s Gaming Act to allow for online gaming, she stated that the license application fee would be $16.7 million.

    The bill has already been amended from what Rep. Davis initially proposed and could be further amended before further action is taken on it, but as the text of the bill stands now this may not be a particularly attractive option for online gaming companies and could severely limit the potential that exists in Pennsylvania.

    QuadJacks – May 8, 2013

    About Griffin Finan

    Griffin Finan is an Associate at Ifrah, PLLC, a Washington, D.C. based boutique law firm specializing in iGaming, Internet advertising and marketing, white collar criminal defense and government contracts. Griffin’s practice focuses on iGaming, regulated sports betting, fantasy sports, and white-collar criminal defense. Griffin has counseled clients on a range of issues including compliance with state and federal gaming laws, structuring fantasy sports games, litigation related to gaming issues, and representing individuals in white-collar criminal defenses cases related to gambling. Ifrah Law maintains its own blog, Crime In The Suites. Follow Griffin Finan on Twitter: @G_Finan. Follow Ifrah Law on Twitter: @IfrahLaw.

    View all post by Griffin Finan

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