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Alerts and Updates

Pennsylvania House Gaming Oversight Committee Introduces Bill That Would Allow Existing Casinos to Offer Internet Gaming

February 27, 2015

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Under the bill, only existing casino licenses, or their affiliates, will be eligible to offer poker and other casino style games over the Internet.

On February 25, 2015, John Payne, Chairman of the Pennsylvania House Gaming Oversight Committee, introduced a bill that would allow existing Pennsylvania casinos to offer Internet gaming to patrons in Pennsylvania. The Pennsylvania Gaming Control Board (PGCB), which currently regulates casino gaming in the Commonwealth, would be responsible for licensing and regulating Internet gaming, as well. Under the bill, only existing casino licenses, or their affiliates, will be eligible to offer poker and other casino style games over the Internet. The proposed legislation also calls for the licensing of "significant vendors," which would include operators of interactive gaming systems on behalf of the existing licensees. Importantly, the proposed legislation does not include a "bad actor" provision that would bar individuals or entities previously associated with illegal Internet gaming activities from being licensed by the PGCB. However, applicants would still be required to satisfy Pennsylvania's suitability requirements, and it remains to be seen what view the PGCB will take of applicants who may have previously engaged in unlawful Internet gaming activities.

Subject to the limits under federal law, the bill limits participation in Internet gaming to those physically present in Pennsylvania, or from states with which Pennsylvania negotiates an Internet gaming agreement. The bill contemplates a rapid implementation cycle by requiring the PGCB to decide a licensing application within 120 days of a proper application being submitted. The PGCB may also grant temporary authorization to any vendor upon the filing of a complete application.

The tax rate on interactive gaming revenue would be 14 percent of gross revenue, which would exclude promotional gaming credits and noncash prizes. However, the tax rate for persons participating in interactive gaming from a jurisdiction outside of Pennsylvania with which Pennsylvania has entered into an interactive gaming agreement would be governed by the agreement—but could not exceed Pennsylvania's 14-percent tax rate. The bill imposes a license fee of $5 million on casinos and $1 million on significant vendors.

The bill prohibits the establishment of Internet cafés—i.e., any place of public accommodation where terminals are advertised or made available to be used primarily for Internet gaming. The bill authorizes the PGCB to adopt appropriate regulations, including those related to internal controls; appropriate age and location safeguards; privacy; and problem gambling.

Chairman Payne has said that Internet gaming could generate approximately $120 million in tax revenue to Pennsylvania in its first year of operations. Based on the tax rate, this would be a projection of $850 million in gross revenue, an optimistic forecast given Internet gaming revenues in neighboring New Jersey. The bill has been referred to the House Gaming Oversight Committee. If it passes committee, the bill would then go the full House and then to the state Senate. We will provide updates to this legislation as they become available.

For Further Information

If you have any questions about this Alert, please contact Frank A. DiGiacomo, Christopher L. Soriano, Eric D. Frank, Adam Berger, any of the attorneys in our Gaming Practice Group or the attorney in the firm with whom you are regularly in contact.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.