While a lot of the recent headlines about gambling in Pennsylvania have been about legalizing sports betting, a storm is now brewing in the state’s gambling sector. Seven of the state’s casinos have filed a lawsuit against the state-operated iLottery.
Gambling in Pennsylvania
Gambling has always been popular in the state. Most forms of gambling, such as casinos, the state lottery, and horse racing, have been allowed for many years.
Pennsylvania legalized online gambling in October 2017 and gave the go-ahead to sports betting legalization in August 2018. It was the fifth state in the country to have legal sports betting, joining Nevada, New Jersey, Delaware, and West Virginia.
The casino industry, in particular, is a big revenue driver in the state, behind only Nevada in annual gross revenue. Therefore, it was a logical move to legalize sports betting.
The state lottery has been operating since 1971, with most of the revenue going toward care for the state’s elderly citizens.
There is a rule that says at least 27% of the lottery’s revenue must fund these types of programs and 40% of the revenues go into the prize pool. Since the creation of the state lottery, $28bn (£21.8m) has been contributed to programs for elderly residents.
Over the years, the scope of this lottery has expanded to include instant games and various side lotteries.
When online gambling was legalized in 2017, it was logical for the state to offer an array of lottery and instant game products online through an iLottery platform. Governor Tom Wolf was a big advocate for the introduction of an iLottery and believes it can be a great driver of revenue for the state.
However, the casinos in the state are not happy about this new iLottery platform, and they want to fight back.
The issue for the casinos
Pennsylvania was just the fourth state to legalize online gambling. This was the catalyst for the iLottery platform being launched in May 2018. Shortly after the announcement of the launch, casinos voiced their concerns.
The 13 casino operators in Pennsylvania and called on the state government to suspend this new platform. They alleged that it is an illegal incursion upon their own online offerings. They wanted to work with the Department of Revenue, the overseers of the state lottery, to create a lawful iLottery program.
The casinos set a deadline of July 3, after which they would go forward with legal action if the state didn’t make a positive move.
None of the casinos in the state is yet offering online gaming. A $10m (£7.8m) licensing fee has to be paid. Three casinos are in the process of receiving their licenses and ten have applied.
There is also a hefty 54% tax rate for online slots, which is a drawback. The casinos’ issue with the iLottery platform is that there is a stipulation in the 2017 gambling law that the state lottery cannot offer games that “stimulate casino-style lottery games.”
They believe that some of the games on the iLottery platform are exactly the same as games offered in the casinos.
There is also a requirement that players in casinos have to be at least 21 years old, compared to 18 years old with the iLottery, which will make younger players move toward the iLottery platform, leading to lost business in the long run for the casinos.
Seven casinos have formed a group called the Pennsylvania Casino Gaming Coalition (PCGC), which filed a lawsuit against the Pennsylvania Department of Revenue.
The casinos in the PCGC are Mohegan Sun Pocono, Valley Forge Casino Resort, Stadium Casino, Harrah’s Philadelphia Casino & Racetrack, Hollywood Casino, Parx Casino, and the Meadows Casino Racetrack Hotel.
These casinos have said they have already experienced the negative impact of this new iLottery platform in the three months or so that it has been in operation. This is certainly a case that many people will be keeping a close eye upon.