Pennsylvania Legislators Remain Split on Online Gambling

PA sealAmong the handful of states considering online gambling expansion, Pennsylvania presents us with the most difficult tea leaves to read. One day it looks like lawmakers are ready to move forward and the next day it appears that expansion is off the table, only to be resurrected once again a few days later.

Online gambling is once again being mentioned in Pennsylvania as the upcoming budget’s individual parts are debated, with online gambling proponents potentially trying to attach an iGaming amendment to the state’s budget.

The final budget is due on June 30, 2014, and while iGaming has been estimated to bring in a few hundred million dollars of needed revenue there are still a lot of questions that need to be answered, and the state legislature seems to be all over the map on this issue.

A perfect example of this confusion can be seen in a recent local column at LancasterOnline.com where several lawmakers were in favor of expansion, several were against it, and about a half dozen reasons were thrown about in just 600 words.

Recent hearing and study paved the way

The online gambling hearing that took place last month was very positive, but lacked a certain sense of urgency. This left most pundits with the sense that while online gaming expansion was inevitable in Pennsylvania, 2014 looked like a long-shot, even though the industry was estimated to be worth about $300 million in revenue according to testimony.

Things took a more positive turn a week later when the legislature was presented with the findings from the online gambling study they commissioned in December 2013, which reiterated most of the testimony during the hearing, once again boosting Pennsylvania’s chances in 2014 to the realm of the possible.

While the potential revenue would be a welcomed addition to the state budget, lawmakers have to balance against the social impacts.

Both sides have conceded that expansion into online gambling is unlikely to solve the state’s budgetary problems (Pennsylvania’s budget was over $28 Billion last year), which has led to opposition and advocacy detouring into several other areas ranging from the need for consumer protections to moral opposition, although the age-old talking points also reared their head.

More education is needed to prevent misinformation

For advocates, one of the most frustrating aspects of the online gambling debate is the inability to breakthrough against these long held myths such as money laundering and cannibalization concerns; arguments that are still being spouted by opponents of gaming expansion.

One man using the cannibalization argument in the LancasterOnline.com article was Peach Bottom Representative Bryan Cutler who said Pennsylvania wasn’t going to solve its budgetary problems with iGaming expansion, before segueing into the debunked cannibalization talking points, “My concern is, we have another form of gaming that’s going to slice down the revenue pie,” adding, “I don’t I don’t necessarily know that it brings new money in.”

These types of arguments (rhetoric that has been proven to be false) indicate that more education is needed on this front to prove that the iGaming estimates are in addition to the state’s current gambling revenue.

Trackable winnings & ancillary revenue

One positive aspect of online gambling that is overlooked is the capability of tracking of winnings, unlike in a casino where only wins of specific amounts are reported.

With online gambling the state could simply ask for a win/loss report on each player to crosscheck the amount of winnings they are declaring or losses they are reporting; players may not appreciate this, but the state’s coffers could.

Representative Mike Sturla, who attended the recent hearing in Pennsylvania is in favor of online gambling, and this is just one of the reasons. Sturla told LancasterOnline.com that “online gaming could yield immediate and trackable revenue.” Adding, “Someone winning small amounts of money at a casino on, say, slots, may not file taxes, but such winnings could be tracked with online gambling.”

In addition to Sturla’s trackable winnings, online gambling expansion will also create other revenue streams in the state as the online sites advertise and market and create new jobs.

In a conference call with investors Boyd Gaming (Boyd Gaming owns a 50% stake in The Borgata) CEO Keith Smith said the $3.2 million online loss in Quarter 1 was due to startup costs, which means the company has pumped millions of dollars into advertising and marketing campaigns in New Jersey, including TV ad buys, print and online ad buys, and of course their partnership with the New Jersey Devils and the Philadelphia 76ers.

Advocates of online gambling need to do a better job explaining to the naysayers that revenue from online gambling is not limited to licensing fees and taxes, as the industry will have a broader economic impact for the state.

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