Las Vegas Sun

March 28, 2024

Report: Online gambling could bring Pa. more than $400 million in six years

A report released Monday states Pennsylvania can rake in more than $400 million by 2022 if lawmakers legalize online gambling.

The 14-page white paper comes as state legislators prepare to open hearings about how to use expanded gambling statewide to help fill a multibillion-dollar hole in the state budget for 2017-18.

Lawmakers will view the report with a skeptical eye because it was produced by Play Pennsylvania and onlinepokerreport.com -- two online gambling industry organizations that stand to gain by the legalization of internet gambling in Pennsylvania. Play Pennsylvania is a website focused almost exclusively on getting internet gambling legalized in Pennsylvania, and Online Poker Report is an web publication that follows online gambling across the globe.

"I view every piece of information about this skeptically because everyone has a bias in some way," said Rep. Scott Petri, R-Bucks, who chairs the House Gaming Oversight Committee, which will begin hearings March 7. "But I'm still interested in the report. We'll take everything into account."

Online gambling tax projections

2017 -- $126 million

2018 -- $46 million

2019 -- $51.8 million

2020 -- $59 million

2021 -- $66.2 million

2022 -- $77.3 million

Source: Onlinepokerreport.com

The report, by onlinepokerreport.com analyst Robert DellaFave, projects that the state will collect $126 million in upfront licensing fees from casinos operating the online gambling sites, and $46 million a year in taxes beginning after the first year. With projected revenues of $230 million in the first year, growing to $364 million by year 2022, a tax rate of 20 percent would bring the state $426 million for the first five years. It bases those rosy projections, at least in part, on legalized gambling in New Jersey that grew from $122 million in gross revenue in 2014 to nearly $200 million in 2016.

"Of any state that has already legalized some form of online gambling or is actively exploring the idea, Pennsylvania represents the biggest economic upside," DellaFave wrote.

The projections only slightly outpace those included in a fiscal note attached to an online gambling bill floated last year in the House. While that bill projected licensing fees of $96 million and $42 million in tax revenues after the first year, DellaFave projects $126 million in fees following by $46 million in taxes the first year.

"These predictions are about as reliable as Warren Beatty's best picture envelope," said John Ashbrook, spokesman for the Coalition to Stop Internet Gambling, which is funded by Sands Casino owner Sheldon Adelson. "It's not surprising that online gaming consultants would exaggerate numbers to help their business."

It's entirely possible that both projections are high, because both assume that all 12 state casinos will pay the fee, but officials at Sands Casino Resort Bethlehem have steadfastly opposed online gambling and signaled that they will not participate if it is legalized.

The report also assumes a 20 percent tax rate, while the bill introduced this month calls for a 16 percent tax rate. The report theorizes that Pennsylvania's market will easily outperform New Jersey's because its 12.8 million people is 4 million more, and its casinos spread out across the state make its rollout quicker than in New Jersey, where all of the casinos are in Atlantic City.

"There's no voodoo involved in these projections," said Chris Grove, an editor and spokesman for onlinepokerreport.com. "These projections are based on New Jersey's experience and adjusted for Pennsylvania's casino industry and demographics."

Grove said the report is designed to keep Pennsylvania from falling into the trap that New Jersey fell into in 2014. In his 2014 budget address, New Jersey Gov. Chris Christie projected $200 million in tax revenue from online gambling that ultimately produced less than $20 million that year.

There's no telling how much lawmakers will rely on the latest report, but there's little question they're counting on internet gambling to bolster state revenues.

The state's 2016-17 budget assumed an extra $100 million in revenue from various forms of gambling expansion, but a gambling expansion never passed. Still, Gov. Tom Wolf's 2017-18 budget proposal assumes that expansion will add $100 million in revenue this year and another $150 million beginning next year.