Pennsylvania has quickly become one of the more “mature” jurisdictions in the USA from a gaming perspective. Following recent state legislation and fast action in the wake of the US Supreme Court’s removal of barriers to sports wagering, both land-based and online gambling are now largely legalised in the Commonwealth. There are 13 authorised land-based casinos in Pennsylvania, with 12 open now and the 13th scheduled to open by the end of 2020.
The state has also authorised an additional 10 smaller “satellite” casinos (subject to “Category 4” licences). Several of these satellite casinos are in development but, as of September 2020, none have opened. Online casino gaming – including slots, casino table games and poker – started to operate in 2019.
Pennsylvania’s land-based casinos are authorised to offer sports wagering (subject to an additional licensing fee). With wagering having commenced in 2019, three online sportsbooks are currently operating in the Commonwealth, and several more will soon follow. In short, given the state’s large population and largely permissive (subject to licensing) environment for gaming, Pennsylvania should be a high-revenue state for gaming in the years to come. Drawbacks that operators and industry observers will study in the coming years are relatively high licensing fees and tax rates in the state.
In 2017, the state passed legislation authorising a major expansion of gambling. The legislation legalised online casino gaming – including poker, slots and table games – in the state. Online casinos launched in the summer of 2019, and the first online poker site (PokerStars) launched in November 2019.
The 2017 legislation also legalised online lottery, which launched in the spring of 2019 and is administered by the Pennsylvania Lottery Commission. Additionally, the legislation regulated daily fantasy sports and provided a framework for legalised sports betting, which became more possible following the 2018 Supreme Court decision in Murphy v NCAA. The first bricks-and-mortar sportsbook opened in Pennsylvania in late 2018, and online sportsbooks launched in Pennsylvania in the spring of 2019.
Online sports betting is legal in Pennsylvania following the 2017 state legislation and the Supreme Court’s May 2018 ruling that ended the federal ban on sports betting outside of Nevada. Online sports betting commenced in May 2019 in the state and is overseen by the Pennsylvania Gaming Control Board (PGCB). Non-sports betting is not legalised in Pennsylvania, and therefore there are no specific requirements in place.
The Pennsylvania Bingo Law, 10 Pa. Stat. § 301 et seq, allows for the operation of bingo games for charitable purposes under the supervision of municipal governing authorities, but it is limited to bricks-and-mortar games.
Online casino gaming was legalised in the 2017 legislation and went live in the spring of 2019, with both online slots and online table games – such as roulette and blackjack – available.
The 2017 legislation legalised iLottery in Pennsylvania, which went live in the spring of 2019 and is overseen by the state’s lottery commission.
The 2017 gaming expansion legislation expressly legalised online daily fantasy sports, defined by 4 Pa. Code § 302 as an online fantasy or simulated game, where:
Major online fantasy sports operators offer games in Pennsylvania.
There are no specific or separate regulations for social gaming, but the laws of the Commonwealth generally permit it. At this time, operators that wish to offer “free-to-play” or no-prize games can do so in Pennsylvania without a licence.
Although specific statutes and regulations do not exist for social gaming, some guidance can be gleaned from other laws and case law from the state. Indeed, courts have evaluated the concept of consideration in the context of coin-operated machines and have determined that deriving entertainment value or being awarded “free play” does not amount to a prize. Thus, these games were determined to be permissible.
Extending that analysis to the similar context of social games, those that are either free to play or do not offer prizes should be determined to be allowable in Pennsylvania. This would appear to extend to “freemium”-type games, in which players are permitted to play for free but can choose to buy in-game add-ons to supplement and enrich the gaming experience.
Pennsylvania’s expanded gaming legislation (2017) does differentiate between “social fantasy contests” and other fantasy contests. Under 4 Pa. Stat. § 302, the law provides that social fantasy contests are those in which:
Although state legislation defines social fantasy gaming, there are no regulations specific to it.
Online casino gaming was legalised in the 2017 legislation and is regulated by the Pennsylvania Gaming Control Board. The first operator (PokerStars) commenced offering games in Pennsylvania in November 2019, with additional operators expected to follow.
Land-based sports betting commenced in the state in November 2018 following the 2017 state legislation and the Supreme Court’s May 2018 ruling ending the federal ban on sports betting outside of Nevada. Sports betting in the Commonwealth is overseen by the Pennsylvania Gaming Control Board and the State Horse Racing Commission. Non-sports betting is not legalised in Pennsylvania, and therefore there are no specific requirements in place.
Poker is a table game in the state’s initial Gaming Act and is subject to regulation by the Pennsylvania Gaming Control Board. Poker is available in the Commonwealth’s land-based casinos, which are licensed by the Pennsylvania Gaming Control Board.
The Pennsylvania Bingo Law, 10 Pa. Stat. § 301, allows for the operation of land-based bingo games for charitable purposes under the supervision of municipal governing authorities.
Pennsylvania’s Gaming Act, at 4 Pa. Stat. § 13A11, authorises licensed casinos to operate casino table games under the supervision of the Pennsylvania Gaming Control Board.
Slot and other machine gaming
Pennsylvania’s Gaming Act, at 4 Pa. Stat. § 1301, provides a legal framework for slot machines, which are regulated by the Pennsylvania Gaming Control Board. Pennsylvania has a detailed system of grouping and classifying slot machines, as these machines were the first type of gambling allowed in the Commonwealth after the Gaming Act was passed. Four kinds of licensing apply to operate slot machines, depending on the category of licensee.
Pennsylvania’s 2017 gambling expansion legislation provides for video gaming terminals at authorised truck stops around the Commonwealth. Gaming terminals are only allowed at truck stops that meet certain standards set by the PGCB. The establishment must be a certain size, operate a convenience store, and achieve the required amount of average annual sales.
Approved truck stops are permitted to have up to five terminals. The first terminal gaming locations opened at truck stops in Pennsylvania in August and September 2019. Both casino and skill-based terminal games are permitted as electronic terminal games in land-based casinos in Pennsylvania.
The Commonwealth operates a state lottery, established under 72 Pa. Stat. § 3761-101, which is administered by the Pennsylvania Lottery Commission.
18 Pa. Stat. § 5513 of the Pennsylvania Criminal Code renders illegal all kinds of gambling that have not been explicitly exempted and permitted by the legislature. Pennsylvania’s gaming criminalisation law is somewhat unusual, as its language seems to be primarily focused on gaming operators rather than players or participants. The state’s law specifically prohibits operating, soliciting, or allowing unlawful gambling. Violation of Pennsylvania’s criminal gambling law is a misdemeanour.
Beyond Pennsylvania’s criminal prohibition of gambling, the following acts have allowed for significant exemption and legalisation. These laws also allow for the oversight and control of permissible gambling in the state.
There is not a specific definition of “gambling” under any Pennsylvania statute. However, like most states, Pennsylvania courts have adopted a traditional definition of gambling that includes the following three elements:
(Commonwealth v Dent, 2010 PA Super. 47, 992 A.2d 190, 192 (25 Mar., 2010, Sup. Ct. Pa.); Commonwealth v Two Electronic Poker Game Machines, 502 Pa. 186, 465 A.2d 973, 977 (1983).)
Furthermore, although there is not a general definition for gambling, a Pennsylvania statute does define the “consideration” component. Under 18 Pa. Stat. § 5513(f), consideration is money or other value collected for a product, service or activity which is offered in direct or indirect relationship to playing or participating in a simulated gambling program.
Pennsylvania criminal law does not set forth a specific definition related solely to land-based gambling.
Pennsylvania criminal law does not set forth a specific definition related solely to online gambling.
Pennsylvania has separate criminal statutes pertaining to (i) illegal lotteries, (ii) gambling in general, and (iii) pool selling and bookmaking.
The illegal lottery law, 18 Pa. Stat. § 5512, makes it illegal for any unauthorised individual or entity to:
The illegal gambling and gambling device law, 18 Pa. Stat. § 5513, makes it illegal for any unauthorised individual or entity to:
The pool selling and bookmaking law, 18 Pa. Stat. § 5514, makes it illegal for any unauthorised individual or entity to:
Violations of all three of the statutes outlined in the preceding sections are punishable as first-degree misdemeanours, which are the most serious misdemeanour offences under Pennsylvania law. Such violations are punishable upon conviction by up to five years in prison and fines of up to USD10,000.
On 7 August 2020, a group of 20 Pennsylvania state representatives introduced Pennsylvania House Bill 2764, which proposes that miscellaneous provisions be added to the 1988 Local Option Small Games of Chance Act to allow for games of chance to continue operating during the COVID-19 pandemic. The Bill was referred to the House Gaming Oversight Committee on 8 August 2020. As of 1 November 2020, no further action has been taken.
There is no additional legislation currently pending in Pennsylvania, given that its recent 2017 legislation represented one of the USA's largest entries into online gaming. Operators remain hopeful that Pennsylvania will revise some of the applicable tax rates (discussed herein), but there is no other pending legislation at this time.
The Pennsylvania Gaming Control Board is the regulatory body that issues licences for both online and land-based casino gaming, poker, sports wagering and fantasy sports.
With licensed gaming – both in land-based casinos and online – now widely authorised in Pennsylvania, the state’s regulatory approach can be best characterised as one that involves “hands-on” gaming regulators who serve as the gatekeepers for operators and vendors acquiring licences to operate in Pennsylvania. The licensing process in the Commonwealth requires detailed submissions, and the Board’s investigations can be significant.
After licensing, the Board continues to pay close attention to licensed operators, with a continued supervisory and auditing role. As discussed in more detail in 11 Enforcement, the Board regularly commences enforcement actions that result in fines and consent judgments. Furthermore, with the requirement for licence renewal, the Board continues to keep close watch over licensed operators in the Commonwealth.
Licences are available for the following activities:
As discussed in the previous section, all the available licences for Categories 1 through 3 in Pennsylvania have been awarded, but five of the Category 4 licences are still available.
Slot machine licences are valid for three years but may be renewed.
To apply for any gambling certificate and/or licence in Pennsylvania, an applicant must submit an extensive written application to the PGCB. These applications are available on the PGCB’s website and require disclosures from the applicant business entity, all members of its ownership and key personnel. In addition, these applications require the applicant to disclose:
One key difference between the application requirements for land-based and online operators is the requirement for online operators to store their servers only in approved states. Due to Wire Act concerns, Pennsylvania’s regulations state that for online slots, poker and table games, the servers must be either located in the state of Pennsylvania or in another location in the USA approved by the PGCB.
Owners, directors, managers, other key personnel and shareholders with direct or indirect ownership of 5% or more of the applicant must also submit a personal history disclosure form. This disclosure form seeks information about the individual’s assets, net worth, family tree, military service, criminal history (if any), prior employment, and compensation from prior employment, and any current positions.
After an applicant submits its paperwork, the PGCB commences an investigation, which may last several months or years. The PGCB’s investigative process includes investigation of facilities, interviews with key personnel, and testing of gaming products. In addition, the PGCB may request personnel to travel to meet with the PGCB to interview, or Board representatives may travel to certain sites as needed.
Category 1 and 2 slot machine operator licences are subject to USD50 million application fees. Category 3 licences are subject to a USD5 million application fee. The 2017 gaming legislation allowed for auctions to take place for Category 4 licences. The cost of a licence in the initial auction peaked at USD50.1 million, and the legislation specifies that the minimum cost of a licence is USD7.5 million.
Slot machine licence holders that seek to offer sports wagering must pay an additional fee of USD10 million. If they seek to offer all three of online poker, online slot machines and online table games, these entities must pay another USD10 million.
Alternatively, any one of the three online casino offerings can be licensed individually for USD4 million. Operators of online casino games are subject to a USD1 million licence fee. Manufacturers and suppliers are subject to USD50,000 and USD25,000 application fees, respectively.
For truck stop gaming terminals, manufacturers are subject to a USD50,000 application fee and a USD10,000 licence fee. Terminal operators are subject to a USD25,000 application fee and USD10,000 licence fee. Additionally, establishments are subject to a USD1,000 application fee and USD250 licence fee per gaming terminal.
For airport gaming tablets, licence costs vary depending on the location. In Philadelphia, the cost is USD2.5 million. In Pittsburgh, the cost is USD1.25 million. Other international airports in Pennsylvania cost USD500,000, and all other public airports in the Commonwealth cost USD125,000.
Every three years, Category 1 and 2 licensees must pay USD1.5 million in renewal fees. Category 3 licence renewals cost USD150,000.
Renewal fees for both online sports gaming licences and online casino licences are USD250,000 every five years. Operators of online casino games are subject to a USD100,000 renewal fee.
Renewal fees for manufacturers and suppliers are USD30,000 and USD15,000 per year, respectively.
The state of Pennsylvania worked to authorise 13 land-based casinos. Twelve of these casinos are currently operating and the 13th is expected to be operating by the end of 2020. Each casino, including their owners and key employees, must be approved and subsequently licensed by the PGCB. The casinos themselves are assigned the title “slot machine license holders.” Pennsylvania has progressively authorised an expansion of up to ten “satellite” casinos in particular locations in addition to their primary casinos. These locations of each casino are being sold off, with priority given to the current slot machine licensees.
Operators must acquire a licence for each online poker, slots and table games product. Operators can elect to secure a licence for one, two, or all three online products. While current slot machine licence holders are given priority to obtain these licences, other qualified gaming entities will be given the chance to operate as the licensing process continues throughout 2019.
Pennsylvania is in the process of issuing regulations and licences for bricks-and-mortar sports betting. These sports betting licences are being offered to current slot machine licence holders. Temporary online sports betting regulations went live in 2018.
Platforms, suppliers, operators and vendors working with licence holders must also acquire certain licences or registrations to operate in the state.
As a rule of thumb, only the state lottery may offer lottery products in either land-based or online forms, so no licences are available for lottery in the state. Businesses must gain approval from the state lottery before operating as a lottery retailer in Pennsylvania.
The State Horse Racing Commission has authority over all aspects of pari-mutuel wagering, including licensing tracks for wagering.
The most significant change for strictly land-based gaming in Pennsylvania is that the 2017 expanded gaming legislation introduced expanded “Category 4” licence availability for up to ten smaller “satellite” casinos. Five licences have been awarded via auction, and four casino sites are currently in development in:
The fifth licence, originally meant for Mount Airy Pittsburgh Casino Resort in Beaver County, was stripped from its original owner due to lack of financing and resold to Philadelphia-based investor Ira M. Lubert in September 2020.
Thirteen interactive gaming certificates exist in Pennsylvania for each online gaming vertical – online poker, slots, or table games – for a total of 39 interactive gaming certificates in the state.
In addition to certificates for each vertical, the Commonwealth has authorised an unlimited number of “skins” on each certificate. Businesses interested in operating a skin must seek an interactive gaming licence and partner with a certificate holder. The licence authorises operators to work “on behalf of” and in partnership with the interactive gaming certificate holder under the operator’s own brand.
At this time, only slot machine licence holders may apply for sports betting licensure. Finally, daily fantasy sports operators are now required to be licensed in Pennsylvania as well. They must petition for Fantasy Contest Operator licences before the PGCB.
Service providers and other suppliers that are not customer-facing must seek a licence, and do not need an established commercial partnership with a certificate or licence holder to do so.
To offer flat-fee marketing services in Pennsylvania for any form of online gaming, an affiliate must register as a gaming service provider.
To offer revenue-share marketing services for any form of online gaming, an affiliate must become certified as a gaming service provider.
The certified gaming service provider application is more complex than the registered gaming service provider application. It also imposes disclosure obligations on related entities.
White-label providers must seek a licence but do not need an established commercial partnership with a certificate or licence holder to do so.
As discussed in detail in this text, online gaming has flourished in Pennsylvania since the passage of the 2017 expanded gaming legislation. In addition to the deployment of additional online sports wagering and online casino operators, the most significant recent development in Pennsylvania was when the first online poker operator launched in the Commonwealth.
Several online poker operators have entered into partnerships with land-based casinos in Pennsylvania (including PokerStars partnering with Mount Airy Casino, PartyPoker teaming up with Valley Forge Casino Resort, and 888 and WSOP joining with Caesars), and PokerStars/Mount Airy commenced operations in November 2019, with additional operators commencing or planning to commence operations in 2020 and beyond.
In addition to its restrictions on server locations, Pennsylvania has placed additional restrictions on online operators, including using appropriate geoblocking services, know-your-customer protocols to protect customers and regulations regarding minimum customer data privacy requirements.
Pennsylvania imposes responsible gaming requirements on operators, which include providing information on responsible gambling resources – such as telephone numbers, internet sites and the opportunity to self-exclude – in a prominent display. This requirement exists for both online and land-based facilities. Under 58 Pa. Code § 501a.3, employees are to be trained in responsible gaming issues, including relating to problem gambling, and preventing minors, intoxicated people and those on the self-exclusion list from participating in gaming.
Pennsylvania has a robust self-exclusion programme, with separate enrolment for casino gaming, online gaming, fantasy sports and video gaming terminals. Self-exclusions for casino gaming, online gaming and video game terminals can be for one year, five years, or for lifetime. For fantasy sports, individuals can request self-exclusion for a minimum of one year, or for any length of their choosing.
Pennsylvania’s criminal law 18 Pa. Stat. § 5111 states that it is a first-degree felony to conduct a financial transaction under any of these circumstances:
If convicted of this felony, the accused would be subject to up to 20 years in prison and a fine of the greater of USD100,000 or twice the value of the property involved. The statute also imposes civil liability to the Commonwealth, in addition to these criminal penalties.
Although Pennsylvania provides criminal penalties for money laundering as discussed above, the statute does not set forth any specific requirements for gaming operators.
The Pennsylvania Gaming Control Board supervises and regulates gaming advertising. For certain aspects of advertising – such as disclosures related to problem gaming – the Board’s Office of Compulsive and Problem Gambling plays an additional role.
Advertising is defined by a Pennsylvania Gaming Control Board regulation as “[g]aming related marketing materials including a notice or communication by a licensee, certified or registered entity or its agent to the public through signs, billboards, broadcasts, publications, mail, e-mail, text message, tweet or other means of dissemination” (58 Pa. Code § 501a.1).
There are several requirements placed on any advertisements made by (or on behalf of) licensed operators in Pennsylvania:
Under a Pennsylvania Gaming Control Board regulation, licensed operators (or their agents) are barred from employing or contracting any person or entity “to persuade or convince a person to engage in gaming or play a specific slot machine or table game while on the gaming floor of a licensed facility” (58 Pa. Code § 501a.7(a)).
Although not specific to the advertising regulations, the Office of Enforcement Counsel of the Pennsylvania Gaming Control Board has the authority, in its sole discretion, to initiate proceedings for violations of gaming statutes or regulations. Under 58 Pa. Code § 405a.3(a), proceedings are initiated by filing a complaint with the Board, and sanctions can include:
Pennsylvania law (4 Pa. Stat. § 1328) and Pennsylvania Gaming Control Board regulations set forth that slot machine licensees are required to inform the Board prior to, or immediately upon becoming aware of, any proposed or contemplated change in ownership of the licensed entity.
The statute further sets forth that notice to the Pennsylvania Gaming Control Board and approval from the Board is required before the proposed or contemplated transfer of ownership of the licensed entity takes place. The Board evaluates the proposed new ownership group consistent with the manner in which it evaluates an initial licence application.
Beyond the disclosure requirements applicable to slot machine licensees, Pennsylvania Gaming Control Board regulations (58 Pa. Code §§ 427a.6, 429a.8, 431a.6 and 1403.7) mandate that manufacturer and supplier licensees — including those connected to either sports wagering or other verticals — submit a Notification of Proposed Transfer of Interest Form with the Bureau of Licensing whenever they become aware of a proposed or contemplated change of control. From a reading of the new regulations, it seems that upon approval by the Pennsylvania Gaming Control Board, the licence gets transferred to the new ownership group.
Under Pennsylvania state law, a change in control is considered to be defined as “the acquisition by a person or group of persons acting in concert of more than 20% of a slot machine licensee’s securities or other ownership interests, with the exception of any ownership interest of the person that existed at the time of initial licensing and payment of the initial slot machine licence fee, or more than 20% of the securities or other ownership interests of a corporation or other form of business entity that owns directly or indirectly at least 20% of the voting or other securities or other ownership interests of the licensee” (4 Pa. Stat. § 1328(c)).
Regulations promulgated by the Pennsylvania Gaming Control Board outline additional triggers for when transitions involve any of the following:
Other than the requisites discussed herein, the Pennsylvania statutes do not set forth additional requirements with respect to passive investors. The regulations explicitly carve out from notification requirements any “transaction through which an institutional investor acquires less than 20% of the securities of a slot machine licensee’s holding company, provided that the securities were acquired for investment purposes only” (58 Pa. Code § 441a.17(f)(2)), and provided that the institutional investor complies with other requirements.
The Bureau of Investigations and Enforcement and the Office of Enforcement Counsel are the bodies within the Pennsylvania Gaming Control Board in which investigation and enforcement powers are vested. Enforcement proceedings are overseen by the Board’s Office of Hearings and Appeals.
In addition to oversight over the licensing process, the Bureau of Investigations and Enforcement is tasked with overseeing and monitoring the operations of licensed entities, as well as auditing licensees’ finances, internal controls, security systems and other matters. If the Bureau becomes aware of possible criminal activity, it reports it to the Pennsylvania State Police for further investigation (58 Pa. Code § 405a.1).
The Office of Enforcement Counsel sits as an office within the Bureau of Investigations and Enforcement. In addition to advising the Bureau as to licensing matters, the Office of Enforcement Counsel has the authority, in its sole discretion, to initiate proceedings for violations of gaming statutes or regulations. Proceedings are initiated by filing a complaint with the Board, and sanctions can include:
In enforcement actions, the Office of Enforcement Counsel acts as a prosecutor in proceedings against licensees before the Pennsylvania Gaming Control Board (58 Pa. Code § 405a.3(a)). The Chief Enforcement Counsel possesses subpoena power to carry out investigation and enforcement responsibilities (58 Pa. Code § 405a.5).
Enforcement actions take place before the Office of Hearings and Appeals of the Pennsylvania Gaming Control Board. As stated in 58 Pa. Code § 491a.7, either the Board itself or a presiding officer conducts hearings. If the hearing is overseen by a presiding officer, the officer makes a report and recommendation to the Board, which can choose whether or not to adopt some or all of the report and recommendation (58 Pa. Code §§ 494a.4, 494a.5). Rulings by the Board are subject to appeal pursuant to the Pennsylvania Rules of Appellate Procedure (58 Pa. Code §§ 494a.11).
As discussed above, in proceedings before the Pennsylvania Gaming Control Board, sanctions can include:
The Commonwealth seems to have a robust enforcement environment. According to the Pennsylvania Gaming Control Board’s Annual Report for 2019–20, over 700 post-licensure enforcement actions came before the Board. Although many of those actions dealt with licensing of individual employees, there were some more significant enforcement proceedings, as well (see https://gamingcontrolboard.pa.gov/files/communications/2019-2020_PGCB_Annual_Report.pdf).
The number of enforcement actions between July 2019 and June 2020 was slightly lower than during the same time periods in the preceding annual report, which makes sense as Pennsylvania becomes more accustomed to the 2017 legislation expanding gaming (see https://gamingcontrolboard.pa.gov/files/communications/2018-2019_PGCB_Annual_Report.pdf).
Between July 2019 and June 2020, the Board entered into six consent agreements, which resulted in USD350,000 worth of fines (see https://gamingcontrolboard.pa.gov/files/communications/2019-2020_PGCB_Annual_Report.pdf). This is significantly lower than the fines issued during the same time periods between 2018 and 2019.
One of the larger fines that was issued between July 2018 and June 2019 was over USD351,000 to a licensed manufacturer – American Gaming Systems – for engaging in business with an unlicensed entity. Additionally, the Valley Forge Casino Resort was fined USD50,000 for giving out excess free slot play (see https://www.prnewswire.com/news-releases/pa-gaming-control-board-levies-over-480-000-in-fines-300673402.html).
During the same time period between 2017 and 2018, the Board assessed over USD2 million in fines (see https://gamingcontrolboard.pa.gov/files/communications/2017-2018_PGCB_Annual_Report.pdf).
As discussed in 2.1 Online, although there are no regulations dealing with social gaming, the 2017 expanded gaming legislation did provide a definition for “social fantasy contests” that carved out “free-to-play” and similar fantasy contests from licensing requirements. For that reason – combined with already-existing case law supporting “free-to-play” games being permissible – it stands to reason that Pennsylvania is a reasonably stable environment for businesses to experiment with social games. Of course, because there are no regulations explicitly exempting social games (outside of the fantasy sports context), the safest approach for any business considering introducing a social game in Pennsylvania would be to consult with gaming counsel prior to doing so.
Although gambling on esports has not been legalised yet in Pennsylvania, there are recent signs of the Commonwealth being a welcome environment for esports in general. Perhaps most notably, the Philadelphia Fusion team (which is owned by Comcast Spectator, a subsidiary of Comcast) of the Overwatch League broke ground in September 2019 on the USD50 million “Fusion Arena”, which – when it opens in 2021 – will be a 3,500-seat arena dedicated to esports. The Overwatch League Finals also took place before a sold-out crowd at the Wells Fargo Center in Philadelphia in September 2019 (see https://www.espn.com/esports/story/_/id/27701213/ground-broken-new-fusion-arena-philadelphia-set-open-2021).
Fusion Arena is being developed in partnership with the owners of the in-construction “Live! Casino & Hotel” in Philadelphia (see https://www.bizjournals.com/philadelphia/news/2019/09/25/comcast-cordish-in-talks-with-naming-rights.html). Thus, while esports gaming is not legal at this time in Pennsylvania, it appears to be a jurisdiction in which esports are popular, and one where esports entities and gaming businesses are already working in collaboration, so there is reason to be optimistic that there could be a market for esports betting in the future.
As discussed in 2.1 Online, the 2017 legislation expanding gaming explicitly legalised fantasy sports in Pennsylvania and introduced licensing requirements for operators. As of the end of fiscal year 2019-20, there were nine licensed fantasy sports operators in Pennsylvania, and during that fiscal year, fantasy sports operators generated over USD202 million in entry fees, resulting in over USD20 million in revenue. The two operators responsible for the overwhelming majority of revenues in that fiscal year were DraftKings and FanDuel (see https://gamingcontrolboard.pa.gov/files/communications/2019-2020_PGCB_Annual_Report.pdf).
The 2017 expanded gaming legislation explicitly authorised the introduction of both “skill slot machines” and “hybrid slot machines” (which combine elements of chance and skill) at casinos in Pennsylvania (4 Pa. Stat. § 1101(12.2), 1103). Additionally, many bars and taverns in Pennsylvania offer “skill gaming” terminals with cash payouts, but such offerings are not regulated and have been subject to legislative scrutiny given the mature nature of Pennsylvania’s gaming regulatory environment.
The COVID-19 pandemic has also engendered public opposition to skill games, which were allowed to continue operating in many areas even while casinos closed down during the height of the crisis (see https://www.casino.org/news/campaign-against-pennsylvania-skill-gaming-machines-intensifies/).
Blockchain technology and cryptocurrency are not currently utilised in connection with any gaming activity in Pennsylvania, and there are no regulations regarding the technology at this time. In 2018 comments during the Pennsylvania Gaming Control Board’s rule-making process, DraftKings advocated that the Board should allow the use of cryptocurrency as a payment method (see https://gamingcontrolboard.pa.gov/files/regulations/EXGAMING_125-213_214_215_DraftKings_Igaming_Comments.pdf). At this time, however, this does not appear to be under consideration.
Pennsylvania’s 2017 expanded gambling legislation almost immediately made it a state with among the most robust gaming offerings in the USA, perhaps lagging behind only Nevada and New Jersey. Pennsylvania currently has a full array of offerings, with casino gaming, poker and sports wagering available both in casinos and online.
Fantasy sports are also widely available in Pennsylvania, and the state lottery is available both in stores and online. Thus, with gaming widely authorised in Pennsylvania, reform efforts could focus on operators seeking to curtail certain tax rates, along with possible efforts to make more gaming licences available. Furthermore, with the rise of esports and its popularity in Pennsylvania, it stands to reason that licensees will seek to include esports wagering among their offerings.
Pennsylvania has some of the highest tax rates in the USA, including the highest tax rates on slots.
The applicable tax rates for land-based gaming are as follows.
The applicable tax rates for online gambling are: