Pennsylvania Online Casinos and Poker Rooms Versus Offshore Sites

Pennsylvania Finally Legalizes Online Poker
It’s taken nearly five whole years to get to this point, but Pennsylvania has finally done it. They join New Jersey, Nevada, and Delaware to become the fourth official state in the entire country to legalize online gambling, including online poker, table games and slots.

But now that the doors into the online gaming market are opened, does that mean everything will be sunshine and roses from here on? No. Far from it. Although legalizing iGaming is indeed a big deal not only for PA, but for the nation as a whole, as many believe the approval of online gambling in a state as big as Pennsylvania will likely entice other states to follow. This is only just the beginning, and with it, many questions that need addressing.

One of the main questions is whether or not Pennsylvania online casinos and poker rooms will be able to compete with offshore sites.

Extortionately High Tax Rates and Licensing Fee
The main cause for concern, indeed, as it has always been since talks of legalizing online gambling in the Keystone State first began, is the industry-high 54% tax rate on slots. Online poker and table games are to be taxed at a very reasonable 16%, which is actually a little less than the 17.5% rate that the same are taxed at in New Jersey. However, NJ’s 17.5% tax rate also extends to their online slots, which is one of the major reason why its online gambling market is thriving, due to online slots accounting for 70% of the total online gambling revenue, while table games make up 20% and online poker contributes the final 10%.

As if the sky-high interest rate isn’t already enough of a deterrent, there is also the eye-watering $10 million licensing fee that PA casinos will have to pay upfront if they wish to offer all three verticals (slots, poker, and table games). Alternatively, casino operators could pay $4 million for individual licenses.

Regardless of which route operators choose to take, this, just like the tax rates, is well above the cost for the same license in New Jersey, which costs a comparatively mere $400,000. Admittedly, NJ online casino operators will also need to pay a $250,000 annual permit renewal fee, as well as $250,000 annual responsible gaming fee.

Truth is, it doesn’t matter which way you look at it. Most, if not all, will still come to the same conclusion that PA’s decision to increase the state’s cut of the online gambling revenue may end up backfiring.

What PA Can Do with $1 Compared to NJ
With the tax rate being so different between the two states, this will directly affect how much PA can spend on promotions, advertisement, and even bonus and benefits that it can pass on to its players.
Below is a breakdown of what each state has to work in regard to $1 worth of gambling revenue:

New Jersey:

• 24% will go towards advertising
• 20% will go towards player retention, such as promotions and bonuses
• 18.5% will go towards payment processing, KYC, content and platform royalties
• 17.5% will go towards taxes
• 12.5% will go towards general administrative costs
• 2.5% will go towards other regulatory
• 5% left as profit.

Pennsylvania:

• 12% will go towards advertising
• 10% will go towards player retention, such as promotions and bonuses
• 18.5% will go towards payment processing, KYC, content and platform royalties
• 42% will go towards taxes
• 10% will go towards general administrative costs
• 2.5% will go towards other regulatory
• 5% left as profit.

As you can see, there’s not exactly much meat left on the bone after all overhead and operating expenses are accounted for. Still, you might think, “but they’re both able to pocket 5%”. While true, the major difference is the amount PA has to spend towards advertising and player retention, which is less than half that New Jersey has to spend. This is a direct result of PA’s high tax rate, and will absolutely negatively impact the potential growth of its only gambling market.

PA Online Poker Rooms Are a Little Luckier
Online poker rooms will have it a little easier compared to online casinos simply because it is taxed at a far lower 16%. This will make all the difference when it comes to operators being able to put substantially more funds into promoting the online poker platform.

Additionally, PA will more than likely join NJ, Nevada, and Delaware to pool all its poker players together, which will, in turn, create more cash-games and bigger tournament guarantees.

When you put all this together, PA online poker rooms stands a far better chance at competing against offshore poker sites, especially when compared to PA’s online casino, which has little to offer its residents that offshore casino sites aren’t already offering.

PA Online Casino and Poker Room Launch Date
No official date has been set, but given that it took NJ around 9 months from authorizing online gambling to launching its first online casino site, it’s likely Pennsylvania will follow the same schedule, if not faster. The reason being is that PA has been in talks with NJ for quite a few years now, and has probably learned a lot from them in regard to the whole process of legalizing online gambling. Therefore, it wouldn’t be at all surprising if we end up seeing the very first online casino site in PA within the first half of 2018.