8/27/2018 Betting on PA‐ Expanded Gaming in the Commonwealth Examining the elements of Act 42 of 2017 Alexandra “Sasha” Sacavage, Esq. McNees Wallace & Nurick LLC www.mcneeslaw.com The Brief History of Legalized Gambling in Pennsylvania . The state legislature authorized slot machines in 2004 and table games in 2010. The first licenses were granted in 2006 to racetracks and stand‐alone casinos. Out of 14 authorized licenses, 12 casinos are operating in PA. Category 1,2,3 and now 4. Slots are taxed at 55%, table games at 14% . This is the highest tax rate in the nation . PA is 2nd only to Nevada in gaming revenue 2 www.mcneeslaw.com Act 42 of 2017 . On October 30, 2017 Governor Wolf authorized legislation to expand casino‐ style gambling in Pennsylvania. Casino license fees and taxes on gambling losses will go to the state’s General Fund, property tax rebates and local government projects. 3 www.mcneeslaw.com 1 8/27/2018 Components of the Law . Satellite Casinos . Fantasy Sports . Gambling at Truck . Local Share Stops ‐ “VGTs” . Resort Casinos . iGaming . Casino Ownership . iLottery . Sports Betting . Airport Gambling 4 www.mcneeslaw.com Satellite Casinos (Category 4) . 10 mini‐casinos across the state . Initial bids must be greater than $7.5 million . 750 slot machines . $2.5 million fee to add up to 30 table games initially. No satellite casinos within 25 miles of another casino . Counties and municipalities can opt out . Winning bidders and locations so far are: . Penn National – $50. 1 million –York County . Stadium Casino (Cordish. Co. & Greenwood Gaming (Parx)) – $40.1 million – Westmoreland County . Mt. Airy – $21.1 million –Beaver County . Greenwood Gaming (Parx) – $8.1 million – Cumberland County . Penn National – $7.5 million‐ Lancaster County 5 www.mcneeslaw.com What happens next? . Applicants have requested more time beyond the 6 months in statute to file their applications. After the first round of bids from the Category 1 and Category 2 operators, bids would open up to the remaining in‐state operators, then a third round of bidding may open up to other “qualified entities.” . The last auction was held April 18, 2018 and attracted no bids. Auctions are at the PA Gaming Control Board’s discretion. The expansion law assumed that all slot and table game licenses would be bid and generate $100 million in fee revenue by the June 30 close of the fiscal year, which is the bulk of the estimated revenue lawmakers and Wolf expect from the law. As you can see the 5 so far have outpaced predictions. 6 www.mcneeslaw.com 2 8/27/2018 Where does the money go? Slot Machine Gross Revenue Table Games Gross Revenue 2 1 2 1 5 5 6 34 14 Property Tax Relief Gaming Economic Development and Tourism Fund General Fund CFA grants to Host County Commonwealth Finance Agency ("CFA") Host Municipality Host County Local Share Commonwealth Finance Agency grants to Host County Host Municipality 7 www.mcneeslaw.com Satellite Casino Legal Issues . New physical locations so you can expect to see legal issues related to zoning, land use, construction, contracts, liquor, traffic, public utilities, data security, compliance with state agencies. Civil Litigation: Although there are instances where potential and existing operators file lawsuits for various reasons, there is an adverse litigation section in Title IV prohibiting the Board from considering an applicant that is seeking to overturn a Board licensing decision. 4 Pa.C.S. 1308(c). This does not affect their ability to engage in civil litigation on other grounds. 8 www.mcneeslaw.com Gambling at Truck Stops Video Game Terminals “VGTs” . Qualifying truck stops can operate up to five slot machine‐style machines called VGTs. Requirements: . is equipped with diesel islands used for fueling commercial motor vehicles; . has sold on average 50,000 gallons of diesel or biodiesel fuel each month for the previous 12 months or is projected to sell an average of 50,000 gallons of diesel or biodiesel fuel each month for the next 12 months; . has at least 20 parking spaces dedicated for commercial motor vehicles; . has a convenience store; . is a PA Lottery Sales Agent. and, . is situated on a parcel of land of not less than 3 acres. Counties that host a casino can prohibit the machines inside its borders. VGTs proved to be controversial and language permitting them at bars and taverns in the state never made it into the final compromise version of the law. Where does the money go? . 42% of the gross revenue generated by VGTs will go into a newly‐established Video Gaming Fund which will be deposited into the General Fund . 10% of the gross revenue will be used for grants to any county in the Commonwealth and administered through the Commonwealth Finance Agency 9 www.mcneeslaw.com 3 8/27/2018 10 www.mcneeslaw.com PA Skills Games . Often confused with VGTs, these have been judicially determined to be games of skill, therefore not gambling, and not regulated by PGCB, or anyone else. In re Pace‐O‐Matic Equipment, Inc. M.D. 965‐2013, Beaver County Court of Common Pleas . Available for play in bars, taverns, and convenience stores. Act 42 definition of slot machines included “games of skill,” which some state officials interpret as making them legal only in licensed casinos. PGCB has not taken a position. Pennsylvania State Police, Bureau of Liquor Control Enforcement, considers this gambling and has suggested PSP will take enforcement action against liquor licensees. The Legislature may take on this issue in the future. 11 www.mcneeslaw.com iGaming . Casinos may apply for licenses for online slots, table, and poker games. Players must be physically located in PA . Under the regulations, there is no limitation on the number of skins that a slot machine licensee may employ to deliver games, but every ‘skin’ that a casino offers must be branded in a manner that makes it clear that it is offered on behalf of the slot machine licensee. License fees start at $10 million then drop to $4 million a piece, online slots revenue tax is 54%, for comparison New Jersey is 15%. Where does the money go? . Table Games: 14% to the General Fund . Slot Machines: 34% to Property Tax Relief Fund; 13% to CFA grants to ANY county; 5% to counties who have a decrease in local share from the prior year . ALL iGaming: 1% to license holder’s home county (Philadelphia County goes to School District of Philadelphia, Delaware County to a newly created authority); 1% to CFA for grants to ANY county 12 www.mcneeslaw.com 4 8/27/2018 iGaming Licenses . In mid‐July, 9 casinos applied for licenses at $10 million each. One applicant applied for the bifurcated licenses at $4 million each. License allows casinos to offer online poker games, slot machines and casino table games. The PGCB has 90 days to approve the license applications, fees are due 60 days after approval . If any of the licenses are unsold after Aug. 14, the PGCB could offer them to qualified operators that do not have casino licenses. 13 www.mcneeslaw.com iLottery . Online Lottery can offer keno and feature online games, including its existing games, instant tickets and raffle games . Players must be 18 years old or older . May not offer games that simulate casino‐style lottery games, specifically roulette, poker, blackjack or slots. Revenue goes to the Lottery Fund . Establishes Lottery Sales Advisory Council to encourage further cooperation between the State Lottery and licensed lottery sales agents. Retailers can sell pre‐paid cards, and receive a 6% commission 14 www.mcneeslaw.com iLottery Legal Issues . In June 2018 the state’s 13 casino operators (all 12 operating casinos and Stadium which is not yet built) wrote a letter to Governor Wolf, asking him to shut down iLottery because it “simulates casino style games” . The PA Lottery responded by stating it would alter its marketing strategy, no longer advertising games as "slot‐style" or "casino‐style" games. August 22, 2018 lawsuit filed by 7 operators . Harrah’s Philadelphia, Hollywood, Meadows Mohegan Sun Pocono, Parx, Stadium Casino, Valley Forge 15 www.mcneeslaw.com 5 8/27/2018 Airport Gambling . Existing Casinos may operate an “interactive gambling parlor” at an international or regional airport in Pennsylvania, with an agreement from the airport authority . Users would gamble on iPads and other similar computer tablets and devices . Games could include slots, blackjack, roulette, poker, and other table games . Machines accessible only to ticketed passengers . Tax Rate is 14% for games that simulate table games and 52% for games that simulate slot machines, goes to the General Fund; 2% goes to local share split among the host county, airport authority, public interest grants, and School District of Philadelphia (gaming at PHL International) . Eligible airports are: . Philadelphia; Pittsburgh; Erie; WilkesBarre/Scranton; Lehigh Valley; Harrisburg; Arnold Palme Regional Airport; and University Park Airport in State College 16 www.mcneeslaw.com Fantasy Sports . Daily fantasy sports betting in Pennsylvania becomes regulated and taxed in Pennsylvania. Fantasy sports operators must verify that players are at least 18. Six sites, including DraftKings and FanDuel, are registered to legally operate. Users pay an entry fee to participate in contests with payouts; different from traditional fantasy sports played by friends who create their own leagues and compete over the course of a sports season. Operators required to offer “beginner” contests to level the playing field. Players do not have to be in‐state but state they play in must permit fantasy contests and site must be legally registered. 15% of revenue goes to the General Fund. 17 www.mcneeslaw.com Sports Betting .