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Can Pennsylvania casinos compete with the sports betting black market? | TribLIVE.com
Pennsylvania

Can Pennsylvania casinos compete with the sports betting black market?

Jamie Martines
| Saturday, July 21, 2018 5:03 p.m
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Blue teller counters decorated with the William Hill logo replaced horse betting counters that once extended throughout the first floor of the grandstand at Monmouth Park in Oceanport, N.J. Patrons placed bets on a variety of sporting events, including the World Cup, on July 11, 2018.
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Patrons visit the William Hill Sports Book at Monmouth Park on July 11, 2018, to watch the World Cup semifinal match between Croatia and England.
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Monmouth Park racetrack in Oceanport, N.J., began taking sports bets in June when it became legal in the state.

OCEANPORT, N.J. — By 2 p.m. on a July weekday, patrons packed a sports bar at Monmouth Park near the Jersey Shore. They sipped beers and snacked on bar food, their eyes fixed on dozens of television screens that lined the walls.

Most weren’t watching horses.

Instead, they gathered at the 148-year-old racetrack to take in the World Cup semifinal match between Croatia and England.

Seated in the newly opened sports book — a bar renovated about five years ago that was outfitted to house live teller windows and enough televisions for viewers to never miss a play — many patrons also hoped to make a few bucks by betting on the soccer game.

New Jersey became one of the first states to get legal sports betting operations up and running after it won a U.S. Supreme Court case in May that struck down a federal ban on sports gambling. About $16 million in bets were placed during the first two weeks sports betting was legal in the state, according to figures from the N.J. Division of Gaming Enforcement.

New Jersey’s three open sports books at the time — Monmouth Park, along with the Borgata and Ocean Resort casinos — together made $3.5 million in gross revenue on those bets. Monmouth Park alone made about $2.3 million.

For now, Joe Asher, CEO of bookmaker William Hill US, isn’t betting on the same short-term success in Pennsylvania. William Hill operates the sports books at Monmouth Park and Ocean Resort Casino as well as over 100 sports books in Nevada.

In the Keystone State, casinos or racetracks wanting a sports book must first pay a whopping $10 million licensing fee. They’ll also have to pay a 36 percent tax on gross betting revenue — or the amount left after winners are paid.

“The tax structure is a real challenge for the legalized sports betting market in Pennsylvania,” Asher said.

In West Virginia, the licensing fee is set at $100,000 followed by a 10 percent tax on revenue. Sports betting operations in New Jersey are subject to an 8.5 percent tax, while gross revenue from online operations is taxed at 13 percent. Casinos must also pay an annual $100,000 licensing fee, along with a one-time $250,000 retainer to be applied to regulatory costs.

The biggest threat of competition isn’t likely to come from neighboring states, Asher said. He’s more concerned about Pennsylvania’s black market — which doesn’t need to advertise the same way casinos or racetracks might in order to get people in the door and putting down money.

“The market will be limited largely to people who don’t have a bookie, currently,” Asher said.

He thinks Pennsylvania casinos will need to invest in special offers or amenities to convince people already betting illegally to come to their facility and do it legally. If revenue is being taxed at a high rate, Asher said Pennsylvania casinos might not be left with money to invest in such promotions.

Bookies, on the other hand, are likely to fight to keep clients by offering incentives like rebates on losses, Asher said.

The American Gaming Association estimates as much as $150 million in illegal bets is placed across the United States annually.

Officials with the industry advocate say it’s still too early to tell what’s going to happen as the legal betting market expands, said Casey Clark, an AGA spokesman said.

Though Pennsylvania got out ahead of the Supreme Court ruling by clearing the way to legal sports betting, Clark pointed out that regulatory and legislative climates in neighboring states might be more effective in driving the illegal sports betting market out of business.

“I think that people have wanted to do this for a long time, and were looking for an avenue to do it,” Clark said.

Not worried

Pennsylvania opened the process in May for its existing 12 casinos and racetracks to apply for sports betting licenses. So far, none have.

The state Gaming Control Board also has not received a single application from sports book operators.

Rep. George Dunbar, R-Penn Township, sits on the Pennsylvania House Gaming Oversight Committee. He said he isn’t worried. With internet gaming applications out of the way last week — nine casinos, including Pittsburgh’s Rivers Casino, applied for the discount $10 million license to offer online gambling — he thinks the state’s casinos will now turn their attention to figuring out how to move forward with sports betting.

“We’re ready to go, the state is ready to go, it’s up to the casinos right now to make sense of it,” Dunbar said.

Dunbar said that he hasn’t heard anyone in the state legislature talk about adjusting the tax rates or licensing fee, which were set as part of the gaming expansion law that passed in 2017.

That hasn’t stopped some Pennsylvania casino operators from lobbying for a better rate.

Penn National Gaming, the parent company of Hollywood Casino at Penn National Race Course in Dauphin County, argues that the license fee and tax rate “may make it impossible for a casino operator to make any return on its investment of capital,” according to a letter submitted to the state Gaming Control Board.

The letter urged Pennsylvania lawmakers to reduce the tax rate and licensing fee to levels competitive with neighboring states so that casinos have a shot at competing with bookies and the off-shore market.

Jamie Martines is a Tribune-Review staff writer. You can contact Jamie at 724-850-2867, jmartines@tribweb.com or via Twitter @Jamie_Martines.

Jamie Martines is a Tribune-Review staff reporter. You can contact Jamie at 724-850-2867, jmartines@tribweb.com or via Twitter .

Categories: Pennsylvania
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