Pennsylvania Gambling Expansion Nears $400 Million for the State in First Year

Upfront licensing fees a short-term boon for state coffers, but revenue from gamblers will still have to wait, says PlayPennsylvania.com

Gambling has injected more than $385 million into Pennsylvania coffers in the first year since a law was passed to expand gambling in the state, surpassing state budget estimates. Upfront licensing fees for casinos, online casinos, and sportsbooks, as well as mini-casino auction profits and tax revenue from lottery expansion and daily fantasy sports, have combined to net Pennsylvania more than $1 million a day since late 2017, according to a recent analysis by PlayPennsylvania.com.

“The most notable aspect of the significant revenue that has been generated is that this is almost completely from fees, rather than tax revenue gained from gamblers,” said Jessica Welman, analyst for PlayPennsylvania.com. “Clearly there is enough interest in Pennsylvania’s enormous market so far to generate the fees.”

The revenue estimates were tabulated by PlayPennsylvania.com using a combination of official statistics and estimates based on iLottery, keno, and virtual sports sales numbers. A detailed accounting of the revenue generated so far can be found at playpennsylvania.com/revenue.

Using return-to-player rates of the games, PlayPennsylvania estimates that the state has collected more than $23 million in revenue from online lotto games ($19.6 million), keno ($3.6 million), and virtual sports ($87,000) through October.

Other sources of revenue so far from the law include:

• Mini-casino auction profits, $128 million
• Interactive gaming petitions, $94 million
• Casino licensing, $78 million
• Sports betting petitions, $60 million
• Daily Fantasy Sports tax revenue, $1.4 million

By comparison to the gambling expansion, the state collected $799.8 million in taxes from statewide slot revenues in fiscal 2017-18. Pennsylvania estimated in February that the state will generate more than $34 billion in general fund revenues for its 2018-19 fiscal year.

“If the point of the expansion was to fill short-term gaps in the state’s budget, then the expansion would have to be considered a success so far,” Welman said. “We believe that the gambling expansion will eventually prove to be a winner for the state’s budget, but the long-term picture is less certain. More casinos and sportsbooks must open before we get a clear picture of whether Pennsylvania’s relatively steep tax rates and license fees will produce the desired outcome.”

With the November opening of the sportsbook at Hollywood Casino at Penn National, the rollout of sports betting is just beginning in Pennsylvania. More openings are expected in December and January, too.

In addition, Pennsylvania should begin adding revenue from online gambling in early 2019, and further down the line, mini-casinos should enter the fray.

“The addition of retail sports betting should help buoy a slowing Pennsylvania casino industry,” said Dustin Gouker, lead sports betting analyst for PlayPennsylvania.com. “If New Jersey is any indication, though, the more significant revenue generator will be online sports betting. A successful rollout there should generate millions of dollars in tax revenue for the state.”

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The PlayUSA Network and its state-focused branches (including PlayNJ.com, PlayNY.com, PlayPennsylvania.com, and PlayCA.com) is a leading source for news, analysis, and research related to the market for regulated online gaming in the U.S.

Source: PlayPennsylvania.com