More Video Gaming Bills Introduced in Pennsylvania

By my count, this week saw the introduction of Video Gaming bills five and six of the current legislative session.

HB 1458 and HB 1462 both would call for the Department of Revenue to administer the law with licensing of machine vendors (commonly referred to as route operators), manufacturers and distributors. The bills are nearly identical with the major difference coming in the form of the distribution of proceeds.

Distribution of Proceeds:

HB 1458: 33% to the establishment; 27% to the vendor/route operator; 30% to the Commonwealth’s Property Tax Relief Fund; 5% to the host municipality for each machine; 5% to licensed casinos in Pennsylvania (although no specifics on how this 5% is distributed among the casinos).

HB 1462: 33% to the establishment; 27% to the vendor/route operator; 30% to the Public School Employees’ Retirement Contribution Restricted Account; 5% to the host municipality for each machine; 5% to licensed casinos in Pennsylvania (again, no specifics on how this 5% is distributed among the casinos).

Other Important Notes Regarding HB 1458 and HB 1462:

Residency Requirements: Route operators would have a 2 year residency requirements (10%+ owners of corporate vendors would be required to meet the 2 year residency requirement. Distributors would be subject to a 1 year residency requirement whereas manufacturers would not be subject to any residency requirement.

Advertising Restriction: Both bills propose a complete ban on all advertising of the video gaming machines.

Limited Number of Machines: These bills limit all establishments, regardless of size, to three machines.

Max Bet and Payout: The max bet is limited to $2.50 and the maximum payout is $1,000 with a minimum payout percentage of 85% per machine.

Stay tuned here as we track these and the previously introduced video gaming bills. For detailed information on these other bills, check my blog entries here, here and here.

Latest PA Internet Gaming Bill Goes Beyond Internet Gaming

As my colleague Eric Frank previewed here, a bill has been introduced in the Pennsylvania Senate regarding internet gaming.   The latest bill, SB 900, was introduced on June 9 sponsored by Senators Ward, Tomlinson, Vogel, Scarnati, Bartolotta, and Stefano.  The bill goes beyond just internet gaming, though, and it remains to be seen whether this bill is the result of a compromise among various interests or is too broad to pass.

Internet Gaming

As with the several other bills we have covered, this bill would allow Pennsylvania casino licensees to offer internet gaming.  However, Category 3 facilities – the two smaller facilities (Valley Forge and Nemacolin) that are part of resorts – would not be authorized to offer internet gaming.  An internet gaming permit would have a $10 million fee attached with a $1 million renewal due every five years.

Servers used for internet gaming must be located within the casino’s facility in a secure space; there is no provision for the use of off-site data sites, except for back-up servers which may be located at another site in Pennsylvania only.  Platform and software providers would have to be licensed by the PGCB as a manufacturer.

Gross internet gaming revenue would be taxed at 54%.

Interestingly, if a person lives within 20 miles of a casino that offers internet gaming, that person must open an account in person and may not do so online.  If implemented, this would be unique to Pennsylvania, as other internet gaming states allow accounts to be opened online regardless of the proximity of a patron to a facility.

But Wait – There’s More

This bill contains two key provisions that would significantly alter the dynamic of land-based casinos in Pennsylvania.  The first change would be to Category 3 casinos.  These casinos are not open to the general public unless a patron either utilizes other amenities of the resort, such as restaurants or hotel rooms, or purchases a membership.  Needless to say, this requirement affects the number of customers who might visit a Category 3 facility.  This bill would allow Category 3 facilities to escape the membership requirement, provided that the casino pays a fee of $5 million if the facility is located in a first through third class county and $2.5 million in any other county.  This would significantly change the dynamics of Category 3 casinos.

Second, the bill allows the establishment of “nonprimary locations” and “ancillary facilities” – essentially, satellite casinos limited to 250 slot machines each.  Category 1 facilities (racetracks) would be allowed to open four such facilities each and Category 2 facilities would be allowed to open two.  There are geographic restrictions as to where these facilities may be opened – no closer than 20 miles to another facility, except for within the City of Philadelphia, where that restriction is 10 miles.  These facilities would have a $5 million license fee.  This, too, would change the overall dynamics of casino location in Pennsylvania.

It remains to be seen whether this legislation advances through the Senate, and how it will reconcile with the several bills that have been introduced in the House.




Pennsylvania Senators to Introduce Internet Gaming Legislation

Four Pennsylvania Republican State Senators filed a Co-Sponsorship Memoranda outlining their plan to introduce legislation in the near future to permit existing casinos to offer Internet gaming to individuals physically located in the Commonwealth.

The full details of the proposal were not yet made available, however, the Memoranda does contemplate the development of expanded compulsive and problem gambling programs specifically related to Internet gaming by the Pennsylvania Gaming Control Board and the Department of Drug and Alcohol Programs.

This is the first measure put forth in Pennsylvania’s Senate this session.  You can view our detailed analysis of the multiple Internet gaming bills introduced in the Assembly here, here and here.

Stay tuned here for full details on the legislation once it is formally introduced.

Duane Morris Partner Christoper Soriano to Speak at the 6th Forum on US Online Gaming

Duane Morris partner Christopher Soriano will be a speaker at the 6th Forum on US Online Gaming to be held on May 12-14, 2015, at the DoubleTree Suites by Hilton in New York City. Mr. Soriano will be a speaker for the “Pre-Forum Master Class: Interstate Gaming: How Can Cross-Border Capability Improve Liquidity?” on May 12 from 3 p.m. to 6 p.m.

Flurry of Gaming-Related Legislation Introduced in Pennsylvania

A lot of activity in Pennsylvania yesterday with legislators dropping a flurry of gaming-related legislation. Here’s the breakdown of the action in SportsCenter fashion..da na na da na na:

HB 986 – This bill is the fourth Video Gaming bill to be introduced in this session. The measure would limit video lottery terminals to clubs having a liquor license whereas every other measure allows for restaurants, bars, taverns and hotels as well. This bill would also bring the regulation of VLTs within the purview of the Pennsylvania Gaming Control Board.

HB 990 – This bill would prevent any Category of slot machine license from being issued within 10 miles of a national military park or a post-9/11 national memorial.

HB 996 – This bill would ban smoking in casinos, adding the word “licensed facility” to the list of “public spaces” under the Commonwealth’s Clean Indoor Air Act.

HB 997 – This bill would require casinos to provide patrons with monthly statements showing winnings and losses equal to or greater than $500.

HB 1013 – This bill would prohibit the Pennsylvania Gaming Control Board from promulgating rules or regulations allowing for any form of Internet gaming. This bill would also make it a crime to organize any form of gambling over the Internet.

HB 1017 – This bill would require the Pennsylvania Gaming Control Board to require each casino to collect a $2 per-patron admission fee. The fees would be collected by the State and used to fund an Intellectual Disabilities and Autism Waiting List Account.

HB 1025 – This bill would require the Pennsylvania Gaming Control Board to require each casino to collect a $2 per-patron admission fee. The fees would be collected by the State and used as follows: (a) 50% to the State Employee’s Retirement System to satisfy mandatory contribution obligations of the Commonwealth; and (b) 50% to the Public School Employees’ Retirement System to satisfy mandatory contribution obligations of the Commonwealth.

UPDATE: Second Video Gaming Bill Introduced in Pennsylvania

A second Video Gaming bill was introduced yesterday in the Pennsylvania House. HB 901 has many similarities to HB 808 introduced last month (which I blogged about here).

But there are some key distinctions:

HB 901 would place control over VLTs in the hands of the Department of Revenue rather than the Pennsylvania Gaming Control Board (although the legislation does provide Revenue with the opportunity to partner with the PGCB for the limited purpose of developing and verifying specifications for the VLTs).

Additionally, HB 901 is silent regarding residency requirements and eliminates the “distributors,” combining that role with that of the “Operators,” who would “buy, sell, own, maintain, service or distribute video gaming machines for placement in licensed establishments.”

The net profits would be distributed: 40% to the General Fund; 30% to the licensed establishment; and 30% to the operator. Under HB 808, the General Fund would receive 34% and establishments and operators would each receive 33%.

So what’s next:

The introduction of a second VLT bill in less than a month is a positive sign for VLT proponents. If either bill is to survive, it likely won’t be done without heavy compromise and amendment, so neither bill is set in stone. The House Gaming Oversight continues to be very active on this issue and others – a hearing was held last week on this issue and a hearing scheduled next week on Internet gaming.

Stay tuned here as we track legislative progress on these gaming-related measures.

Constitutional Amendments for Vegas-Style Gaming get Traction in Georgia and Tennessee this Week

Some movement this week in Georgia and Tennessee on proposed constitutional amendments to authorize full casino gaming.  We break it down for you here:

HR 807 in Georgia

On Wednesday, Representative Ron Stephens (R-Savannah) introduced HR 807, a House Resolution proposing an amendment to the Georgia Constitution to permit the General Assembly to authorize through legislation up to six casinos in the state.

The amendment would require a local public referendum approving the resort facilities. Additionally, the resort facilities would be spread throughout the state in five distinct licensing regions. Two license may be permitted in one region (Atlanta) with a “primary casino gaming license” and a “secondary casino license.”

The secondary license would be limited to 2,000 total gaming positions while primary licenses would have no restriction on total gaming positions.

State revenue derived from gaming will go to fund educational programs, support operational expenses associated with regulation of the casinos, to support problem gambling initiatives and to host municipalities of the casinos.

Rep. Stephens simultaneously filed HB 677, the proposed 127-page gaming legislation to be implemented upon approval of the constitutional amendment. HB 677 outlines the capital investment requirements for the “primary casino gaming licenses” in the various regions: $1 billion in Region One (Atlanta) and $200 million in Regions 2 through 5. License fees are proposed at $25 million for the primary license in Region One, $10 million for the secondary license in Region One and $10 million for the primary licenses in Regions 2 through 5. The facilities would be subject to a 12% tax on gross gaming revenue.

HJR 87 in Tennessee

The Tennessee State Government Subcommittee received House Joint Resolution 87 this week. This constitutional amendment would permit the Legislature to authorize casino gaming in Tennessee. Unlike the Georgia proposal, HJR 87 does not limit the Legislature in the number of casinos it can authorize.

HJR 87 would require state revenue derived from gaming to be allocated to K-12 education or problem gaming programs, as well as to administer and regulate gaming operations in the state.

HJR 87 was before the State Government Subcommittee on Wednesday and was deferred to a summer study.

We’ll keep you updated here if there is any movement on these bills.

Video Gaming Bill Reintroduced in Pennsylvania

Pennsylvania House Bill 808, introduced this week, would authorize video gaming machines for video poker, bingo, keno and other games in establishments with valid liquor licenses, such as restaurants, bars, taverns, hotels or clubs, in Pennsylvania. Similar legislation was introduced last year, and we provided an analysis of that bill here. In addition to providing an overview of the legislation, this Alert highlights the many similarities and distinct differences between House Bill 808 and last year’s legislation.

What’s Authorized

Licensed establishments with less than 2,500 square feet would be permitted up to five video gaming terminals. One additional terminal would be permitted for every additional 500 square feet, up to a maximum of 10 terminals. In comparison, last year’s legislation authorized up to only three machines at an establishment.

Maximum wagers are held to $2.50 with a maximum payout of $500 and a payout percentage of 85 percent. The only change from last year’s legislation is a reduction from $1,000 to $500 on the maximum payout.

To read the full text of this Alert, please visit the Duane Morris website.

Bill Calling for Special Lottery for Funds for Repayment of Bond Indebtedness for Mass Transit Introduced in Pennsylvania…Again

A new bill would authorize a minimum of 12 special purpose lotteries in Pennsylvania “for the purpose of providing a source of funds for the repayment of indebtedness on bonds issued for the development of mass transit as economic development projects” in the Commonwealth.

Under HB 799, introduced yesterday and referred to the Pennsylvania House Gaming Oversight Committee, the funds from the special lotteries would be placed in a special fund known as the Economic Development Fund for Mass Transit. The special lotteries would be earmarked for specific projects and advertising and tickets associated with each special lottery would identify which project that lottery benefits.

This is not the first time this bill has been introduced…or the second. The bill’s sponsor, Representative Harry Readshaw, is making his third attempt with the bill. In each of the previous two sessions, Representative Readshaw’s special lottery bill has died in committee. Could budget woes make this third time a charm? We’ll keep you updated here if this bill moves. Stay tuned.

Oral Argument on NJ Sports Betting – What Does “Authorize” Mean?

Today’s oral argument in the United States Court of Appeals for the Third Circuit, on whether New Jersey’s partial repeal of its prohibitions on sports betting, repeatedly came around to one question:  what does it really mean to “authorize” something?  No clear answer was apparent by the end of the argument.

To put the importance of this concept into context, it’s important to look at the Professional and Amateur Sports Protection Act (“PASPA”).  That statute makes it unlawful for a governmental entity to “sponsor, operate, advertise, promote, license, or authorize by law or compact” sports betting.  New Jersey’s first challenge to PASPA was its constitutionality – that it violated the Tenth Amendment to the United States Constitution because it commandeered the legislative power of the state.  The courts rejected that challenge, finding that the state was not commandeered because “we do not read PASPA to prohibit New Jersey from repealing its ban on sports wagering” and determining “what the exact contours of the prohibition will be.”

Against this backdrop, New Jersey repealed its criminal sports betting prohibitions to the extent that they prohibited sports betting at casinos, racetracks, or the sites of former racetracks operational within the last fifteen years.  The sports leagues sued, claiming that this partial repeal amounted to an authorization of sports betting at these facilities – which are heavily regulated by the State already.

Today’s argument centered around that point-  what does it mean to authorize, and is there a distinction between authorizing something and repealing a prohibition on it?  The state argued that it was simply following the Third Circuit’s prior decision that said that the state was free to set the contours of its prohibition on sports betting.  The state also argued that there is a distinction between authorizing something by law and repealing a criminal prohibition on that activity.  Former Solicitor General Theodore Olson, on behalf of the state, said that the Court’s prior opinion said that to “authorize” requires some affirmative act, but the panel seemed to suggest that that statement was dicta and the precise question of whether authorizing requires an affirmative act was not before the Court at that time.

Interestingly, Judges Rendell and Fuentes observed that of all the things prohibited by PASPA, “regulating” is not one of them.  Judge Fuentes suggested that if the state prevails in this case, perhaps the state could still regulate sports betting and be consistent with PASPA, rather than have sports betting operate in an unregulated space.

Former Solicitor General Paul Clement, on behalf of the Leagues, also confronted the question of what it means to authorize, with Judge Rendell pressing him on whether “authorizing” required the implementation of some sort of scheme, or required the state to do more than just repeal a prohibition.  The leagues cited to the legislative history of PASPA, saying that Congress was concerned with stopping casino-style sports betting, and that New Jersey’s partial repeal does exactly that.  The leagues argued that a partial repeal that keeps the vast majority of the statute in place amounts to a state authorization.  Judge Fuentes asked how far the repeal had to go in order to comport with PASPA.  The leagues argued that the repeal cannot be limited to just a few licensed venues in the state.  The leagues suggested that it would be acceptable to repeal the sports betting prohibition to permit wagers under $100, limited to family members or acquaintances.  The leagues further suggested that at least half of a statute needs to be repealed in order for it to be a true partial repeal rather than an implicit authorization.

Despite the thorough, spirited argument, it was very difficult to predict which way this decision might go.  Each side can probably point to different comments by the panel to suggest leanings, but we won’t know the final outcome until the decision comes out – probably in several months.