Pushes for the legalization of gambling in Pennsylvania started in the 1980s. However, the crime and violence in Nevada served as examples of what casinos and gambling can do to a state. As they viewed it, gambling would cost the government more than it would benefit the state.
However, the laws were changed in 2004 with the establishment of the Pennsylvania Gaming Control Board (PGCB). The state enacted laws that allowed various forms of gambling, including race tracks.
Online gambling hasn’t been legalized in PA till 2017. Traditional casinos had launched campaigns against the legalization of online casinos, and this slowed down the progress of the industry. But since a lot of the state’s funds were flowing to online casinos legalized in places like Nevada, PA had to act faster.
Today, PA brings in the second-highest amount of revenue from gambling, and it is just after Nevada. It is interesting to note that many states have larger numbers of casinos, both online and offline, compared to Pennsylvania. So, how exactly did the state manage to rake in $3.5 billion in gambling revenue in 2019?
How Does PA Get Money from Gambling?
First, we need to determine how the state generates revenue from gambling. A large proportion of the income the state gains is from the taxes charged on casinos. These taxes are among the highest in the country.
Another key source of revenue for the state is the licensing fee charged on traditional and online casinos. Lottery expansion and mini-casinos also generate large amounts of money for PA.
Land-based casinos make money in many different ways, including the sales of drinks and food. This revenue is taxed, although it is not classified as a gambling one.
Online Sports Betting Legalization
PA was among the first states to legalize online sports betting, and that has given them an edge over other jurisdiction. Operators in the state have to pay some of the steepest taxes for sports gambling.
For bets placed in land-based facilities and online sites, the operators have to pay taxes of 36%. It is quite high, especially when compared to the rates of other states.
For example, Nevada, the state with the highest tax revenue, collects 8.5% on all bets placed in land-based casinos. Online sportsbooks in Nevada pay a slightly higher rate of 13%.
Presently, more people are turning from standard sports betting to online alternatives. By July of 2019, the state of PA was able to rake in close to $980,000 from online sports betting. This amount would rise to about $5.3 million by November of the same year.
Online Slots Taxes
Slots are the most popular casino games, particularly on online sites. According to Jpost, slots constitute 70% of all the games played in online casinos. Their availability on mobile devices has only helped to boost their popularity among gamblers.
The state of Pennsylvania understands this fact and charges very high taxes on slot machines. At 54%, the state makes even more money than the casinos. Since July 2019, the revenue collected from slot machines has been rising dramatically.
In July, the state managed to collect just under $300,000 from slot machines, and the total amount of online casino tax was about $360,000. In only five months, the revenue gained from slots rose to $2.7 million. That November, the total amount compiled by the state in online casino tax was $3.1 million.
The rest of the money was collected from table games. The tax rate for table games is currently set at 16%.
These games provide a good chunk of the money, but not nearly as much as slot machines. In July of 2019, the state obtained about $47,000 in table game taxes.
By November of the same year, the funds had only risen to about $415,000. Remember, it is the same month when PA raked in $3.1 million from online slot machines.
According to The Inquirer, 72% of all the gaming revenue in PA was obtained from slot machines in 2019. It shows a 1% increase from the previous year.
Casino Licenses
PA also gets a cool amount of money from licensing fees. To start an online sportsbook in the state, an operator has to front $10 million just for the license. Being such a large amount of money, many operators have had to partner with existing companies to offer the services.
A fully-fledged casino may have to pay a total of $78 million for the license. Besides, the state charges extra fees on sites offering daily fantasy sports, online lotto games, keno, and virtual sports.
As seen on Wikipedia, online casinos have to be licensed in PA to advertise their services in the state. However, players can always sign up with sites that are licensed in other states. As such, they can’t be subjected to legal repercussions for betting with sites that are not licensed in Pennsylvania.
Do Players Pay Taxes on Their Winnings?
The one advantage players can enjoy is that they don’t need to pay taxes on their winnings from online casinos. However, it is believed the casinos will pass on the taxes to the players in some way.
One of these ways is by setting poor odds on the games. Some may also charge players for depositing or withdrawing funds.
Conclusion
Pennsylvania licensed casinos and sportsbooks in an attempt to boost their budget. The state has been successful in funding their activities with gambling money, having raised $3.5 billion in gambling revenue.
PA primarily raises the money by charging licensing fees and taxing the gambling facilities very highly. The license for an online sportsbook in the state is $10 million, and a fully-fledged online casino will need to pay for a license of close to $80 million.
The taxes are charged on the operators and not the players. Slot machines give the state the highest amounts of money since these games are highly popular. Also, the rates for slot machine bets are very high. Sportbooks also have to pay high taxes of 36% on the bets placed.