On October 30, 2017, Pennsylvania Governor Tom Wolf signed House Bill 271 into law as Act 42. The law amends the Pennsylvania Race Horse Development and Gaming Act. Among the amendments, Act 42 authorizes interactive gaming (“iGaming”), video gaming terminals (“VGTs”) at truck stops, internet lottery (“iLottery”), tablet gaming at airports, fantasy sports contests, and ancillary slot machine facilities.

The following is a high-level summary of key components of Act 42:

iGaming

• Authorized categories of internet gaming
  • Peer to peer (i.e. poker)
  • Non-peer-to-peer, which simulate table games (internet roulette, blackjack, etc.)
  • Non-peer-to-peer, which simulate slots (internet slots)

• Number of licenses:
  • 39 licenses permitted, 13 per category of license
  • The Pennsylvania Gaming Control Board (the “Board”) may issue one of each type of iGaming certificate for each of the authorized Category 1, 2, and 3 slot machine licenses
• Timing of petitions and license fees:
  • Within the first 90 days that the Board begins accepting petitions, slot machine licensees may petition to offer all three categories of iGaming
    • License fee: $10 million
  • Between 90 days and 120 days, slot machine licensees may petition to offer one or more categories of iGaming
    • License fee: $ 4 million per category of license        
  • After 120 days, qualified gaming entities licensed in any jurisdiction may petition to offer one or more categories of iGaming
    • License fee: $ 4 million per category of license
  • iGaming operators (i.e. certificate holders’ operating partners) must also petition for a license
    • License fee: $1 million
• Tax rates:
  • 14% on peer-to-peer games and a 2% Local Share Assessment (“LSA”)
  • 14% on non-peer to peer table games and a 2% LSA
  • 52% on non-peer-to-peer slots and a 2% LSA
• Facilities:
  • Devices and equipment may be located in a restricted area on the licensed facilities’ premises, a restricted area within the same county as the licensed facility or any other area approved by the Board
• Authorizes the Board to enter into reciprocal internet gaming agreements with other states

Airport Gaming Tablets

• Only ticketed passengers beyond security may play
• License fees based on airport:
  • Philadelphia: $2.5 million
  • Pittsburg: $1.25 million
  • Other international airports: $500,000
  • All other airports: $125,000
• Tax rates:
  • 14% on peer-to-peer games and a 2% LSA
  • 14% on non-peer to peer table games and a 2% LSA
  • 52% on non-peer-to-peer slots and a 2% LSA

VGTs

• VGTs may only be operated at truck stops that:
  • Have diesel islands used for fueling commercial motor vehicles;
  • Have sold, or are projected to sell, on average 50,000 gallons of diesel or biodiesel each month for 12 consecutive months;
  • Have at least 20 parking spaces for commercial motor vehicles;
  • Have a convenience store;
  • Are situated on a 3+ acre parcel of land; and
  • Are not located on property owned by the Pennsylvania Turnpike.
• Maximum 5 machines per location
• Application and License Fees:
  • Manufacturer supplier: $50,000 application fee + $10,000 license fee
  • Terminal operator: $25,000 application fee + $10,000 license fee
  • Establishment: $1,000 application fee + $250 license fee per VGT
• Tax rate:  42% tax + 10% LSA
• VGT operators must pay 15% of total gross revenue to the establishment licensees
• Requires connection to central control computer system operated by the Department of Revenue
• Counties hosting Category 1, 2 or 3 licensee may opt out within 60 days of October 30, 2017

Category 4 'Ancillary' Licenses

• Successive competitive bidding for up to 10 locations
  • The Board will conduct separate auctions for each of the 10 licenses
  • Minimum bid: $ 7.5 million
  • Initial rounds will be open to Category 1 and 2 licensees (only 1 per licensee in first round)
  • Initial auctions occur between January 15 and July 31, 2018
  • If all 10 licenses are not awarded during the initial round of auctions, the Board may allow Category 1, 2, and 3 or other qualified entities to bid
    • A non-licensee winning bidder is subject to a $10,000 fee per slot machine
• Winning bidders are entitled to select an exclusive location with a 15-mile radius
• Category 4 facility may not be located within 25-mile radius of an existing casino (unless winning bidder owns the existing casino)
• Category 4 licensees may operate 300 to 750 slots (from existing authorization)
• A Category 4 licensee may petition for a table game certificate to operate up to 30 table games (expandable to 40 after 1 year)
  • Table game certificate fee: $2.5 million
• Tax rate:
  • Slots: 50% tax + 4% LSA
  • Table games: 12% tax + 2% LSA
• Municipalities may opt out by December 31, 2017

Fantasy Contests

• License fee: $50,000 ($10,000 Renewal Fee)
• Tax rate: 15%
• Fantasy contest operators must offer contests limited to beginners
• Casinos may offer fantasy contest terminals

iLottery

• Permits online sale of internet instant games and other lottery products
• Casino style games are prohibited

Casino Simulcasting

• Category 2, 3, and 4 licensed gaming entities may conduct casino simulcasting by agreement with a Category 1 licensed entity
• No authorization fee
• Tax rates:
  • 1.5% on all win, place, or show wagers
  • 2.5% on all exotic wagers

Sports Wagering

• Sports wagering authorized “if and when” federal law permits states to regulate sports wagering
• Fee upon authorization: $10 million ($250,000 renewal fee)
• Tax rate upon authorization: 34% tax

Category 3 Modifications

• Requirement that a gambler must also take part in other amenities offered by the establishment eliminated for payment of $1 million fee
• Slots may be increased by 250 units (to 850) with payment of $2.5 million fee
• 15 Non-banking tables may be added for payment of $ 1 million fee
• Third Category 3 license is eliminated

Miscellaneous

• Multistate wide-area progressive slot machine systems permitted
• Skill slot machines permitted
• Five year renewal period for all licenses

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