There is a huge black market that pays zero tax,” Greg Carlin, CEO of Rush Street Gaming, whose company operates two casinos in Pennsylvania, told USA TODAY Sports. “If legal sports betting is going to be a regulated and successful business, the tax rates can’t be so high that it makes it impossible to compete with the black market.”
Pennsylvania is seeking a $10 million licensing fee, along with a state tax of 34% on gaming revenue. By comparison, Nevada – the only state before Monday that had legalized, state-sanctioned betting – pays 6.75% to the state. All states must pay a federal excise tax, which equates to about another 5%.
It’s a sticker price that has given multiple companies pause, including two that operate gambling establishments in the state: Rush Street (Rivers Casino in Pittsburgh and Sugar House Casino in Philly) and Penn National Gaming (Hollywood Casino in Grantville).
“We haven’t made a final determination on whether to pursue sports betting in Pennsylvania,” Jeff Morris, vice president of public affairs and government relations at Penn National Gaming, said in an email to USA TODAY Sports. “In addition to the high application and annual licensing fees, the challenge will be trying to make the 34% tax rate work – this would be the highest tax rate in the world on sports betting. For comparison, West Virginia recently passed a sports betting law at a 10% tax rate, which is the range most states are considering.”
New Jersey is expected to tax gaming revenue between 8%-10%, and Mississippi, another state that could launch sports gambling in the coming week, will have a tax of 8%.
Carlin said Rush Street Gaming “hasn’t made a decision” to launch sports betting under the current terms, although he didn’t rule out jumping into the market to keep a competitive advantage if others decide to pounce.
“There could be circumstances that we would get in, even if it means we aren’t going to make any money and possibly lose money,” Carlin said. “We are still assessing costs and making projections. We want to see the regulations are completed.”
Pennsylvania Gaming Control Board spokesperson Doug Harbach said that likely won’t happen until next month, at the earliest. Harbach said the agency has had conversations with potential sports gaming operators, although it’s too soon to conclude how many – or if any – will agree to the current fee and tax rates: