Pennsylvania has finally awarded licenses for sports betting, which was legalized in 2017. It has been legal on a federal level since May, so it is surprising that the state has only now awarded two sports betting licenses.

There was a lengthy application and review process before the Pennsylvania Gaming Control Board issued the state’s first licenses for sports betting. The licenses went to Parx Casino and Racing and to the Hollywood Casino, which is located on the Penn National Racecourse.

Parx Casino and Racing had applied for a license in August when the application process was opened, shortly after Hollywood Casino owners had done the same.

They have to pay a license fee of $10m (￡7.6m) in addition to a 36% tax on revenues from sports betting.?This is considerably higher than any sports betting tax found in other states where the activity is now legal. It compares to 6.5% in Nevada, 9.25% in New Jersey, and 10% in West Virginia.

This high tax rate was seen as a deterrent for parties interested in applying for a sports betting license in Pennsylvania, but three other operators are waiting to hear back from the Gaming Control Board to see if their applications were successful.

Road to legalization

Pennsylvania has been undergoing significant changes to its gambling picture since 2017.

Online gambling and sports betting were legalized in October 2017. This was in anticipation of the federal sports betting ban being ended in 2018. While they were quick off the mark to push through a bill, they were not the quickest to open up the actual sportsbooks in the region.

Pennsylvania is behind only Nevada in annual gambling revenues. They have had a very successfully lottery since 1971; more than $28bn (￡21.4bn) has been contributed to social causes over the years.

The legalization of sports betting always seemed to be a natural evolution.

Multiple sports betting hurdles

Several factors explain the delay in the issuance of sports betting licenses. A significant problem arose between the state gambling regulators and the casinos in Pennsylvania.

The state launched an iLottery platform where residents could buy lottery tickets online and play some instant-win games. These were similar to casino-style slots games, which are not supposed to be offered by the state.

With the casinos planning to launch their own online offerings, this was a major issue. A group of them came together and filed a lawsuit against the state regulator.?As this issue was rumbling on, both parties were not as focused on the sports betting side of things.

Criticism was also leveled at the way licenses are being issued. The $10m license fee is deemed to be excessively high in addition to the 36% tax rate that was previously mentioned.

The current situation

In addition to the two casinos that have received their sports betting licenses, Harrah’s Philadelphia Casino and Racetrack and Rush Street Gaming are waiting to hear if their applications were successful.

Caesars Entertainment, which owns Harrah’s, wants to offer sports betting both online and offline. Rush Street Gaming operates the SugarHouse Casino in Philadelphia.

Rush Street has already received the green light to offer online gambling after they were awarded a license in July but will have to wait until the next board meeting to find out if its application for a sports betting license was successful.

That meeting is scheduled for October 31. It will be a public meeting to discuss the two applications. Both applicants will make presentations providing details such as the planned timeline for a sportsbook opening.

Another applicant, Rivers Casino, has withdrawn its application without explaining why. That withdrawal means that there is more opportunity for an out-of-state operator to get involved in the market.

It will take a number of weeks for the two sportsbooks to get up and running. They will be disappointed to have missed out on the start of the NFL and NHL seasons, which would have attracted significant sports betting revenues.