Gaming in the United States: Pennsylvania: overview
A Q&A guide to gaming in the United States: Pennsylvania.
The Q&A provides a high level overview of the legislative framework of gambling regulation; the regulatory authorities; gambling products; land-based gambling; regulation and licensing; online gambling; B2B and B2C operations; mobile gaming and interactive gambling; social gaming; gambling debts; tax; advertising and developments and reform.
To compare answers across multiple jurisdictions, vist the Gaming Country Q&A Tool.
This Q&A is part of the Gaming Global Guide. The gaming global guide serves as a starting point for understanding the regulatory framework of land-based and online gaming.
Legislative framework of gambling regulation
The Pennsylvania Criminal Code makes any form of gambling that is not specifically exempted by the legislature illegal (18 Pa Laws § 5513). This statute is unusual, as it focuses on the actions of game operators, not the players. It specifically prohibits operation, solicitation, or allowing unlawful gambling. Violation of the law is a misdemeanour. Beyond this general prohibition, the following acts have exempted and control permissible gambling in the state:
The Pennsylvania Race Horse Development and Gaming Act (Gaming Act) (4 Pa Laws § 1101 et seq). This act:
established the Pennsylvania Gaming Control Board, which oversees all regulatory and enforcement matters related to gambling in the state. Currently, the law only covers land-based gambling, as that is the only form of gambling expressly authorised in the state;
authorises licensed casinos to offer table games and slot machines; and
oversees pari-mutuel wagering.
Act 7 (H.B. 941, 2016 Pa. Gen. Assemb., Reg. Sess. (Pa. 2016)). The newly passed Act 7 controls horse race wagering, and repealed prior legislation related to horse racing in the state.
State Lottery Law (72 Pa. Laws §§ 3761 et seq). This law governs Pennsylvania's state lottery. There are eight state-specific styles of lottery offered and three multi-state games. The state lottery law establishes the appropriate pay outs for winning each game and dictates the cost of playing the lottery and the price of lottery tickets.
The Local Option Small Games of Chance Act (10 Pa. Laws §§ 311 et seq).Pennsylvania allows non-profit organisations and taverns to offer small games of chance, such as pull-tab games, punch board and raffles. The act sets out the licensing requirements for such offerings.
The Bingo Law (10 Pa. Laws. §§ 301 et seq). This law authorises non-profit organisations to host charitable bingo games.
Definitions of gambling
There is no statutory definition of gambling in Pennsylvania. However, Pennsylvania courts have adopted the traditional, three-element definition that gambling includes (Commonwealth v Dent, 2010 PA Super. 47, 992 A.2d 190, 192 (Mar. 25, 2010, Sup. Ct. Pa.); Commonwealth v. Two Electronic Poker Game Machines, 502 Pa. 186, 465 A.2d 973, 977 (1983)):
Although a general definition is not provided, a state statute does define the consideration element as money or other value collected for a product, service or activity which is offered in direct or indirect relationship to playing or participating in a simulated gambling programme (18 Pa. Laws § 5513(f)).
As Pennsylvania has not legalised online gambling, there is no separate definition of online gambling under state law.
There is no a definition specific to land-based gambling under Pennsylvania law.
Pennsylvania Gaming Control Board
The Pennsylvania Gaming Control Board has authority over regulatory, supervisory, licensing and enforcement matters for all entities that fall under the Gambling Act.
The Board itself is made up of seven voting members. Three are appointed by the Governor. The President pro tempore of the Senate, Minority Leader of the Senate, Speaker of the House of Representatives, and Minority Leader of the House of Representatives each make one of the remaining appointments. The key task of the Board is to award licences. A qualified majority, meaning one of the gubernatorial appointments and the four legislative appointees, must approve each licence.
Within the Board, there are 14 separate divisions, called either offices or bureaus, handling day-to-day matters, including:
The Bureau of Licensing, which handles all licensing matters, including for casinos and their employees.
The Bureau of Gaming Operations, which handles issues such as compliance and audits.
The Bureau of Gaming Laboratories and Office of Information Technology, which handle field inspections, certification for slot machines and gaming kiosks, and other various technical support issues.
A separate Bureau of Casino Compliance, which is tasked with ensuring gaming integrity at casinos around the state, and assigns representatives to each casino to monitor activities and compliance.
On the enforcement side, the Bureau of Investigations and Enforcement and Office of Enforcement Counsel, which have regional offices throughout the state to enforce the laws and regulations at casinos within the state.
There are several other bureaus and offices within the Board that handle administrative, financial, communications, problem gambling and diversity matters.
State Horse Racing Commission (Racing Commission)
The primary task of the Racing Commission is oversight of the racing industry, including horse and jockey welfare, and track licensing. However, that authority necessarily covers pari-mutuel wagering as part of track licensing and management.
The Racing Commission is a new oversight body that was established by Act 7 in 2016. With the new arrangement, thoroughbred and harness racing are now under the same commission rather than separate governmental entities.
There are nine commissioners. The governor makes five appointments to the Racing Commission and must make appointments from both the thoroughbred and harness racing industries, and include one licensed veterinarian who is not a member of any horsemen's or breeders' association. The President pro tempore of the Senate, the Minority Leader of the Senate, the Speaker of the House of Representatives, and the Minority Leader of the House of Representatives each also make an appointment. The Secretary of Agriculture or their designee serves as a non-voting ex officio member.
Pennsylvania Lottery Bureau
The Pennsylvania Lottery Bureau sits within the Department of Revenue. It is responsible for management of all lottery games, collection of revenue and taxes, and disbursement of benefits to selected programmes. Additionally, the Lottery Bureau is tasked with licensing all ticket retailers and ensuring that retailers provide the appropriate revenues from lottery ticket sales to the state.
Local authority over gambling
County treasurers can issue club licences for small games of chance. The Pennsylvania Liquor Control Board has licensing authority over tavern gaming and can also impose penalties for violations of the law.
As unlawful gambling is a misdemeanour in Pennsylvania, state and local police along with state district attorneys can investigate and prosecute violations of the criminal code pertaining to gambling.
Poker has been listed as a table game in the Gaming Act and is subject to regulation by the Pennsylvania Gaming Control Board. All forms of poker are currently permitted under each casino's licence.
General non-sports betting is not permitted in Pennsylvania, and therefore no requirements are in place.
The only sports betting permitted in Pennsylvania is pari-mutuel wagering on horse racing. Pari-mutuel wagering includes manual, electronic, and computerised forms of wagering based on the outcome of the horse race. Either the racing facility or a licensed secondary pari-mutuel organisation can hold the pool.
Pennsylvania does not separately classify or define casino games.
Slot and other machine gaming
A slot machine is defined broadly under the legislation (4 Pa. Laws § 1103). Pennsylvania has a robust classification system for slot machines, as this was the first type of gambling permitted after the Gaming Act was passed. The law established three categories of licensing for slot machine operators, depending on the type of licensee (see Question 5).
Pennsylvania does not offer terminal-based gaming.
Bingo as a game is specifically defined in Pennsylvania law (10 Pa. Laws § 303).
Pennsylvania operates a state lottery. While the law does not expressly define lottery other than to note that the state will run one, it differentiates the state lottery from keno and internet instant games (72 Pa. Laws § 3761-302).
Licences can be for:
Slot machines. These include:
Category 1, which permits slot machines at race tracks, but limits it to seven licensed facilities around the state. As of 2016, six of the licences have been awarded;
Category 2, which permits stand-alone casinos to open and operate slot machines in designated cities or tourist locations. Licence holders in category two are permitted to have up to 5,000 slot machines. There are five Category 2 licences, and four have been awarded; and
Category 3, which is for resort casinos and only allows for up to 600 machines. The law allows for two such licences, both of which have been awarded.
Racetracks. All available licences for pari-mutuel wagering tied to horse racing have been issued.
Small value gaming. Bingo and other small games of chance are licensed through local governing bodies. These are granted for either continual games or for special events.
There are no overall limitations on application for slot machine licensing. Licensing for small games of chance is limited by statute to eligible organisations, such as charitable organisations or taverns.
The application procedures are as follows:
Slot machine licences. Applications for slot machine licences are only accepted during the designated application filing windows, as set out by the Pennsylvania Gaming Control Board. The length of time for action on the application varies, depending on the complexity of the application, the applicant's previous experience, and other factors. The 68-page application is available online, including instructions for providing adequate information and documentation. The documentation required includes corporate structure information, financial disclosures on salary, stocks, profit sharing, and other gaming licences the business holds.
Racetracks. Pennsylvania has issued all available licences for thoroughbred and harness racetracks.
Small games of chance. To apply, interested organisations or taverns should contact the county treasurer where they wish to hold their game.
Duration of licence and cost
The duration and cost of slot machine licences are:
Category 1 and 2 licences: US$50 million application fee, valid for three years. Can be renewed for US$1.5 million.
Category 3 licences: US$5 million application fee, valid for three years. Can be renewed for US$150,000.
Gambling is generally prohibited, other than for the listed exceptions for pari-mutuel horse race wagering, slot machines at appropriate venues, lottery, and small games of chance. To gamble in any of these venues, a player must be 18 at a pari-mutuel, or 21 at a casino.
Pennsylvania does impose some social responsibility requirements. Placards bearing information about problem gambling and the related hotline phone number must be posted in venues with gambling. Otherwise, the only other restrictions are set out in the various types of licences.
Anti-money laundering legislation
While Pennsylvania criminalises money laundering, the statute does not impose any specific obligations on gaming operators.
Online gambling (including daily fantasy sports) has not been legalised in Pennsylvania. As such, there is no licensing regime. However, the Pennsylvania legislature is considering a bill that would legalise online poker, daily fantasy sports, and some forms of mobile gaming at specified airports. The House passed a bill with these elements in October 2016, but the Senate has been slower to take up the issue. Nonetheless, the legislation is still pending, and the Senate is expected to consider this bill after the autumn 2016 elections. If the bill were not to pass during the 2016 legislative session, Pennsylvania would need to start the legislative process at square one in 2017.
As online gambling is not legal in Pennsylvania, there are no limitations or requirements imposed on operators. However, the Pennsylvania legislature is currently considering new laws to legalise online gaming. The proposed law would legalise online poker, daily fantasy sports, and some forms of mobile gaming at specified airports. While the House has tried to move quickly on this bill, the Senate has been less receptive and is not expected to take up this legislation until the election season.
B2B and B2C
Mobile gambling and interactive gambling
Social gaming is not separately regulated in Pennsylvania but is generally permitted under the current laws of the state. Currently, game operators can offer free-to-play or no-prize games without a licence.
While there are no specific regulations or laws on social gaming, other laws and prior case law provide some guidance. Pennsylvania courts have analysed consideration in the coin-operated machine context and concluded that free play or entertainment do not constitute a prize. These games were ruled to be lawful. Under this reasoning, social games that are either free to play or do not offer prizes would be permissible. This would include "freemium" games, where a player can play for free but has the option to purchase in-game add-ons to enhance their gameplay.
At this time, Pennsylvania does not appear interested in addressing social gaming with further legislation or regulation.
The applicable tax rates are:
Personal income tax. Gambling winnings, both in and out of state, are taxable income at the personal rate of 3.07%. This includes non-cash winnings, such as vacations or automobiles. However, lottery winnings are not taxable in Pennsylvania.
Casino taxation. This is levied at:
55% on slots (highest in the US);
16% on table games.
Pari-mutuel. This is levied at a variable rate depending on the amount of the pool, with the smallest pools of US$0 to US$100,000 taxed at 3.25%, and pools over US$1 million taxed at 8.75% on the entire pool.
As online gambling is illegal in Pennsylvania, there is no applicable tax regime.
Advertising is permitted for land-based gambling. However, the Gaming Act and Pennsylvania Gaming Control Board regulations require that all marketing or advertising material offered to the general public must have a statement about problem gambling (including signs, billboards, print or radio advertisements). The text and design of the statement must be submitted for approval to the Office of Compulsive and Problem Gambling at the Pennsylvania Gaming Control Board.
As online gambling is not officially legalised in the state, there are no laws pertaining to advertising for online gambling.
Developments and reform
The major changes in land-based gaming in Pennsylvania have occurred over the past 12 years. For most of the state's history, gambling was illegal, except for horse race wagering and lottery. Only in 2004 did the initial form of the Gaming Act pass, legalising casinos and slot machines. The Gaming Act has been updated since then, most significantly in 2010, when it was expanded to permit all card games.
In addition, 2016 saw the overhaul of horse racing and wagering legislation with Act 7. Act 7 repealed the Race Horse Industry Reform Act, which had been in place for several decades. The new act established a new single commission to manage both thoroughbred and harness racing and gave control of gambling issues to the Pennsylvania Gaming Control Board.
There is no online gambling history in Pennsylvania.
A gambling expansion bill was introduced during the summer 2016 legislative session. The bill includes four elements to expand land-based gaming:
The bill would allow for video gaming terminals at truck stops and establishments licensed for the sale of alcoholic drinks (but not hotels and grocery stores). The video terminals would be limited to a maximum US$2.50 wager and US$1,000 pay out.
The bill would allow slot machines at select state airports.
The bill would authorise the Pennsylvania Gaming Control Board to licence slot machines at the state's ten off-track-betting venues.
The bill contains a provision that sports betting would be legal in Pennsylvania if blocking federal provisions (such as the Professional and Amateur Sports Protection Act) were to be removed.
This bill did not pass when initially introduced, but the legislators behind this bill remain optimistic that passage is likely during the fall session.
Online gambling legislation has been a hot topic in Pennsylvania, and the state hopes to have a final win in 2016 for legalisation. The legislature is in session until November 2016 and is expected to address online gambling during this time. The House has already approved a bill legalising online poker, daily fantasy sports, and mobile gaming at some state airports. However, the Senate has not acted on the legislation and is unlikely to move until after the autumn 2016 elections.
Included in the gambling expansion bill introduced over the summer of 2016 (see above) were several provisions related to online gambling. As contemplated in the bill, already-licensed casinos would be authorised to offer online gambling website and mobile applications. There is also a daily fantasy sports provision that would officially legalise this form of online gambling. The anticipated revenue from online gambling for the state is US$100 million per year.
As with the land-based provisions, legislators remain optimistic that online gambling will be legalised this year. The current state tax bill includes the anticipated US$100 million in revenue from online gambling, suggesting the legislature expects the gambling expansion to pass.
Casinos have also signalled their support and expectation of success, as they have begun to offer online gaming to next-door neighbour New Jersey. Having already entered the New Jersey online gaming market, these casinos will be ready to do the same in Pennsylvania as soon as the law is passed.
The current proposed legislation has made significant progress. If the Senate returns to it during the 2016 legislative session, online gambling could become legal in Pennsylvania in the near future. If the Senate does not approve online gaming in 2016, both houses of the legislature will need to start over during the 2017 legislative session. Even if legalisation is delayed until 2017, significant positive momentum has been established to legalise online gaming in Pennsylvania.
There is no expected legislative or regulatory action on social gaming in Pennsylvania.
The regulatory authorities
Pennsylvania Gaming Control Board
Description. The Pennsylvania Gaming Control Board has authority over regulatory, supervisory, licensing, and enforcement matters for all entities that fall under the Gambling Act.
Pennsylvania State Horse Racing Commission
Description. The Commission is primarily responsible for oversight of the racing industry, such as horse and jockey welfare, and track licensing. That authority necessarily covers pari-mutuel wagering as part of track licensing and management.
Pennsylvania General Assembly
Description. This website is maintained by the state legislature and is up-to-date with current law. It contains the full text of the law.
Description. This website provides access to the Pennsylvania Code. This website is maintained by the state legislature and is up-to-date with current law.
A Jeff Ifrah, Founder
Professional qualifications. US attorney admitted to the bar in New York, New Jersey and the District of Columbia.
Areas of practice. US government investigations; igaming law; financial services and payment processing; digital media law; white collar defence; e-commerce.
Non-professional qualifications. Named 2015 Litigation Trailblazer by the National Law Journal; Listed in Chambers & Partners (USA) for Gaming & Licensing (Nationwide 2015-2016) and White Collar Crime and Government Investigations (Washington, DC 2011-2016); Named 2015 White Collar Crime Local Litigation Star by Benchmark Litigation; Listed as Outstanding Fraud and Compliance Lawyer by Nightingale's Healthcare News; Listed as "Expert News Source" in Corporate Governance and Securities, and Health Care/Pharmaceutical, by LexisNexis.
- Legal representation of the world's largest online gaming operator.
- Serves as Special Internet Counsel for the Delaware State Lottery.
- Negotiated historic agreement between the US Department of Justice and high profile clients following the federal internet-gambling ban in 2011.
- Won dismissal of 56 separate felony counts for gaming odds-master regarding criminal allegations tied to a multi-million dollar sports betting ring.
- Won standard-setting victory for internet operator related to an international jurisdiction matter following a related US Supreme Court ruling.
- Founded the iDevelopment & Economic Association (iDEA), a trade association advocating for the interests of online interactive entertainment companies worldwide.
Languages. French, Hebrew
Professional associations/memberships. International Masters of Gaming Law; UNLV Gaming Law Journal Advisory Board; Online Gambling Lawyer Editorial Board; ABA Criminal Justice Section, American Health Lawyers Association, ABA Business Law Section, National Association of Criminal Defense Lawyers, ABA Procurement Law Section
- Articles Appearing in the Houston Chronicle, Law360, iGaming Business, Gaming Intelligence, eGaming Review, NLJ.
- Federal Sentencing for Business Crimes (LexisNexis), only comprehensive treatise on federal sentencing for business and white-collar crimes.
- The Definitive Guide to iGaming in the US, white paper covering the history, business opportunities, individual state legislation and future of iGaming.
Jessica Feil, Associate
Professional qualifications. US-based attorney admitted to the bar in Ohio and District of Columbia; Case Western Reserve University School of Law, JD
Areas of practice. US government investigations; igaming law; financial services and payment processing; digital media law; white collar defence; e-commerce.
Non-professional qualifications. Bachelor of Arts, Skidmore College
- Compiled a 50-state survey on the laws applicable to mobile social gaming for the world's largest online poker operator.
- Formulated a favourable plea deal for client accused of bank/wire fraud and money laundering for processing offshore gambling payments.
- Conducted key discovery and research for a US federal civil case with allegations of fraud and breach of contract involving a Native American tribe.
Professional associations/memberships. Women's Bar Association, Order of the Barristers
- iGaming Business North America, Online Gambling Lawyer (formerly World Online Gaming Law Report), eGR North America, Law360.
- Case Western Reserve Journal of International Law, "Cyberwar and Unmanned Aerial Vehicles: Using New Technologies, from Espionage to Action".