Filing the petition on 29 July, casinos such as Stadium Casino, Chester Downs, Rivers Philadelphia, Parx Casino Shippensburg, Wind Creek and Greenwood Gaming have requested “declaratory and injunctive relief” after considering the state’s lack of taxation on unlicensed operators and machines as “unconstitutional”. 

The petition has named the Pennsylvania Department of Revenue, along with its Secretary Patrick M Browne, and the Pennsylvania Gaming Control Board as respondents, demanding that taxes be “uniform, upon the same class of subjects”.

Casinos have issued the petition after considering the Pennsylvania Gaming Act’s “substantial” ~50% tax on slot machine revenue as “unconstitutional” due to the lack of taxation on unlicensed gaming operators offering skill and hybrid games. 

In 2023 alone, licensed operators contributed around $1.2bn in taxes through the ~50% slot machine revenue tax law, while unlicensed operators contributed 0% of their revenue from slots, skill or hybrid games. 

The petition claims that since the Gaming Act was first introduced in 2004, over $20bn in revenue has been collected from slot machine taxes alone. 

As a result of these findings, petitioners have claimed that the Gaming Act’s laws are being violated in numerous ways, stating that “there are numerous unlicensed entities in the Commonwealth operating devices that annually earn billions of dollars in revenue which, if earned by a licensed casino, would be taxed as slot machine revenue”. 

Skill and hybrid slot machines

In 2017, amendments were made to Pennsylvania’s Gaming Act to change the definition of a slot machine to include skill and hybrid slot machines. Skill and hybrid slot machines implement at least a slight element of skill into a game of chance to be differentiated from a standard slot machine. 

However, according to the petition, since the 2017 amendments to the Gaming Act, the operation of slot machines by unlicensed entities outside the framework of the Gaming Act has “expanded significantly”. 

The petition noted: “Recent estimates suggest that approximately 67,000 skill and hybrid slot machines are operating in the Commonwealth.”

It is believed that several unlicensed establishments, whether they be bars, taverns, convenience stores, gas stations, pizza shops, laundromats or other venues, are offering skill and hybrid slot machines without distributing any taxes from their machines’ revenue, and without age-restriction and accessibility laws implemented through licences. 

Referring to research from the American Gaming Association, the petition claimed that “these machines generate an estimated $1.9bn in revenue for unlicensed operators annually – close to the $2.5bn that Pennsylvania casinos earned from slot machines in 2023”.

The petition also refers to the violation of the Uniformity Clause of the Pennsylvania Constitution, which states that taxes be “uniform, upon the same class of subjects”. 

To affirm this belief, the petition set out to compare the similarities between slot machines and skill and hybrid machines that can be found in many unlicensed establishments. 

The petition named Banilla Games and Pace-O-Matic as two unlicensed skill and hybrid machine developers, delving into their cabinets to explain that their games are basically just slot machines with added mini-games with slight skill-based gameplay. 

One game, Pace-O-Matic’s Pirates title, had its gameplay showcased in a video included in the petition. The footage shows standard slot gameplay with players relying on chance for the vast majority of their wins. 

While skill-based gameplay does become implemented into these titles, the petition states that this is usually in the form of “time-consuming and difficult” memory games in which players are often required to remember lengthy sequences that take between 12 and 15 minutes to complete, just to win back around 105% of their original stake. 

The petition claimed that “all ‘skill’ and ‘hybrid’ games function like this”, and again referred to research from the AGA that showed 65% of those familiar with skill and hybrid slot machines state that they “are no different from slot machines where wins are based on random chance, and that even a skilled player cannot reliably influence the outcome”. 

Additionally, the petition noted that in 2023, Pennsylvania’s 1-800-GAMBLER hotline received 121 calls from individuals who identified ‘skill machines’ as their ‘most problematic gambling’ or ‘the gambling activity that the caller/subject has the most difficult time controlling’.  

The hotline also received another 68 calls from individuals who identified ‘non Casino – slots’ (defined as unregulated slots) as their ‘most problematic gambling’. 

Those 189 calls make up approximately 8% of all calls received by the hotline throughout 2023, which the petition refers to as “remarkable” considering unlicensed operators that offer these machines aren’t even required to advertise the responsible gambling hotline. 

Furthermore, the rise of ‘parlours’ in Pennsylvania was noted by the petition, suggesting that at least two have opened up in the state. These parlours are essentially often unlicensed game rooms dedicated to operating skill or hybrid slot machines, without regulation as to who can access them or where they can be located.

One Pennsylvanian parlour, the Keystone Klub, was mentioned specifically in the petition as the facility’s website advertises its “game room to play skilled games”, where customers “don’t have to sit at the back of a gas station or a loud smoke-filled bar or casino”. Instead, they can play in the “game room”, complete with complimentary “beverages and snacks” and the “best payouts”.

The Keystone Klub’s website advertises “recent winners” of “jackpot[s]” and “grand prize[s]”, showing thousands of dollars of winnings. The petition then included the following image to show the Klub’s offering, which looks similar to standard slot machines.  

The petition explained: “To date, the Commonwealth Court, as well as Courts of Common Pleas, have held that unlicensed entities are not prohibited from operating these skill and hybrid slot machines because the machines do not constitute ‘gambling devices’ or ‘slot machines’ under Section 5513 of the Crimes Code.

“In addition, the Commonwealth Court has held that the unlicensed operation of skill and hybrid slot machines is not subject to the Gaming Act’s regulatory framework.

“As a practical matter, these decisions effectively conclude that unlicensed operators of skill and hybrid slot machines are also not subject to the Gaming Act’s slot machine tax.”

Petitioners have underlined that they “vigorously disagree” with those decisions, leading to this very petition which asks for relief on four counts. 

Declaratory and injunctive relief

Firstly, on Count I, the petition demands a declaration from the respondents that the taxation laws on slot machines are constitutional. Count II, meanwhile, seeks a corresponding permanent injunction requiring respondents to collect taxes from revenue generated from all slot machines in the state, including those operated by unlicensed entities. 

Alternatively, the petitioners asked the Supreme Court to enjoin respondents from collecting slot machine taxes altogether. 

The petition read: “To avoid any immediate and disruptive effects on the Commonwealth’s tax revenue, Petitioners request that this Court stay such an injunction for 120 days to allow the General Assembly to correct the unconstitutionality of the slot machine taxes.

“To be clear, Petitioners do not seek to pay no taxes on revenue generated from slot machines; rather, they seek parity in the burden of slot machine taxes, as required by the Uniformity Clause.”

Both Counts III and IV included similar aspects of Counts I and II, however, they referred to skill and hybrid machines rather than slot machines. 

The Pennsylvania Supreme Court is prepared to consider how the state imposes tax rates on slot machines after granting a request last week from Attorney General Michelle Henry to hear a case concerning the legality of skill and hybrid machines – often referred to as grey machines.

Henry has asked the court to consider whether electronic slot machines cease to be an illegal ‘gambling device’, governed predominantly by chance, if the machine’s manufacturers embed into its programming a skill element that is almost entirely hidden from view.

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In response to rising COVID-19 cases in Philadelphia, the city and Department of Public Health have announced changes to restrictions on businesses, events and gatherings, and other activities to help flatten the epidemic curve, prevent hospitals from becoming overwhelmed, and reduce the number of COVID-19 deaths.

The ‘Safer at Home’ restrictions come into effect on November 20, 2020 until January 1, 2021. It is warned that an extension of these and/or the implementation of additional restrictions is possible, depending on trends in the spread of coronavirus across the region.

As a result of the mandated order, Rivers Casino Philadelphia, the sole land-based gaming entity currently within city limits, will be forced to shut down its operation once more. The facility will be joined in the region next year by the $700m Live! Casino and Hotel.

Casinos fall under a “businesses and activities are not allowed” subsection, are joined by theatres, including cinemas and other performance spaces; bowling alleys, arcades and game spaces; museums; libraries; recreational activities and sports for youth, community groups, and schools; and gyms and indoor exercise classes, although exercise groups and classes may continue outdoors.

Furthermore, High schools and colleges must move to online instruction only, with the exception of clinical instruction for students in health sciences, with takeout, delivery and outdoor dining permitted to continue, although additional restrictions have been implemented on the latter.

“We may be tired of COVID, but COVID’s not tired of us,” noted Dr Tom Farley Philadelphia Health Commissioner, upon introducing the extensive mandate to combat the rising spread of cases across the area.

Philadelphia has also issued new guidance on changes to events and gatherings, additional changes to capacity limits and other precautions for businesses and activities that are able to continue, businesses and activities that can continue to function under current guidance from the Department of Public Health, and a safety checklist.

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Following an official opening ceremony the home of the first brick-and-mortar sportsbook to be approved by the Illinois Gaming Board and become the first to accept a legal sports bet.

“The BetRivers sportsbook will take March Madness out of the office pool and into an exciting, elevated live sports wagering experience,” said Corey Wise, senior vice president and general manager of Rivers Casino. 

“We are grateful to the Illinois Gaming Board staff for their work approving our sportsbook in time for the college basketball tournament, one of the greatest sports events of the year.”

The BetRivers sportsbook features a 4,840 square sports bar with a 47-foot-wide ultra HD LED video wall, with five betting windows and a total of 30 sportsbook kiosks to also be included.

Furthermore, fans can enjoy ten 86-inch and four 75-inch HD televisions placed throughout the lounge offering patrons a panoramic view of live sports events. A full-service island bar in the space offers seating for 32, and the sportsbook also offers 26 bar-top video poker games, 29 leather lounge chairs and additional table seating options.

“Whether you are a seasoned sportsbook player or a casual sports fan interested in this new entertainment option, we’re dedicated to an environment where all customers will enjoy themselves in this great venue within our premier casino,” stated Greg Carlin, CEO and co-founder of Rush Street Gaming, a minority owner of the entity.

All parties also suggest that BetRivers will launch the BetRivers.com site and mobile app later in the year.

“BetRivers sportsbook meets the high bar established by the team at Rivers Casino Des Plaines as one of the most successful and unique regional gaming destinations in the country,” said Bill Carstanjen, CEO of CDI. “We’re excited to add this top-flight amenity to what is already a premier destination.”

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The property, along with its online and mobile complements, is currently undergoing a $15m rebranding to Rivers Casino Philadelphia, which is to be reflected within the partnership.

The multi-year agreement is to see the creation of two sports lounges inside the 19,500 capacity arena, which are to open in time for the Flyers’ 2019/20 season opener against New Jersey Devils on October, 9.

Furthermore, the deal also forges a marketing partnership that incorporates advertising inside the arena’s bowl and throughout the concourse as well as radio, billboards and digital media placements.

“Philadelphia fans’ interest in sports betting is why we’re expanding our state-of-the-art SugarHouse sportsbook this fall,” stated Rob Long, general manager of SugarHouse Casino. “We can’t wait to bring the same energy that we’ve seen at the casino to these brand-new sports lounges at the Wells Fargo Center.”

The sportsbook-style lounges, a reflection of that in-house at SugarHouse Casino, are to be located on the centre’s main concourse and on the arena’s top level.

The latter, occupying a 6,500 square-foot space, is to be facing the bowl so fans can watch the live action as it happens, and will feature a custom 22 feet long by eight feet tall LED video wall that will anchor the viewing area, as well as dozens of further live action screens.

On the main concourse, the 5,680 lounge boasts ten 86″ screens grouped throughout the seating areas, and an additional 16, 65″ monitors at the bar.

“We are thrilled with this sponsorship deal to become the official sportsbook of the Philadelphia Flyers and Wells Fargo Center,” added Mattias Stetz, COO of Rush Street Interactive, the operator of SugarHouse in-casino and online sportsbooks.  

“Philly has some of the best sports fans in the country, and we look forward to hosting them in our sports lounges at the stunning Wells Fargo Center.”

The Wells Fargo Center is currently in the midst of ‘Transformation 2020,’ a $265m initiative that is re-inventing the arena’s live event experience through a series of major upgrades.

This includes a new scoreboard, an all-inclusive event-level VIP club and complete redesigns of both levels housing the sportsbook-style lounges.

Valerie Camillo, president of business operations for the Philadelphia Flyers, explained: “With Pennsylvania on the forefront of legalised sports gaming, we and our SugarHouse partners are excited to elevate the game day experience at the Wells Fargo Center in a unique way. 

“These new lounges will bring the energy and excitement of PlaySugarHouse.com, a market-leading sportsbook, into the arena and introduce another step in our transformation to become one of the most technologically-advanced arenas in the world.”

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Debuting it new Rivers sportsbook lounge this week, a number of representatives, guests and dignitaries attended the ribbon cutting ceremony, including Sean Landeta, Super Bowl champion and former New York Giants punter, Erik Coleman, Pro-Bowl safety and former New York Jet; and Bucky Dent, World Series MVP and ex-New York Yankee.

Rivers Casino’s sports wagering supplier Rush Street Interactive promises a “high quality in-casino sportsbook solution,” as it adds the property to its Pennsylvania operations at Rivers Casino Pittsburgh and SugarHouse Casino in Philadelphia

Justin Moore, Rivers Casino and Resort acting general manager, said of the launch: “We’re so proud to be the first gaming operator in New York to take legal sports bets. Many people worked very hard to make legal sports wagering a reality in New York State, and we thank all of them for their tireless efforts and dedication. 

“Sports fans and bettors from across the capital region and beyond will be thrilled with our new state-of-the-art Rivers Sportsbook lounge. We look forward to having them as guests at Rivers Casino and Resort and the City of Schenectady.”

Occupying over 5,000 square feet, the Rivers Sportsbook contains a 53′ x 9′ LED video wall that anchors the sportsbook viewing area, along with 22 additional TV monitors, as well as 14 betting kiosks and 6 staffed betting windows.

Gary McCarthy, mayor of Schenectady, added: “We couldn’t be happier for our great community partner Rivers Casino and Resort. It is indeed a historic day not just for the state of New York, but for the City of Schenectady. 

“As Rivers Casino grows, so does its positive impact on our community. The opening of Rivers Sportsbook will surely attract even more guests to the property and to our great city. 

“Looking ahead, we are also hopeful that our leaders in Albany will see how hard Rivers Casino is working to keep up with growing regional competition, and recognise how important it is for them to address structural tax disadvantages in the market.”

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Following approvals being issued almost two years ago by the Pennsylvania General Assembly as part of a state-wide gaming expansion under bill H271, Penn National Gaming’s International Game Technology powered Hollywood Casino became the first entity to conduct its soft launch earlier in the week.

This was quickly followed by Greenwood Gaming and Entertainment’s Parx Casino, whose igaming platform has been supplied by Gan, before SugarHouse Casino, which is to soon be renamed Rivers Casino Philadelphia, undergoes its two-day testing phase tomorrow (Wednesday 17 July).

Should each of the respective testing phases proceed without a hitch, state regulator, the Pennsylvania Gaming Control Board, will issue the green-light to proceed with full operation.

Richard Schwartz, president of Rush Street Interactive, which introduced its SugarHouse Casino igaming entity in New Jersey three years ago, commented on the impending launch: “We thank the Pennsylvania Gaming Control Board, for authorising us to be a part of history this week in bringing our online sportsbook and casino to gaming enthusiasts in the state of Pennsylvania.  

“We are also proud to become the first gaming operator to offer the same online brand in both Pennsylvania and New Jersey so players who live or work across the border of these states can bet on PlaySugarHouse.com in either state.

“Along with our recent success in Pennsylvania, Rush Street Interactive has grown market share in New Jersey since entering the market in 2016, in large part due to the quality of the user experience at PlaySugarHouse.com and the time we’ve invested listening to what our players want to improve their experience, and by offering responsive customer service and fast payouts.

“We are proud to now bring the same quality, award-winning PlaySugarHouse.com interactive sportsbook and casino service to players in the state of Pennsylvania.”

Those wishing to enter the market can obtain licences for online slots, casino games or poker at a cost of $4m each, or secure all three for $10m.

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The 5,200 square-foot Saint Regis Mohawk Tribe owned property grants the group the option to operate and brand real-money online sports betting, poker and casino in New York on a first skin basis.

Recently the New York State Gaming Commission rubber stamped the state’s entry, with hopes in place that the first sportsbooks could launch within weeks, as the impending September start date of the National Football League edges closer.

According to law, sports betting is to be granted at four upstate casinos, namely Resorts World Catskills in Monticello, Rivers Casino in Schenectady, del Lago Casino near Rochester and Tioga Downs near Binghamton, as well as the seven tribal entities. 

“We are excited to announce this agreement with Mohawk, which further strengthens our market access as we work to build our Fox Bet business into one of the leaders in the emerging US online betting and gaming market,” added Robin Chhabra, CEO of Fox Bet, the new U.S. sports betting brand of The Stars Group.

Furthermore, the agreement is to also provide support services for Mohawk, relating to the launch of operation of the retail sportsbook within Northern New York.

Mohawk is to receive a revenue share from the operation of the online offerings, with Stars to gain its revenue share from the operation of the retail sportsbook.

Todd Papineau, general manager of the Akwesasne Mohawk Casino Resort, explained: “We are thrilled to elevate the sports betting experience for our guests in our new sports lounge, a 5,200 square foot sports betting hub that will be ready during the NFL season.  

“Once permissible in the state, we will be prepared to accept sports wagers through our new kiosks. With its online betting and gaming solutions and Fox Bet and PokerStars brands, we believe The Stars Group is the ideal partner for us, and it is positioned to become a leader in the US online betting and gaming industry. 

“We are delighted to work with The Stars Group, one of the world’s largest, most licensed online gaming companies, to leverage the opportunity presented by online betting and gaming in the State of New York.”

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Releasing its latest yearly breakdown of the figures, ahead of a total gaming revenue report that it to follow later this month, slot machine revenue posted increases in nine of the 12 month during the period to come in at $2.37bn.

Representing a $26.5m increase to the total posted during the 2017/18 time frame, the board also noted that tax revenue produced as a result of slot machine play came in at $1.23bn for the year, a 3.71 per cent boost from $1.19bn.

To date, since the first land-based establishment opened its doors in 2006, revenue from slot machine play has totalled $27bn resulting in tax generation of $14.5bn. 

Furthermore, the PGCB also broke down the figures further, looking at year-long performances from across the Keystone State’s ten stand-alone and racetrack casinos in operation, along with its two smaller resort entities.

The Greenwood Gaming and Entertainment owned Parx Casino came out as market leader across the 2018/19 period analysed, bringing an increase of a little over four per cent from $400.7m to $416.8m.

Coming out in second, but over $120m behind Parx, is Winds Creek Bethlehem, recently sold by Wynn Resorts for $1.3bn to the Poarch Creek Band of Creek Indians with a prompt name change from its former Sands Bethlehem, which saw a 2.09 per cent dip to $295.7m (2017/18: $302m).

Rounded off the top three is Rivers Casino‘s $291.1m, up 6.15 per cent from $274.2m, but beaten to the accolade of largest percentage increase by Valley Forge Casino Resort, with the Boyd Gaming property jumping 11.06 per cent to $96.2m (2017/18: $86.6m).

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As a result of the ruling sports wagering is to be permitted at four upstate properties, namely Resorts World Catskills in Monticello, Rivers Casino in Schenectady, del Lago Casino near Rochester and Tioga Downs near Binghamton, in addition to tribal casinos across the region.

Approving rules and regulations for licensing, opening and operating sports betting facilities, early estimates say operations should be safely in effect by the start of the National Football League season, that is due to commence on Friday 6 September when the Green Bay Packers travel to Soldier Field to take on Chicago Bears.

Mobile sports betting is not yet part of the state’s plans, with lawmakers said to be working on significant proposals to allow online betting through mobile devices.

This is, however, up against a quickly approaching deadline of Wednesday 19 June, which marks the end of the New York legislative session, with approval also having to be won from governor Andrew Cuomo.

Cuomo has previously suggested that permitting mobile sports betting would require an amendment to the state constitution, a multi-year process that would also require direct voter approval, state lawmakers sponsoring the initiative disagree however, arguing it would only require the passage of a new bill.

Similar to most other states that have proceeded with legislation of their own, punters in New York will not be able to bet on college sides that play within its boundaries.

Of the four upstate properties, del Lago Casino has partnered with Boston-based DraftKings, Resorts World Catskills has aligned with bet365, Tioga Downs is partnered with Betfair US, the US-facing arm of bookmaker Paddy Power Betfair, which will see FanDuel run its sportsbook and Rivers Casino and Resort is to operate alongside its Rush Street Gaming parent organisation.

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As the New York Gaming Commission gets set to vote to approve the activity next week, which it is thought would permit the activity at four upstate properties, namely, Resorts World Catskills in Monticello, Rivers Casino in Schenectady, del Lago Casino near Rochester and Tioga Downs near Binghamton, lawmakers spearheading efforts have made amendments that could permit racetracks, off-track betting parlors, and sports stadiums and arenas to accept bets.

It is thought that off-track betting parlors at the Saratoga, Belmont and Aqueduct racetracks, operated by the New York Racing Association, could be permitted to proceed with operations when full-service casino have debuted their sportsbooks.

However, sports facilities, which would partner with casinos as a sports betting affiliate, would operate mobile kiosks that would be owned and operated by a licence casino property within the state.

As specified by Legal Sports Report, a stadium may only serve as the affiliate in a county that does not have another affiliate, meaning venues such as Madison Square Garden, Yankee Stadium, Barclays Center and Nassau Coliseum could well be included.

With the Wednesday 19 June cut-off point fast approaching, which marks the end of New York’s legislative session, the bill maintains 8.5 and 12 per cent tax rates for land-based and mobile betting and a 0.2 per cent ‘royalty fee’ to sports leagues.

No in-person registration would be required, only one skin would be permitted per casino licence and a $12m fee would be attached as a licence fee.

Currently seven states have regulated sports betting, namely Nevada, Delaware, New Jersey, Mississippi, West Virginia, Pennsylvania and Rhode Island, with New Mexico tribes also in operation due to state compacts.

Iowa, Indiana, Tennessee and Montana are also thought to be close to joining that list.

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