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Push to legalize online gambling in Pa. picks up steam

| Sunday, March 15, 2015, 9:00 p.m.

The idea of legal online gambling in Pennsylvania seems to be gaining momentum.

In February, an international research firm predicted the state would be a focal point for Internet-gambling supporters. Less than a week before Gov. Tom Wolfe proposed numerous tax increases to combat a $2.3 billion state budget deficit, the chairman of the state House's Gaming Oversight Committee proposed legalizing online gambling and predicted it would raise millions for the state. Another legislator proposed a poker-only bill .

Pennsylvania's size, location and budget problems make it ripe for online gambling.

A study by GamblingCompliance, which has offices in London and Washington, D.C., estimates eight to 11 states will consider bills this year to authorize or amend Internet-gambling laws.

“We expect Internet-gambling proponents to focus on the populous Northeastern corridor, where Internet and mobile penetration is high and per-capita income is attractive,” the study says. “We expect Pennsylvania and New York to serve as the states around which all lobbying efforts in that corridor revolve.”

Only Nevada, New Jersey and Delaware now allow online gambling; about a dozen states have a form of Internet lottery. Users must be within the state to play online. Software pinpoints where players are; identity and age verification are part of setting up betting accounts.

Tax revenue in the three states with online gambling hasn't met predictions. Proponents predicted New Jersey casinos would see an online market of $200 million to as much as $1 billion a year. The actual casino win for its first year of online gambling was $122 million, with the state getting 15 percent of that.

Payne calls his prediction of $120 million in Pennsylvania conservative, noting that the gambling market is 30 percent larger than New Jersey's. His bill would limit control of online gambling to existing casinos. Licenses would cost $5 million, and the state would get 14 percent of gross online-gaming revenue in taxes. That's the same rate as on table games in traditional casinos.

Previous online bills have gone nowhere in the Legislature. Payne, chairman of the House gaming committee, says the state's need to raise money increases the chances for approval.

“If I have choice of an income-tax increase or additional gaming revenue, I'm taking additional gaming revenue,” he says. He also notes that the committee's Democratic co-chairman, Nick Kotik of Coraopolis, is a co-sponsor of the bill, so it's not a Republican vs. Democrat proposal.

The online bill is part of an effort to bolster the state's casino industry. Payne also wants to legalize and regulate fantasy-sports betting.

Some in the casino industry doubt the wisdom of allowing online gambling. Casino consultant and former executive Jim Kilby says it doesn't create jobs and will take jobs away from traditional casinos.

“People can go broke from the comfort of their bedroom,” he adds.

Billionaire Sheldon Adelson, whose casinos include the Sands in Bethlehem, backs a federal bill to outlaw online gambling. The GamblingCompliance study predicts that effort will fail.

Matt Katz, CEO of Central Account Management Systems, which provides payment-processing and player-verification services to online casinos, says government officials should understand that online gambling is an investment that doesn't pay off immediately.

“When you look at Europe, the growth of a regulated market takes a good three to five years before it really hits its stride, to where the industry is generating a good amount of taxable revenue for the state,” he says.

Katz, who started an interactive online-gambling business while in college, says the Internet has created many new jobs. He supports linking online casinos with land-based casinos to help preserve the “massive investments” made in traditional gambling operations.

He's hopeful Pennsylvania or another state will add online gaming this year.

“Everything in business is about positive momentum,” he says. “What we really need to see is additional states legalizing (online gaming) every single year until we reach critical mass in the United States.”

Mark Gruetze is administrative editor for Trib Total Media. He can be reached at 412-320-7838 or players@tribweb.com.

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