Pennsylvania is moving steadily forward in its roadmap to enact online gaming. Now that the PA Gaming Control Board has made applications for interactive gaming suppliers available on its website, it is only a matter of time until gamers can participate.

But, as we highlighted in a previous article, there’s still a lot to work out. The most pressing question continues to be whether the Board will permit operators to offer multiple “skins” (customer-facing branded websites) or if it will limit each operator to just one.

However, we know for a fact that allowing operators to offer multiple skins fosters innovation and encourages growth in the iGaming market. Why? Because New Jersey is already allowing it.

In New Jersey, each operator is restricted to five distinct online gaming brands, but it has no limit on skins. That means operators can experiment with various user experiences and presentation models to the end of creating a better product for consumers.

The result is an iGaming market full of competition and innovation, and plenty of happy customers. Thanks to this thriving environment, New Jersey casinos bring in excess of $20 million in revenue every month.

It goes without saying that New Jersey’s experiences with iGaming could belong to Pennsylvania, too. But not if it chooses to limit skins. As we wrote in a letter to the Board, doing so could artificially cut the revenue that Pennsylvania could earn from smaller operators:

“Limiting skins would effectively pick winners and losers in the Pennsylvania market and hand the market to the state’s largest land-based casino operators (that are willing to enter the market). Because each license is extraordinarily expensive (up to $10 million plus taxes), smaller operators may only be able to afford interactive gaming operations if they subsidize some of the license expense and high tax rates through revenue sharing skin agreements.

“Even if they could justify the up-front licensing cost, smaller casinos will find themselves at a significant disadvantage when it comes to marketing budgets, which constitutes a much more significant cost for interactive gaming than it does for traditional, land-based casinos.”

The biggest casinos don’t need this much extra help, and handing the iGaming market to them would simply drive new players out. Instead, Pennsylvania should consider what is best for everyone in the iGaming market—big players, small players, and consumers, too.

The Pennsylvania Gaming Control Board is weighing its options carefully, but it’s important to remember that this isn’t a decision between two unknown entities. New Jersey is a real-life example of exactly how well a competitive iGaming market would play out.

Pennsylvania finally legalized online gaming this past October. Now comes the hard part.

Even though the plan to legalize online gaming in Pennsylvania had been in the works for years, H 271 was passed quickly. As a result, the lengthy bill is still a bit vague on a few points, lacking certain vital clarifications it needs to fully govern the reality of online gaming.

Now, the Pennsylvania Gaming Control Board is left to iron out the details.

One of the major questions on their plate right now: just how many skins (customer-facing branded websites) each online gaming organization will be permitted to operate? Sources close to the Board suspect a decision may be in the works limiting each operator to one skin.

This kind of restriction could severely hamper the opportunities for legalized gaming in Pennsylvania before it even fully gets off the ground. Here is why such a limit could stifle online gaming, and why Pennsylvania should consider New Jersey’s model instead.

Limiting the number of skins squelches competition
If each operator is allowed just one skin, Pennsylvania has already decided to side with its largest casinos while knocking smaller organizations out of the game.

Since the licensing fee to set up a skin can cost up to $10 million plus taxes, smaller operators may only be able to afford their own online offerings by subsidizing some of the license expense and high tax rates through revenue sharing skin agreements. Of course, this option is no longer available if only one skin per operator is permitted.

Even if smaller casinos can justify the eight-figure licensing fee to set up an online gaming offering, they will still face the struggle and cost of marketing it (compared to larger organizations with bigger budgets).  And since they only get one shot to set up a skin, there’s no room for innovation either.

If a restriction must happen, Pennsylvania should follow the New Jersey model
How can we be so confident that a strict one-skin limit will hurt smaller casinos? Because New Jersey has already made the case for allowing operators to offer multiple skins.

New Jersey limits each operator to five distinct online gaming brands, but it has no limit on skins. Currently, it has five online gambling licensees with 17 skins total. Each time a new brand or skin has launched, it has expanded the market. Now, online casinos in New Jersey generate in excess of $20 million in revenue—every month.

Since there are no limits on skins in New Jersey, the state’s online gaming offerings have expanded to fit the market, foster competition, and encourage innovation. If Pennsylvania would like to experience similar gains, it only needs to look to its neighbor to the east.

In December 2017, the Supreme Court heard oral arguments on whether or not to overturn the Professional and Amateur Sports Protection Act (PASPA). As we wait in limbo for the ruling to arrive sometime this spring, experts in the field are making arguments and predictions for how the so-called New Jersey sports betting case might play out. In this post, we’ve rounded up some of the smartest and most interesting takes on the topic:

Argument analysis: Justices seem to side with state on sports betting

Let’s start with the take closest to the source. Writing for SCOTUSblog, Amy Howe shares courtroom illustrations and summarizes the general attitude in the courtroom during the oral arguments. Based on her eyewitness account, “New Jersey seemed to find a more sympathetic audience in the justices” than it has in other courtrooms during its prior attempts to overturn PASPA. Read her full report for more details about the arguments as they happened.

SCOTUS Oral Arguments Suggest That America’s Sports Betting Ban Could Soon End

Above The Law, a blog by and for lawyers, assumes its readers are well-versed in law and therefore offers one of the most high-level analyses of the arguments. Their play-by-play notes that United States Deputy Solicitor General Jeffrey B. Wall has now been tasked with defending both PASPA and Trump’s travel ban: two positions that are generally unfavorable with the majority of Supreme Court justices.

Legal Sports Betting Unlikely to Mean Big Tax Bucks for States

On the flipside, Ryan Prete writing for Bloomberg suggests that even if New Jersey does win the case, they will not reap the benefits legislators are hoping for. Pointing to fantasy sports leagues as an example, he cautions states from over-taxing sports betting so heavily that would-be-players are scared away from placing a bet before it is even legalized.

Sports Betting Myth Busters: Only Four States Are Exempt From The Federal Ban

In a three-part series, Ryan Rodenberg for Legal Sports Report dispels commonly held misperceptions about what PASPA currently does and what exactly New Jersey is hoping the Supreme Court will overturn. For readers who are confused about the terminology of PASPA (and it is certainly obtuse), this primer explains what the act really does.

If the Supreme Court decides in favor of New Jersey in the pivotal sports betting case Christie vs. NCAA and determines that sports betting should be legal in all states, state governments and all affected organizations want to be ready to cash in on the potential windfall.

In Indiana, however, it appears that the sports leagues are hedging their bets. Although the sports leagues are the parties opposed to the legalization of sports betting in the Supreme Court case, those in Indiana are getting ready to lose the battle but win the war. In an article on Ifrah on iGaming, attorney George Calhoun points out that legislators in Indiana, supported by entities like the NBA and Major League Baseball, are planning to introduce a bill which will impose a one percent “integrity fee” on betting, payable to the governing sports bodies.

Mr. Calhoun declares that “The proposed fees clearly are an effort by the leagues to benefit from sports gaming. The size of the potential fee is staggering.” For example, if the Indiana law had applied to Nevada in 2017, “that would equate to a $50 million fee to be paid to leagues.”

The article argues that the proposed fee is disproportionately large and will prevent sports books from turning a profit. It cites the American Gaming Association’s statement that “handing sports leagues 20 percent of what’s left over after winnings are paid out undercuts [the industry’s] economic viability. Doing so will ensure the illegal market continues to thrive in the state, and gut the tax revenues available to fund essential public services.”

Instead of encouraging the growth of a regulated industry which could bring jobs, tax revenue and other economic benefits to the state, Indiana’s proposed law will likely discourage competition and enable black market sports wagering to continue.

Plus, the so-called “integrity fee” is actually nothing of the sort, as it undermines “its seeming purpose by making the leagues directly interested in the amounts wagered on their sports. The potential for mischief in such a situation is astronomical.”

To read the full Ifrah on iGaming article, click here.