The Allegheny Institute for Public Policy (AIPP) is sounding the alarm that the proliferation of unregulated skill games may threaten Pennsylvania’s lucrative gambling industry and a declining population will impede growth. Although its policy brief says the industry is currently “coming up aces,” these two trends, in combination, paint a more worrisome picture for the long term.
After nearly 20 years of legal Pennsylvania gambling, “state and local governments have gotten used to the steady stream of revenues,” the AIPP warns.
AIPP is a non-profit research and education organization. According to its website, its mission is to “defend the interests of taxpayers, citizens and businesses against an increasingly burdensome and intrusive government.”
From the brief:
Gaming money should not be so heavily relied upon. Policymakers in the Pittsburgh area and in Harrisburg must do a better job of making Pennsylvania a more business-friendly state to encourage jobs and real economic growth.
Skill Games, Population Decline Pose Challenges
The “proliferation” of skill games in neighborhoods around the commonwealth could threaten industry revenues, the AIPP report argues.
Although the Pennsylvania Supreme Court recently ruled that skill games are legal to operate, the state does not regulate the machines. That means the law treats Pennsylvania’s 15,000 estimated skill machines differently than the 25,000 slot machines at “sanctioned” casinos.
Although there’s been some pushback at the municipal level, AIPP suggests casino revenues may suffer if nothing changes.
Skill games may start to make a dent in the retail slot figures.
Pennsylvania’s population decline is the second concern the AIPP brief notes. Since 2020, the state population dropped by 10,400. Further, Philadelphia, the state’s largest county, had an even more significant drop of 16,300, while Allegheny County lost 7,800 residents, AIPP said.
If the population losses continue in Pennsylvania, gaming revenues could start to drop.
The report indicates that state and local governments have become accustomed to gaming’s “steady stream” of revenues. Specifically, it recalls how gaming money “bailed out” Allegheny County’s airport authority, allowing it to pay down debt and fund a new terminal.
The report concludes that while gaming revenues continue to roll along in Pennsylvania with seemingly “no end in sight,” everything has its consequences.
Even neighboring New Jersey and Ohio are seeing continued growth. But what is quickly forgotten is that every dollar spent on gaming is a dollar not spent on other goods and services. Gaming is a leisure activity; it is likely taking away revenue from other leisure activities.
The report also claims there “isn’t any data” on problem gambling behaviors or the social impact of gaming that may require taxpayer money to address. Certainly, more information is almost always better. However, Pennsylvania’s Council on Compulsive Gambling’s (CCGP) annual helpline data report is one example of available Pennsylvania-focused data.
Otherwise, Everything’s Coming Up Pennsylvania
As the brief also highlights, Pennsylvania closed 2023 with $5.69 billion in gaming revenue—its highest annual total, up 9.3% over 2022. Tax-wise, the report notes that gaming added 10.4% more to the state coffers than in 2022 ($2.34 billion vs $2.12 billion).
In total, Pennsylvania regulates six types of gaming:
- retail slots
- retail tables
- Internet gaming (online casino)
- sports wagering
- video gaming terminals (VLTs)
- fantasy sports (DFS)
With 19 casinos and several legal gambling options, Frank Gamrat, AIPP’s executive director and the brief’s credited author, wrote that “it appears gaming in Pennsylvania will continue to grow.”
Despite that upward trajectory, AIPP’s report shared concerns over Pennsylvania’s gaming industry and future.
Retail Slots Remain King—For Now. Online Slots Growing
Regarding revenue share, AIPP notes retail slots remain Pennsylvania’s most popular form of gambling despite weakening dominance.
Even though other gaming options have popped up over the years, it remains the most popular form of gaming, accounting for 43.3 percent of all gaming revenues in 2023.
However, the institute also acknowledged the percentage has steadily fallen in recent years, “particularly as the popularity of internet gaming continues to rise.” A trend, it adds, that is “likely” to continue.
At the same time, the report notes that Pennsylvania online casino gaming has proven “very hot” since its 2019 debut.
In 2023, online gambling captured 30.6% of the revenue share, up from 21.3% in 2020, putting it solidly in second place. Additionally, AIPP noted how quickly online revenue overtook that of retail table games (now third place revenue-wise).
From the report:
For every $1 in revenue earned by retail table games, internet gaming collected $1.12 in 2020. In 2023, for every $1 in revenue earned by retail table games, internet gaming collected $1.80.
Sports betting, in contrast, comes in just behind retail table games as Pennsylvania’s fourth-highest gambling revenue driver. All told, Pennsylvania sports betting managed to bring in $458.7 million in 2023, a 35% jump over 2021 revenues ($340.1 million).
Retail Gains Slow While Online Gaming Soars
Considering how Pennsylvania gaming is faring compared to its neighbors, AIPP considered data from 2015 through 2023.
The report notes that New Jersey had legal gambling much longer than Pennsylvania. Ohio established its industry, on the other hand, in response to Pennsylvania’s successful legalization effort in 2004.
As referenced above, Pennsylvania has 19 casinos, while New Jersey hosts nine. Ohio has a mixed bag, including seven racinos (racetracks with commercial slots) and four stand-alone casinos featuring retail slots and table games. All three states allow retail slots and floor games, while only New Jersey and Pennsylvania permit online gaming.
Notably, the review found that revenue from Pennsylvania retail slots climbed 20% during that eight-year timeframe. In contrast, New Jersey and Ohio revenues jumped 22% and 51%, respectively. However, the report also suggested Pennsylvania’s “slower-than-Ohio growth” should be attributed to the introduction of multiple gaming options.
Looking at retail table games during the same period, Pennsylvania’s revenue increase of 4.1% also trails Ohio (9.1%) and New Jersey (7.8%). However, in 2023, Pennsylvania collected $970.1 million in table games revenue, while New Jersey earned $736.2 million, and Ohio $286 million. In each case, revenue dropped below 2022 levels.
Further, in Pennsylvania and New Jersey, online revenues surpassed that of retail table games.
In New Jersey, online gaming revenue grew by 15.7% over 2022, while Pennsylvania online casinos saw an even more significant 27.7% increase.
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