In just two short weeks, Pennsylvania regulators have generated over $90 million in new revenue from mini casino license auctions.

Stadium Casino LLC — an entity which combines controlling interests of the Live! and Parx brands — acquired the second Keystone State satellite casino license at a whopping price of $40.1 million Wednesday. The Derry municipal location (Westmoreland County, just outside Pittsburgh) could open its doors in 2019 with up to 750 slot machine terminals and 30 tables games.

Factoring in Penn National’s $50.1 million winning bid in the inaugural January 10th auction, Pennsylvania regulators have brought in a verifiable windfall to the state’s coffers with more than $90 million in revenue so far in 2018… from license fees alone.

To put that number into perspective, a full-blown casino license in Pennsylvania can be acquired at a cost of approximately $50 million. The minimum bid of $7.5 million for a PA satellite casino license has been easily surpassed in the first two blind auctions.

Pennsylvania Regulators Extract Huge Payments from Casinos

Pennsylvania’s enormous October 2017 gambling expansion, which paves the way for online poker, casino, DFS, and lottery games along with “truck stop” Video Gaming Terminals (VGTs), airport gambling and potential sports betting, has rapidly turned the Keystone State into a legalized gambling mecca in the United States.

Yet all may not be well on the operator front in PA. After carving out regional-based market share over the past decade, the Category 4 provisions have prompted existing casinos to place astronomical bids in hopes of either defending their current territories or encroaching upon established ones.

With as many as eight mini casino licenses still up for grabs, it is already clear that the Category 4 casinos will result in a major shake-up of the Pennsylvania land-based gambling industry. And there’s more revenue on the way as Pennsylvania regulators prepare to collect from online gambling operators and iLottery sales.

Pennsylvania Regulators Mini Casino License Map

Confirmed and Speculative PA Mini Casino Locations (REVISED FROM SOURCE: PAleague)

A look at the map above shows confirmed locations for PA satellite casinos along with predictions of how the remaining licenses might be distributed. An auction for the third license is set to take place on Wednesday, February 7th.

Will “Nosebleed” Fees Force Continued Mergers & Acquisitions?

As statewide gambling officials become more informed on how to extract the most value from both land-based and online gambling operators throughout the country, many smaller casinos may be forced into a Merger & Acquisition phase. It is also possible that the actions of Pennsylvania regulators will serve as a new blueprint for lawmakers who desire to utilize legalized gambling as a means to compensate for growing budget deficits.

Furthermore, it is widely assumed that Pennsylvania’s jaw-dropping 54% tax rate on internet slot Gross Gaming Revenue (GGR) will dissuade a number of operators from even entering the market.

On top of that, regulated online gambling permits in the Keystone State will expire after a period of only five years. Which means that online gambling operators will have to adapt to the surge in regulated license expenses if they wish to compete in what is already an ultra-competitive market, and that adaptation is likely to come in the form of Mergers & Acquisitions.

This reality has come to fruition in the regional land-based gambling industry through the Cordish Companies and Greenwood Gaming merger along with a Penn National’s recent $2.8 billion purchase of Pinnacle Entertainment.

But What About Poker?

Competitive peer-to-peer poker offerings have been trending away from cash games into tournaments for years, and will likely continue to do so as long as “MTTs” along with casino-driven formats remain popular with casual players.

However, the cost to participate in those games could be on the rise soon, as both land-based and online operators experience further declines in overall revenue percentages generated from that vertical.

To read more analysis on this topic, consult our Pennsylvania Land-Based Poker analysis sheet, which includes a break down of official revenue numbers obtained from Pennsylvania regulators (PGCB).

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