Pennsylvania Web Gambling Debate Exposes Industry Divide

Casino operators sparred over the impact online betting is having on land-based properties as Pennsylvania legislators consider whether to make the state the most-populous yet to allow Internet wagering.

Michael Cohen, an executive at Caesars Entertainment Corp. (CZR)’s interactive unit, told the state Senate Community, Economic and Recreational Development Committee today people who bet online don’t typically go to casinos. Andrew Abboud of Las Vegas Sands Corp. (LVS) testified that online betting would steal customers from his resort in Bethlehem.

“We’re looking at turning every house in Pennsylvania into a casino,” Abboud said. “Gaming was never expected to be everywhere.”

The stakes are high for Pennsylvania, which has 12 properties and passed neighboring New Jersey two years ago to become the second-largest casino market in the U.S. It’s also become the center of the debate over online wagering as other states, including New York and California, weigh legalizing it. Las Vegas Sands founder Sheldon Adelson leads the opposition.

In the three states where Web gaming is allowed, New Jersey, Nevada and Delaware, online revenue has fallen far short of expectations, while betting nationwide in casinos has been weak for years.

Several Bills

“I don’t think you can say with any authority that there is not an impact on bricks-and-mortar casinos,” Robert Green, chairman of Pennsylvania’s top-grossing property, the Parx Casino in suburban Philadelphia, said at the hearing. Revenue in the Parx poker room is down 20 percent since New Jersey introduced online betting in November, he said.

Pennsylvania lawmakers have proposed several bills, including one to prohibit any expansion of gambling without a referendum or two-thirds vote of the legislature and another to allow online bets for many casino-style games. Senator Edwin Erickson, a Republican from Newtown Square, has said he plans a measure to legalize only Internet poker.

If full-fledged Web gaming is approved, online operators could take in $184 million in revenue in the first year and $307 million annually after that, according to report written by Philadelphia-based Econsult Solutions for the joint Budget and Finance Committee. Pennsylvania’s casino revenue fell 1.4 percent to $3.1 billion last year, the first decline since they began opening there in 2006.

Christie’s Estimate

The online projections are “reasonable” and show why the state should move quickly to take a lead in the industry, said Robert Pickus, chairman of the Valley Forge Casino Resort.

In New Jersey, online wagering revenue was $11.4 million in April. Governor Chris Christie had estimated it would bring in $1 billion annually.

Testimony at the hearing mirrored national positions staked out by casino companies. Adelson has said he’s opposed to online wagering based on moral and other grounds. Las Vegas-based Caesars has pursued the business, offering online wagering in New Jersey and Nevada. Caesars operates the Harrah’s Philadelphia casino.

“The Internet is a new distribution channel, tapping a new customer,” Cohen said.

Sands’ Abboud said technology to prevent underage betting isn’t effective and that checks to restrain gamblers with problems aren’t available online.

“No computer can tell me if I’ve had too much to drink,” Abboud said.

Senator Randy Vulakovich, a Republican from Shaler Township, said he’s concerned about market saturation.

“I don’t know how I’m going to vote on this,” Vulakovich said. “Initially, I’m not for online gambling. I don’t think we need any more casinos.”

To contact the reporters on this story: Christopher Palmeri in Los Angeles at cpalmeri1@bloomberg.net; Romy Varghese in Philadelphia at rvarghese8@bloomberg.net

To contact the editors responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net Rob Golum

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