Legal challenges filed against aspects of Pennsylvania's new gambling expansion legislation

Barely two months on from its successful but agonisingly slow passage through the Pennsylvanian Legislature, the state’s new gambling expansion laws are already under fire, with legal actions filed against provisions relating to the establishment of mini-land casinos and subsidies paid by successful land operators to underperforming rivals.

Our readers will recall that the $376 million in revenue the state expects to harvest from the expansion is an important element in balancing a state budget that had a $2 billion deficit.

In a federal action filed by the Hollywood Casino Tuesday, the casino claimed that the gambling expansion law leaves its business uniquely vulnerable to the poaching of its customers by the proposed new “mini-casinos” envisaged in the new law.

Hollywood’s parent group, the Mountainview Thoroughbred Racing Association, has already filed a petition with the Commonwealth Court requesting tighter regulation of where such mini-casinos may be located.

The new law protects established land casinos from the ten proposed mini-casinos across the state by imposing a prohibition on locating the satellites within a 25-mile radius of an existing casino.

According to the suit, Hollywood Casino would lose $34 million a year if gamblers use new facilities, causing “significant and unique” financial harm.

It has also transpired that on December 28 Sheldon Adelson’s Sands group filed a lawsuit in the state Supreme Court alleging the new law violates the state and federal constitutions by requiring high-performing casinos such as Sands to pay a special tax to subsidise financially struggling casinos.

That tax, the lawsuit claims, violates the state constitution’s tax uniformity clause and another section that says all taxes must go to the public good. Sands claims it also violates the due process protections in the U.S. Constitution.

State lawmakers planned that the money from this special tax will be paid into a marketing fund to help struggling land operators. Observers have speculated that this was a move designed to placate Mount Airy Casino, which in 2016 successfully sued over a provision in the original state law that required casinos to pay host fees to municipalities in and around their facilities (see previous reports).

Although the fees, which generated $142 million annually for communities, applied evenly to all casinos, the state Supreme Court found they had a greater impact on smaller, less profitable casinos.

Thus far the state Governor’s office has not commented on the legal actions, a course followed also by the state Gaming Control Board.

The auction for the first mini-casino licence will take place at 10 a.m. today (Wednesday) before the board’s regular meeting. A spokesman said the board has no idea how many bidders will attend, or if existing casino operators, who also may seek mini-casino licenses, will participate.

Nine other public auctions are scheduled, with one winner announced at each, between Jan. 24 and May 16.

The minimum asking price is $7.5 million for a mini-slot parlour and another $2.5 million fee from a separate table game licensee to be awarded at a later date to the same entity.

Legal experts have pointed out that in the event of pending litigation it is standard practice for courts to order a suspension to parts of any law being challenged,