Golden Nugget Follows MGM Into Pennsylvania’s Online Gaming Market

Golden Nugget Follows MGM Into Pennsylvania’s Online Gaming Market

Recently, MGM Resorts became the first casino operator from outside the state to apply for a casino gaming license in Pennsylvania. Now we can add Golden Nugget to this list.

At the meeting on Wednesday, Golden Nugget submitted its application to be considered a Qualified Gaming Entity (QGE) to the Pennsylvania Gaming Control Board (PGCB). Being approved as a QGE is the first step to being approved to hold one of Pennsylvania’s new online gaming licenses. While MGM purchased all three online gaming licenses (slots, table games, and poker) for a price tag of $10 million, Golden Nugget opted for just two of the licenses (slots and table games) for a price tag of $8 million ($4 million each). Operators were offered a $2 million discount to hold all three licenses.

Six licenses remain from eleven available

The PGCB initially reserved online gaming licenses to the state’s existing thirteen casinos. Of the 39 total online gaming licenses available, PA’s land-based casinos only opted to take 28 of them. That leaves eleven remaining. These are broken down as follows:

  • Three online slots licenses
  • Three online table games licenses
  • Five online peer-to-peer gaming (poker) licenses

Although the PGCB has set in place a lottery system to pick between multiple QGEs who may apply for one (or more) of Pennsylvania’s eleven available online gaming licenses, that elaborate process may be completely unnecessary. As the clock counted down, only MGM and Golden Nugget stepped up to take advantage of this opportunity.

Although they can’t expect the process to be a rubber stamp, given their long track record as successful casino operators, it seems more than likely that both MGM and Golden Nugget will be approved by the PGCB. That means Pennsylvania’s coffers will soon increase by $18 million and that six online gaming licenses might remain unused – one each for online slots and table games and four for online poker.

While it might seem unusual that such a lucrative asset as a license to operate online poker games might be ignored by casino operators, the fact that some have declined their option to have one isn’t particularly unexpected. Not only are the license fees and tax rates quite high, it can be difficult for multiple poker sites to compete in one state and all find success. For example, online poker has been struggling in New Jersey. Returns have diminished significantly since initial launch, with sites collecting less than $2 million in revenue each month.

New Jersey’s online poker market currently consists of seven sites, none of which is remarkably successful. Pennsylvania is a much more populous state, but even so, eight competing sites seems more sustainable than the thirteen that were initially allowed for.

Golden Nugget is the market leader in New Jersey

While online poker in the Garden State has been struggling, online casino gaming in general is a big business in New Jersey. Although Golden Nugget was a late entrant to the state, it has since increased its volume and has become the top operator in the market. This is due in part to its high-quality gaming partner, Scientific Games (NYX), a huge library of casino games, and of course its popular brand name.

Last month Golden Nugget took in $9.3 million of the total $24.1 million New Jersey online gaming revenue pie. That’s a market share of over one-third. Perhaps even more impressive, Golden Nugget accomplishes this without an online poker presence of any kind.

Golden Nugget was coming to PA one way or another

Golden Nugget enjoys a healthy relationship with Rush Street Gaming (owner of SugarHouse casino), an operator that also has a presence in New Jersey. As one aspect of that partnership, the PlaySugarHouse online casino brand operates under Golden Nuggets’ New Jersey license (as does Betfair Online Casino).

It was suspected early on that their relationship with Rush Street (and SugarHouse specifically) would be Golden Nugget’s pathway to operating in the Pennsylvania online gaming market. Golden Nugget could, if they wished, operate as a skin under an existing PA online gaming license. This path to licensure is a thorny and expensive one, however. Operating as a skin comes with a somewhat onerous pile of regulations as well as an additional hefty fee.

Once Golden Nugget saw that it could bypass these annoyances and just operate independently as a QGE, that option must have been much too good to pass up.

What’s next for these QGEs?

As it appears that only MGM and Golden Nugget will be vying for the abandoned PA online gaming licenses, the next step in the process is for the PGCB to vet these applications and decide whether to approve them or not.

While both casino operators are well known and well established, and can be expected to gain approval, they are going to have to wait a while for the PGCB to anoint them as QGEs. MGM’s application was 139 pages long and included extremely detailed operating info about Borgata Casino’s New Jersey gaming license. Clearly there’s a lot of paperwork to go over. Industry leaders don’t expect any movement on this process until the PGCB’s next meeting on November 28.