Established in 2007, the Erie-based casino was a beacon of economic development, employing hundreds and bolstering local tourism. However, the rapid proliferation of unregulated skill games drew patrons away from the venue, eroding profits. Pennsylvania’s substantial gambling tax further eroded the casino’s profits, leaving it on the brink of bankruptcy.
Mounting Pressures Could Become Unbearable
Presque Isle Downs VP and general manager Gary Hendricks was adamant that skill games were the primary threat to traditional casinos in Pennsylvania. While visually and functionally similar to slots, these machines are not classified as gambling under current Pennsylvania law because they involve an element of “skill.” This distinction allows them to exist in a regulatory grey area, avoiding the tax burdens associated with gambling.
Pennsylvania casinos are subject to the USA’s highest gaming tax of 57%, with some, like Presque Isle, effectively paying up to 64% after other levies like the annual $10 million revenue share to the Erie County Gaming Revenue Authority (ECGRA). Speaking for local news outlet YourErie, Hendricks noted that the venue was quickly running out of options to remain afloat.
Let’s say your household income got taxed at 64%. You are going to probably be trying to live a different way, right? We don’t want to think about tough decisions in the future, but we have to consider possibilities.
Gary Hendricks, Presque Isle Downs VP and general manager
Neighboring states present a stark contrast. New York casinos are subject to a 25-30% tax, while Ohio’s gambling levies range from 33% to 43%. Hendricks noted that this reduced burden allowed properties to offer customers better incentives and rewards, bolstering engagement and retention. However, these enhanced offerings also encourage Pennsylvania bettors to gamble cross-border, placing further pressure on local venues.
Urgent Reforms Are Necessary
Governor Josh Shapiro’s FY 2024/2025 budget included a proposal to regulate skill games, with lawmakers considering a potential 52% tax rate. However, despite growing political momentum, the state has yet to propose concrete legislation, leaving skill games in a regulatory grey area and placing rising pressures on traditional casinos.
New Year’s Eve, the busiest day of the year for us. I still have about 500 games that won’t get played because that’s how far the demand has dropped off with all these other games on the market.
Gary Hendricks, Presque Isle Downs VP and general manager
Despite the ongoing struggles of the brick-and-mortar sector, Pennsylvania’s iGaming sector remains thriving. Digital slots, table games, and online sportsbooks saw a 12.3% year-on-year surge in February, even as physical venues faced a slowdown. While experts predominantly attribute these results to shifting consumer preferences, the proliferation of skill games could be another factor.
The potential shutdown of Presque Isle would be a tremendous loss to the region. The facility has already eliminated 250 positions since 2019, and its closure would significantly impact community-facing programs and nonprofits dependent on tax contributions. Hendricks warned that without urgent action, this grim uncertainty could become a reality.