Pennsylvania Gaming Supplier Regulatory Overview

Introduction

The Pennsylvania Gaming Control Board ("Board") was created in 2004 through the passage of ACT 71, also known as the Race Horse Development and Gaming Act ("Act"). The Act authorized licensed gaming facilities to offer electronic games of chance in the state of Pennsylvania.

Pennsylvania gaming facilities employ approximately 6,000 employees. For every dollar produced as revenue from slot machine play, $0.55 is returned to state coffers, with distributions to state and local governments of nearly $750 million annually.

Effective January 2010, Pennsylvania has authorized table gaming within the state. Although the games have been authorized, the Board has yet to fully integrate regulation of table games into the present licensing system. The analysis below discusses the present system of licensing in the state, although table game regulations and licensing will likely be similar to the licensing schemes and processes discussed herein.


Manufacturer License Requirements

A manufacturer is defined as a person who "manufactures, builds, rebuilds, fabricates, assembles, produces, programs, designs, or otherwise makes modifications to" any gaming device.¹

Duration

A Manufacturer License is valid for one year. Renewal applications must be submitted at least two months prior to the expiration date of the current license.²

Fees

A $5,000 application fee is required to be submitted in connection with the application. Upon issuance of a license, a manufacturer must pay a $50,000 licensing fee.³ The renewal fee is $90,000 for a term of three years.⁴

Application

Applicants must complete the Manufacturer Application and Disclosure Information Form. In order to complete the form, the following information is necessary:

1. Basic identity information;
2. Organization form;
3. Tax identification numbers;
4. Criminal history;
5. Regulatory action history, past10 years;
6. Bankruptcy history, past 10 years;
7. Other professional or regulatory licenses held;
8. Contributions and disbursements, past 10 years;
9. List of incorporators/founders;
10. List of other names used by the applicant;
11. List of all addresses;
12. List of current officers, directors, and trustees;
13. List of former officers, directors, and trustees;
14. List of all employees earning over $100,000 in annual compensation;
15. Bonus and profit-sharing plans;
16. Stock description;
17. List of voting shareholders;
18. Description of interest of current and former partners;
19. List of nonvoting shareholders;
20. Description of long-term debt;
21. Description of securities options;
22. List of other principals;
23. Financial institutions where accounts are held;
24. Description of insider transactions;
25. Description of all gaming contracts;
26. Political contributions; and
27. Diversity plan information.⁵

In addition, the following documents must be provided by the applicant (note that some documents are required that are in addition to the information listed in the above list):

1. Description of the business and former business, past 10 years;
2. Description of all bonus and profit-sharing plans;
3. Description of all current litigation;
4. Description of long-term debt;
5. Description of securities options;
6. Audited financial statements, past five years;
7. Annual reports, past five years;
8. Last quarterly statement;
9. 10-K forms, past five years;
10. Any interim reports filed;
11. Last definitive proxy or information statement;
12. Registration statements, past five years;
13. Independent audit reports, past five years;
14. Certified copies of organizational documents (e.g., articles of incorporation, bylaws, charter);
15. Current ownership table;
16. Functional table of organization that contains job descriptions and names of employees earning over $100,000 per year;
17. All business-related tax forms filed with the IRS, past five years;
18. 5500 forms filed with the IRS, past five years; and
19. Description of criminal history.⁶

Manufacturer Designee License Requirements

All persons or entities employed by a licensed manufacturer for the purpose of repairing or delivering slot machines must be licensed as a manufacturer designee. Once licensed, a manufacturer designee may complete an abbreviated application for each additional manufacturer that employs the designee.⁷ In addition to other requirements, the designee must establish a place of business within Pennsylvania.⁸

Duration

The initial manufacturer designee license is valid for one year. Renewals are valid for three years. Renewal applications must be received by the Board at least two months prior to the expiration of the current license.⁹

Fees

An application fee of $5,000 is due at the time of the application. Upon receiving a license, the designee must pay a $5,000 licensing fee. Each additional Manufacturer Designee License requires a $500 licensing fee.¹⁰

Application

Applicants must complete the Manufacturer Designee Application and Disclosure Information Form. In order to complete the form, the following information is necessary:

1. Basic identity information;
2. Organization form;
3. Tax identification numbers;
4. Criminal history;
5. Regulatory action history, past 10 years;
6. Bankruptcy history, past 10 years;
7. Other professional or regulatory licenses held;
8. Contributions and disbursements, past 10 years;
9. List of incorporators/founders;
10. List of other names used by the applicant;
11. List of all addresses;
12. List of current officers, directors, and trustees;
13. List of former officers, directors, and trustees;
14. List of all employees earning over $100,000 in annual compensation;
15. Bonus and profit-sharing plans;
16. Stock description;
17. List of voting shareholders;
18. Description of interest of current and former partners;
19. List of nonvoting shareholders;
20. Description of all debt;
21. Description of securities options;
22. List of other principals;
23. Financial institutions where accounts are held;
24. Description of insider transactions;
25. Description of all gaming contracts;
26. Political contributions; and
27. Diversity plan information.¹¹

In addition, the following documents must be provided by the applicant (note that some documents are required that are in addition to the information listed in the above list):

1. Description of the business and former business, past 10 years;
2. Description of all bonus and profit-sharing plans;
3. Description of all current litigation;
4. Description of debt;
5. Description of securities options;
6. Description of existing litigation;
7. Audited financial statements, past five years;
8. Annual reports, past five years;
9. Last quarterly statement;
10. 10-K forms, past five years;
11. Any interim reports filed;
12. Last definitive proxy or information statement;
13. Registration statements, past five years;
14. Independent audit reports, past five years;
15. Certified copies of organizational documents (e.g., articles of incorporation, bylaws, charter);
16. Current ownership table;
17. Functional table of organization that contains job descriptions and names of employees earning over $100,000 per year;
18. All business-related tax forms filed with the IRS, past five years;
19. 5500 forms filed with the IRS, past five years;
20. Description of criminal history;
21. List of all assets or lines of credit for machines to be placed in service; and
22. Agreements with manufacturers.¹²

Supplier License Requirements

Each person or entity that supplies slot machines or associated equipment to a licensed gaming facility within the state must be licensed as a supplier.

Supplier licensees must establish a principal place of business within the state in order to remain eligible for licensure.¹³ The place of business must be established within one year from the issuance of a Supplier License and must be:

1. Owned or leased by the supplier;
2. Where the licensee maintains all records of business with licensed gaming facilities in Pennsylvania;
3. Staffed by at least one person during normal business hours;
4. Equipped with a telephone;
5. Large enough to accommodate all required materials and personnel; and
6. Open for inspection during normal business hours.¹⁴

In addition, suppliers must have lines of credit or insurance sufficient to cover all sales, financing, servicing, and repair of all slot machines to be placed into service. These lines of credit and insurance must be an independent source unrelated to gaming activities.¹⁵

Duration

A Supplier License is valid for one year. Renewal terms are valid for three years. Renewal applications must be submitted at least two months prior to the expiration date of the current license.¹⁶

Fees

Upon issuance of a license, a supplier must pay a $25,000 licensing fee.¹⁷ The renewal fee is $45,000 for a term of three years.¹⁸

Application

Applicants must complete the Supplier License Application and Information Disclosure Form. Information necessary to complete the form includes:

1. Basic identity information;
2. Basic background information;
3. Organization form;
4. Tax identification numbers;
5. Criminal history;
6. Regulatory action history, past 10 years;
7. Bankruptcy history, past 10 years;
8. Other professional or regulatory licenses held;
9. Contributions and disbursements, past 10 years;
10. List of incorporators/founders;
11. List of other names used by the applicant;
12. List of all addresses;
13. List of current officers, directors, and trustees;
14. List of former officers, directors, and trustees;
15. List of all employees earning over $100,000 in annual compensation;
16. Bonus and profit-sharing plans;
17. Stock description;
18. List of voting shareholders;
19. Description of interest of current and former partners;
20. List of nonvoting shareholders;
21. Description of all debt;
22. Description of securities options;
23. List of other principals;
24. Financial institutions where accounts are held;
25. Description of insider transactions;
26. Description of all gaming contracts;
27. Political contributions; and
28. Diversity plan information.¹⁹

In addition, the following documents must be provided by the applicant (note that some documents are required in addition to the information listed in the above list):

1. Description of the business and former business, past 10 years;
2. Description of all bonus and profit-sharing plans;
3. Description of all current litigation;
4. Description of debt;
5. Description of securities options;
6. Description of existing litigation;
7. Audited financial statements, past five years;
8. Annual reports, past five years;
9. Last quarterly statement;
10. 10-K forms, past five years;
11. Any interim reports filed;
12. Last definitive proxy or information statement;
13. Registration statements, past five years;
14. Independent audit reports, past five years;
15. Certified copies of organizational documents (e.g., articles of incorporation, bylaws, charter);
16. Current ownership table;
17. Functional table of organization that contains job descriptions and names of employees earning over $100,000 per year;
18. All business-related tax forms filed with the IRS, past five years;
19. 5500 forms filed with the IRS, past five years;
20. Plan to establish and maintain a principal place of business in Pennsylvania within one year of the issuance of a license;
21. List of technicians trained by supplying manufacturers;
22. Documentation demonstrating that physical facilities are properly maintained;
23. Description of criminal history;
24. List of all assets or lines of credit for machines to be placed in service; and
25. Agreements with manufacturers.²⁰

Gaming-Related Service Provider

Those persons or entities that supply gaming materials to a slot machine licensee must register with the Board if the total amount of business conducted is between $100,000 and $500,000 in a single calendar year.²¹ If the applicant intends to conduct more than $500,000 worth of business in a single calendar year, then the applicant must be certified by the Board.

Note that if the applicant is seeking registration and has already contracted to conduct business with a licensed facility, the registration form will be submitted by the slot machine licensee.

Duration

A Gaming-Related Service Provider registration or certification is valid for four years. Renewal terms are four years. Renewal applications must be submitted to the Board at least 60 days prior to the expiration of the current license.²²

Fees – Registration

An application fee of $500 is due when submitting application materials to the Board. Once issued, a $2,000 registration fee is due. Renewal fees are $2,000 for a term of four years.

Fees – Certification

An application fee of $1,500 is due when submitting application materials to the Board. Once issued, a $4,000 certification fee is due. Renewal fees are $4,000 for a term of four years.

Registration Application

Applicants must complete the Unsponsored Gaming Service Provider Registration Form. In order to complete the application form, the following information is required:

1. Basic identity information;
2. Minority business information, if applicable;
3. Billing contact;
4. Tax ID number;
5. Business organization structure;
6. Description of business services;
7. Identity of qualifying individuals;
8. Criminal history;
9. Existing litigation; and
10. Other licenses or permits held.²³

In addition, a current ownership chart and management table of organization must be submitted with the application.²⁴

Certification Application

Applicants must complete the Gaming Service Provider Certification Application and Information Disclosure Form. In order to complete the form, the following information is necessary:

1. Basic identity information;
2. Addresses;
3. Applicant's business background;
4. Names and address of subsidiaries;
5. Licenses and permits held;
6. List of salespersons and employees conducting business with the slot licensee;
7. Current officers and directors;
8. Applicant's owners;
9. Bankruptcy history;
10. Criminal history;
11. Regulatory action history; and
12. Existing litigation.²⁵

In addition, the following documents must be submitted in connection with completing the application:

1. Current ownership chart and management table of organization;
2. Name, address, phone number, and goods/services provided for all subcontractors; and
3. Tax returns, past three years.²⁶

Principal/Key Employee Licensing Requirements

All principals employed with a licensed facility must be licensed as a principal. Principal individuals include: officers, directors, senior surveillance personnel, internal audit executives, those with direct ownership, individuals with more than 1% indirect ownership, and individuals with 5% or more of voting-class securities.²⁷

In addition, entities that must file as a principal include: intermediate/holding companies, those that control management decisions at the applicant level, holders of direct ownership interests, holders of 5% or more in indirect interest, certain private investment funds.²⁸

Lenders or loan underwriters are required to be licensed as principals unless they are banks or financial institutions that issue loans in the normal course of business.²⁹

All employees whose duties require contact with gaming devices and all sales representatives of licensed entities are required to obtain a Key Employee License.

Duration

A Principal/Key Employee License is valid for one year. Renewal terms are one year. Renewal applications must be received at least two months prior to the expiration of the current license.

Fees

An application fee of $2,500 is due when the application is submitted.

Application

Applicants must complete both the Multi-Jurisdictional Personal History Disclosure Form and the Pennsylvania Supplement to the Multi-Jurisdictional Personal History Disclosure Form. The Multi-Jurisdictional Personal History Disclosure Form ("Pennsylvania Supplement") is a lengthy application requiring detailed personal information. Information required to be disclosed includes:

1. Basic identity information;
2. Citizenship and passport;
3. Residence information, past 15 years;
4. Family relationships;
5. Occupation information for family members, including spouses of family members;
6. Military service background;
7. Education;
8. Offices and positions held, including fiduciary, government, and trust relationships;
9. Offices and positions held by spouse, past one year;
10. Employment history, past 20 years;
11. Spouse employment history, past one year;
12. Professional or regulatory licensing;
13. Gaming licenses applied for or held;
14. Business ownership information, 5% threshold;
15. Civil suit and criminal history;
16. Vehicle operation permits and licenses;
17. Financial schedules and bankruptcy history;
18. Net worth statement and schedules including assets and liabilities; and,
19. Three references over 18 years old who are not related to the applicant.³⁰

In addition to the information requested in the application, a recent photograph is required to be submitted in connection with the application.

The Pennsylvania Supplement to the Multi-Jurisdictional Personal History Disclosure Form contains questions regarding the following information:

1. Basic identity information;
2. Address;
3. Business entity information;
4. Alcohol and controlled substance use;
5. History of insurance claims (business activities), past 10 years;
6. Two personal references, different from the persons listed on the Multi-Jurisdictional form and who are unrelated to the applicant;
7. Ownership interests;
8. Public service history;
9. Tax information;
10. Military records; and
11. Political contributions.³¹

The following documents must be submitted in connection with the Pennsylvania Supplement:

1. Tax returns, past five years; and
2. Spouse's tax returns, past five years.³²

Gaming Employee License Requirements

Those employees of licensed manufacturers and suppliers whose job duties require the interaction with gaming equipment and who are not principals or key employees must be licensed as a gaming employee.

Duration

A gaming employee license is valid for one year from the date of issuance.

Fees

An application fee of $350 is due at the time materials are submitted to the Board.

Application

Applicants must complete the Gaming Employee License Application and Information Disclosure Form. Information required to complete the application includes:

1. Basic identity information;
2. Address and residence history;
3. Business address;
4. Driver's license information;
5. Citizenship;
6. Family and social data;
7. Military service history;
8. Employment history;
9. Professional licenses and permits held;
10. Educational history;
11. Financial data/credit history;
12. Bankruptcy history;
13. Three personal references, known for at least one year and who are unrelated to the applicant;
14. Alcohol and substance abuse history;
15. Insurance claims related to business activities, past 10 years; and
16. Civil, criminal, and regulatory action history.³³

In addition, documents that provide further support of certain answers may be requested by the Board in order to process the application.

Licensing Process

Applicants must complete all necessary applications. Once completed, the applications and supporting documents must be sent to the Board with the required application fees.

The Board will then review the submitted materials and begin the background investigation process.³⁴ The Board may require personal interviews with applicants to help determine the applicant's suitability. At any time during the review process, the Board may request additional information or documentation from the applicant. All materials submitted to the Board are considered confidential information and will not be publicly disclosed.³⁵

The applicant may make a request for withdrawal of the application at any time prior to a final determination being made.³⁶ The Board may grant, grant with prejudice, or deny the request.

Disclosure and Reporting Requirements

Before License Is Issued

The applicant must disclose all materials requested by the Board during the application process. This includes information not included on the application form or in initial supplemental materials.

All applicants are required to implement and disclose to the Board a diversity plan to insure that the applicant is an equal opportunity employer.³⁷

After License Is Issued

It should be noted that manufacturers who contract with suppliers must insure that each supplier is licensed by the Board before conducting business with the supplier.³⁸

All business agreements between a person and a licensed gaming facility are subject to Board approval and must contain certain provisions regarding termination if the Board does not approve the agreement. This includes agreements between licensed entities (e.g., manufacturers and manufacturer designees).³⁹

Manufacturers, suppliers, and manufacturer designees must provide the Board with changes in circumstances that would affect the ability of the entity to be licensed under the Act or Rules, copies of all Securities and Exchange Commission ("SEC") filings within 30 days of filing with the SEC, and any other information requested by the Board relating to the license.⁴⁰

At least annually, an executive officer of the licensed entity must submit a report to the Board regarding internal procedures implemented to prevent political contributions that are prohibited under the Act and Rules.⁴¹

Suppliers are required to maintain a logbook of all individuals who enter the place of business where gaming devices are held.⁴²

All license holders must maintain the following records:

1. Correspondence with the Board;
2. Correspondence with other entities that involves gaming equipment;
3. Promotional and advertising materials;
4. Personnel files on all employees;
5. Financial and accounting records; and
6. Tax returns.⁴³

Prior approval is necessary before an entity or person acquires 20 percent or more ownership interest in a licensed manufacturer, manufacturer designee, or supplier.⁴⁴ Forms are available on the Board's website regarding these transactions.

Reapplying for a Denied License

If an applicant is denied a license, then the applicant must wait five years before reapplying.⁴⁵ However, after two years, the applicant may request that the Board waive the five-year prohibition.

If the request for waiver of the five-year prohibition is denied, then the applicant must wait one year before requesting the waiver again.

Gaming Technology Standards

The Board has put forth an extensive list of software, games, systems, and related items that must be submitted to the state Bureau of Gaming Laboratory Operations for approval. Items that must be submitted, including procedures, are maintained at 58 Pa. Code § 461 et seq. Forms for submitting specific items are located on the Board's website.⁴⁶

All slot machines must be approved by the Board through the state Bureau of Gaming Laboratory Operations prior to their introduction to the public.⁴⁷ Slot manufacturers must submit and maintain records of software and processes which are utilized by each slot machine.⁴⁸

Payout percentage for each slot machine may not be lower than 85 percent.⁴⁹

All slot machines must be compatible with the state's central control computer.⁵⁰

Political Contribution Limitations

Pennsylvania’s statute states that all manufacturer, supplier, and key licensees are prohibited from making contributions to any politician, political party, or political group holding office or seeking election within the state of Pennsylvania.⁵¹ On September 19, 2018, a federal district judge struck down Section 1513, which prohibits political contributions, finding it unconstitutional due to First Amendment concerns.

Exemptions

The Board may create an abbreviated licensing process for entities that have manufacturers' or suppliers' licenses in other jurisdictions. The Board may not, however, waive the licensing fees under the abbreviated process.⁵² This exemption is only available if the Board determines that the licensing process in the other jurisdiction is similarly comprehensive, the applicant has no pending or past license violations (or has provided adequate explanations of past violations), and a copy of the other jurisdiction's completed application is filed with the Board.⁵³

Officers and directors of publicly traded holding or intermediary companies may request a waiver from the principal licensing requirements if they are not involved in overseeing activities related to gaming equipment.⁵⁴ Outside directors at publicly traded holding or intermediary companies who are not involved in the audit committee or are not chairperson of the board are exempt from the principal licensing requirements.⁵⁵

Certain private investment funds may be exempt from the principal licensing requirements.⁵⁶

Institutional investors owning less than 15% of outstanding voting securities in a publicly traded intermediate or holding company may be exempt if they file a Schedule 13G with the SEC and file a notice with the Board.⁵⁷ Institutional investors holding less than 10 percent of the outstanding voting securities in a holding or intermediate company may complete a Principal Waiver-Entity Form and, if approved, be granted a waiver from the principal licensing requirements.⁵⁸

Publicly traded companies that provide non-gaming equipment or services may apply for an exemption from the gaming service provider registration and certification requirements by completing the Publicly Traded Gaming Service Provider Form.

Temporary credentials may be issued to principals and key employees whose presence is necessary but have not yet completed the licensing process. Temporary credentials may not be issued for a period of longer than 180 days.⁵⁹

Temporary credentials may be issued to non-gaming employees who have been fingerprinted, photographed, and have submitted the proper application materials to the Board. Temporary credentials for non-gaming employees may not be issued for a period of longer than 30 days.⁶⁰

Temporary credentials are also available for gaming service providers if the work does not include contact with gaming machines.⁶¹ Such credentials are issued at the gaming facility by a licensed representative.

Gaming service providers may be temporarily allowed to conduct business with licensed operators under specific circumstances or emergency conditions.⁶²

---

¹4 Pa.C.S. § 1103, 'Manufacturer.'
²58 Pa. Code § 427a.3.
³4 Pa.C.S. § 1208(1)(ii).
⁴'Schedule of Fees.'
⁵'Manufacturer Application and Disclosure Form,' pp. 6-9.
⁶Id.
⁷58 Pa. Code § 429a.3.
⁸58 Pa. Code § 429a.5(b).
⁹58 Pa. Code § 429a.4.
¹⁰'Manufacturer Designee Application and Disclosure Information Form,' p. iii.
¹¹'Manufacturer Designee Application and Information Disclosure Form,' pp. 6-10.
¹²Id.
¹³4 Pa.C.S. §1317(b)(1.2).
¹⁴58 Pa. Code § 431a.4.
¹⁵58 Pa. Code § 431a.4(b).
¹⁶4 Pa.C.S. §1317(c), (d).
¹⁷4 Pa.C.S. § 1208(1)(i).
¹⁸'Schedule of Fees.'
¹⁹'Supplier License Application and Information Disclosure Form,' pp. 6-7.
²⁰'Supplier License Application and Information Disclosure Form,' pp. 7-9.
²¹58 Pa. Code § 437a.1.
²²58 Pa. Code § 437a.6.
²³'Unsponsored Gaming Service Provider Registration Form.'
²⁴'Unsponsored Gaming Service Provider Registration Form,' p. iv.
²⁵'Gaming Service Provider Application and Information Disclosure Form,' pp. 3-4.
²⁶Id. at 4.
²⁷58 Pa. Code § 433a.3.
²⁸58 Pa. Code § 433a.4
²⁹58 Pa. Code § 433a.6.
³⁰'Multi-Jurisdictional Personal History Disclosure Form.'
³¹'Principal/Key Employee Form – Pennsylvania Supplement to the Multi-Jurisdictional Personal History Disclosure Form.'
³²Id.
³³'Gaming Employee License Application and Information Disclosure Form.'
³⁴See 58 Pa. Code § 423a.3 for a detailed summary of Board actions that constitute the investigative process.
³⁵4 Pa.C.S. § 1206(e).
³⁶58 Pa. Code § 423a.5.
³⁷4 Pa.C.S. § 1325(b)(1).
³⁸4 Pa.C.S. § 1317(a).
³⁹4 Pa.C.S. § 1321(b); see also 58 Pa. Code § 429a.7; 431a.4(c).
⁴⁰58 Pa. Code § 427a.5.; 429a.5; 431a.4(d).
⁴¹4 Pa.C.S. § 1513(b).
⁴²58 Pa. Code § 431a.5.
⁴³58 Pa. Code § 451a.1.
⁴⁴See 'Licensee's Notification of Proposed Transfer of Interest Form.'
⁴⁵58 Pa. Code § 423a.7.
⁴⁶See http://www.pgcb.state.pa.us/?p=65.
⁴⁷58 Pa. Code § 461a.3.
⁴⁸See 58 Pa. Code § 461a.4.
⁴⁹Id. at 461a.7.
⁵⁰4 Pa.C.S. § 1320(c).
⁵¹4 Pa.C.S. § 1513.
⁵²4 Pa.C.S. § 1319.
⁵³58 Pa. Code § 427a.4.
⁵⁴58 Pa. Code § 433a.2(e).
⁵⁵58 Pa. Code § 433a.2(e).
⁵⁶See 58 Pa. Code § 433a.4(f), (g).
⁵⁷58 Pa. Code § 433a.5.
⁵⁸Id.
⁵⁹58 Pa. Code § 435a.8.
⁶⁰58 Pa. Code § 435a.9.
⁶¹Id.
⁶²See 58 Pa. Code § 437a.11.