Pennsylvania Gaming Control Board Outlines Rules for Category 4 Casino Bidding

The Pennsylvania Gaming Control Board (PGCB) is in the midst of legal proceedings concerning the Category 4 casino license it issued in January to SC Gaming OpCo, LLC. The agency’s offices, situated in Harrisburg, are attempting to discern the regulations of the bidding process for these mini-casinos, also known as ‘satellite casinos.’

SC Gaming OpCo is under the control of Pennsylvania businessman Ira Lubert. Lubert, who graduated from Penn State and was a trustee of the university, has partnered with the Bally’s Corporation to construct a casino close to the main campus of Penn State University.

The Cat. 4 casinos were established through the state’s 2017 gaming expansion package. These casinos are allowed to possess up to 750 slots and 30 table games, with an additional fee of $2.5 million for the latter. After one year of functioning, Cat. 4 table game casinos can add another 10 tables.

The Cat. 4 chances were initially only made available for entities with an existing brick-and-mortar slot concession in the commonwealth. However, when the bidding process stalled in 2020, the PGCB welcomed individual investors in slots licenses to bid.

Lubert was the highest bidder during the state’s September 2020 Cat. 4 auction round with a $10,000,101 submission. Lubert selected the former Macy’s department store at the Nittany Mall for his casino project, which is located in College Township, an area that did not opt out of the Cat. 4 consideration.

Legal Dispute

Shortly after Lubert secured his Cat. 4 license for College Township, attorneys from The Cordish Companies alleged that Lubert breached the PGCB’s bidding regulations for the mini-casinos. Cordish operates Live! Casino & Hotel Philadelphia and Live! Casino Pittsburgh in Westmoreland, the latter being a Cat. 4 property.

Cordish’s lawsuit suggests that the winning bidder was expected to pay the license fee on their own. Since Lubert had apparently organized an investment group before the bid, Cordish’s legal team argues that the PGCB should not have even considered his September 2020 offer.

Cordish’s appeal of the PGCB awarding Lubert’s SC Gaming OpCo a Cat. 4 permit reads, “Lubert did not pay the entire winning bid to the Board himself, as required by… the Gaming Act.”

Newly released filings from the PGCB related to the Bally’s Nittany Mall casino project show that the state gaming agency was aware that the $10 million the state agency received from Lubert within two days of the September 2020 auction was not exclusively his money. In the legal documents, PGCB officials refer to Lubert as having “funding.”

When questioned the PGCB about the matter, the state’s legal team said that there has been some confusion about how the winning bid must be paid to the state. The PGCB’s stance is that the Gaming Act permits bids and projects to have financial backers, so long as the funds used are subject to clear agreements and that the investors involved are thoroughly vetted.

The PGCB’s response to Cordish’s petition for review states, “It is admitted that Mr. Lubert had other sources of funding for the bid, though Mr. Lubert paid the bid himself via a wire transfer from his personal bank account.”

The Gaming Act does not explicitly say that a Cat. 4 high bidder has to pay the bid alone. Under Section 12.1 of the Gaming Act — Cat. 4 “Auction Procedures” — the law reads, “The winning bidder shall pay to the Board the bid amount within two business days following the auction. Payment shall be by cashier’s check, certified check, or any other method acceptable to the Board.” Additionally, under “Financial Backer Information,” the Gaming Act reads, “The Board shall require an applicant for a terminal operator license to produce the information, documentation, and assurances as may be necessary to establish by clear and convincing evidence the integrity of all financial backers, institutional investors, investors, mortgagees, bondholders, and holders of indentures, notes, or other evidence of indebtedness, either in effect or proposed.”

The Pennsylvania Gaming Control Board is currently engaged in a legal dispute surrounding the Category 4 casino license it granted in January to SC Gaming OpCo, LLC. The state gaming agency’s legal team is attempting to clarify the bidding regulations for these mini-casinos, or ‘satellite casinos.’ SC Gaming OpCo is managed by Pennsylvania entrepreneur Ira Lubert, who is in partnership with the Bally’s Corporation