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Pennsylvania lawmakers begin their new legislative session on Monday (January 27), with top Republican Senate leaders calling for the regulation and taxation of skill-game devices that provide an increasing competitive threat to the state's established gaming industry.
The debate over whether to clearly prohibit or instead regulate and tax the many thousands of skill-game machines located in Pennsylvania convenience stores, gas stations and bars has gone nowhere over the last three legislative sessions.
Governor Josh Shapiro, a Democrat, called for legalizing and regulating skill games in last year’s budget.
That effort to tax and regulate the machines failed, but Shapiro is expected to again include potential tax revenue from skill games in his budget address on February 4.
Senate President Pro Tempore Kim Ward, Senate Majority Leader Joe Pittman and two other key Republican senators, Rosemary Brown and Chris Gebhard, released a memo prior to the new session similarly calling for the machines to be regulated.
“Without a regulatory structure in place, the Commonwealth cannot determine the number of machines that are operating across Pennsylvania, whether appropriate taxes are being remitted, and whether the payouts offered by these machines are fair to the player,” the senators wrote.
The memo seeking co-sponsors for a future bill does not mention what tax rate the senators would propose.
“We intend to introduce legislation authorizing the Pennsylvania Gaming Control Board to license and regulate a limited number of machines for operation at certain liquor-licensed and lottery-licensed establishments across the Commonwealth,” the memo states. “Our legislation will further ensure that fair and appropriate taxes are collected.”
The legal status of skill-game machines have been disputed for years, with opponents arguing that the companies that manufacture and distribute skill games do not pay taxes, while the devices have a negative impact on consumers and the legal gaming industry.
“Reputation matters a lot,” said Bill Miller, president and CEO of the American Gaming Association (AGA). “How the public perceives us matters a lot, and so it isn’t as much about market share, although that’s important. It really is about making sure that we are trying to press law enforcement, (and) regulators to protect the public.”
“Protecting the public means putting these people out of business,” Miller told Vixio GamblingCompliance.
Miller admitted that illegal gambling machines are never going away, so the AGA and regulated gaming companies have to be prepared for a “never-ending war against people that don’t want to pay the licensing fee”.
"They don’t want to pay the taxes. They don’t want consumer protections, and they don’t want testing. Those people are going to kind of continue to exist if they believe there is lax enforcement or loopholes in the law and the statute.”
“Our job,” Miller told Vixio, “is going to continue to be to make their job as difficult as possible because they are a danger to the entire industry.”
“If you are ‘John Q Public,’ it is very difficult for you to separate a slot machine on a casino floor, a VLT (video lottery terminal), and the machine that looks just like it and performs just like it at a convenience store.”
Lead by Penn Entertainment, the Pennsylvania casino industry filed a lawsuit in 2024 calling for unregulated skill games to be subject to the same 54 percent tax rate that is applied to slot machines in regulated land-based casinos.
The Pennsylvania Lottery, racetracks and truck stops that offer gaming machines have also said they are being negatively impacted by the unchecked proliferation of skill-game machines throughout the state.
Meanwhile, Republican Senator Gene Yaw also began circulating a co-sponsorship memo earlier this month for his latest effort to get a bill through the Pennsylvania General Assembly to legalize the terminals. Yaw, who has been a vocal supporter of regulating the machines, introduced Senate Bill 706 in the 2023-2024 session that died in committee.
Under the legislation he expected to introduce this session, skill-game terminals would be restricted to five per bar or convenience store and ten in fraternal and veterans clubs. Yaw’s memo did not include a proposed tax rate, but his previous bill included a 16 percent tax rate, or significantly below the 54 percent rate paid by casinos.
Yaw expects the machines to generate $300m in annual tax revenues. Estimates put the number of unregulated skill-game machines in Pennsylvania at between 67,000 and 80,000.
Commonly branded as Pennsylvania Skill, the machines developed by Pace-O-Matic are the dominant terminals in the marketplace. Included on Pennsylvania Skill’s website is a section describing the machines as a “legal and defendable game of skill” and citing several state court rulings that determined their machines to be lawful.
Some state courts have ruled that the outcome of the games are not fully dependent on chance, which excludes them from restrictions on gaming devices as established by the Pennsylvania Gaming Act.
The legality of skill-game machines is once again being considered by the Pennsylvania Supreme Court. As of Friday (January 24), the court had not issued an opinion on the matter. The state’s highest court announced in June it would take up a case involving machines that were seized in Dolphin County.
Pennsylvania attorney general Michelle Henry appealed a lower-court decision that found the games are based on a player’s ability, not solely chance. The Supreme Court had earlier declined an appeal of a separate ruling that found the machines are not illegal gambling.
