Pennsylvania Lawmakers Debate Taxing and Regulating 'Skill Games'

Key facts

• Untaxed, unregulated video gaming machines resembling slot machines, known as 'skill games,' are prevalent in Pennsylvania.
• Court rulings have determined these games are skill-based and not illegal slot machines, exempting them from gaming regulations and taxes.
• Proponents, including manufacturers and small business owners, advocate for taxation and regulation to generate state revenue.
• Opponents, including the casino industry and public safety advocates, raise concerns about addiction and crime.
• Governor Josh Shapiro proposed a 42% tax on skill games, estimating potential revenue of over $150 million annually.

Pennsylvania is grappling with how to regulate and potentially tax 'skill games,' video machines that closely resemble slot machines but are legally distinguished by their purported reliance on player skill rather than chance. These machines, found in various establishments like bars and convenience stores, currently operate outside the state's Gaming Act, meaning they are neither taxed nor regulated like traditional gambling devices.

Several court decisions, including a November 2023 ruling by Pennsylvania's Commonwealth Court, have affirmed that games like those branded 'Pennsylvania Skill' are not illegal slot machines per se, allowing them to remain in operation. Judge Lori A. Dumas noted in the ruling that the machines were not slot machines as commonly defined.

This regulatory gray area has created a divide. Manufacturers and small business owners see taxing and regulating these games as a significant opportunity to generate much-needed revenue for the state, especially in light of potential budget deficits. Mike Barley, a spokesperson for Pace-O-Matic, highlighted the potential for easier budget balancing if such a revenue stream had been available in past years.

Conversely, the casino industry has actively opposed the regulation of skill games. Public safety advocates also express concerns, fearing that the proliferation of these machines could lead to increased crime and exacerbate addiction issues within the commonwealth.

Governor Josh Shapiro has publicly supported regulating the games, including a proposal in his 2024 budget that estimated over $150 million in revenue for the 2024-25 fiscal year through a 42% tax on daily gross gaming revenue. The Pennsylvania Gaming Control Board, led by Executive Director Kevin O’Toole, is monitoring court decisions, including potential appeals to the Supreme Court, to determine the legal framework for regulating these games.