Economic Boom or Tax Revenue Threat?

Pennsylvania Skill Gaming Machines

Pennsylvania Skill Gaming MachinesSkill gambling in Pennsylvania is currently navigating rough legislative seas; if a new law receives enough support, it may result in the prohibition of these well-liked devices. Legislation authored by state senator Amanda Cappelletti and representative Mark Rozzi seeks to outlaw “skill” slot machines, which are frequently found in a variety of non-casino venues around the commonwealth. The impact and regulation of these machines, which have been a source of friction for legislators, small companies, and the casino industry, is the subject of a larger discussion that includes the proposed ban.

Famously referred to as “Pennsylvania Skill”, skill games have proliferated at eateries, pubs, supermarkets, convenience stores, and retail establishments. These games aren’t subject to the same stringent regulations as regular casino slot machines, even with their growing popularity. The strictly regulated casino slots follow predetermined payout rates and are kept an eye on for fair play. On the other hand, the significant 52% effective tax rate on gross revenue from casino slots does not apply to skill games. Both the state’s horse racing sector and property taxes are greatly aided by these revenues.

Lawmakers Clash Over the Fate of Skill Gaming Amid Economic and Legislative Turbulence

Opposition to the proposed legislation is expected from a number of sources, chief among them being small enterprises who claim that these devices have been essential to their survival—especially in light of the obstacles presented by the epidemic and high inflation. Firms such as Pace-O-Matic, collaborating with Miele Manufacturing of Pennsylvania, have highlighted how skill games have helped small firms grow, recruit more staff, and raise wages.

Still, there has long been discussion about skill games in Pennsylvania. Sen. Gene Yaw of the state filed bipartisan Senate Bill 706 earlier this year with the goal of establishing a framework for skill game regulation. A 16% tax on the gross proceeds of the terminals was planned, along with regulations for the terminals. This different strategy sought to establish some kind of structure in the skill games market.

Sponsors of the proposed ban, Cappelletti and Rozzi, contend that skill games are more harmful than beneficial. They draw attention to the lack of laws protecting consumers, prohibiting underage gaming, helping problem gamblers, and other related issues. The legislators maintain that there is no merit to the claim that because talent is a component of skill games, they do not qualify as gambling. They cite testimony from the office of Pennsylvania Attorney General Michelle Henry, who said that these gadgets are like slot machines.

Cappelletti and Rozzi’s Proposed Legislation

The argument is further complicated by the casino industry’s claim that skill games are drawing players away from its regulated slots and decreasing the state’s tax benefits. Recent revenue data from the state’s casinos, however, presents a different image. The casinos made $2.39 billion from retail slots in 2022, which was their second-best year ever. In 2023, Pennsylvania emerged as the second largest gaming state by revenue in the US.

In Pennsylvania, skill gaming is still not legally recognized. Judge Patricia McCullough of the Commonwealth Court found in 2019 that the state’s Gaming Act only controls games of chance, not skill, despite Attorney General Henry’s office classifying them as slot machines. The General Assembly must clarify this issue, according to the Pennsylvania Gaming Control Board.

The proposed legislation by Cappelletti and Rozzi aims to amend the Gaming Act by placing “all forms of skill games” under its jurisdiction and limiting the use of such devices to casinos with state licenses alone. An already contentious problem in the state’s gaming environment is made more complex by the current legal and legislative tug-of-war around skill gaming. The survival of skill gaming in Pennsylvania is in doubt in this developing story because corporations, legislators, and stakeholders are debating divergent ideas about what the industry should look like in the future.


Author: Eugene Gray