“Skill games have been baked into the economies of local businesses for a while now,” stated Mike Barley, chief public affairs officer with skill games manufacturer Pace-O-Matic.
Budget discussions are mired in gridlock between Pennsylvania’s GOP-led Senate and Democrat-led House, with the regulation and taxation of thousands of “skill games” scattered across the Commonwealth continuing to play a key role in negotiations.
Skill games–slot-like machines common in convenience stores, bars, and private clubs–operate in a legal gray area. A court ruling previously found them legal because they involve a degree of player skill as opposed to only luck. That decision is under review by the state Supreme Court, and, in the meantime, lawmakers are scrambling to determine whether and how to bring the games under state oversight.
Gov. Josh Shapiro’s $51.5 billion budget proposal banks on roughly $369 million in new revenue from taxing the machines, alongside revenue from the hypothetical legalization of adult-use recreational marijuana. The administration is proposing a steep 52% tax rate on the games, which reflects a similar rate to what casinos pay on slot machines.
Gov. Shapiro proposes regulations for skill games in budget address
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Small business owners and game manufacturers, however, argue that those rates would devastate their operations. Some have proposed a more modest 16% rate, saying it would yield $250-300 million for the state while allowing businesses to stay afloat.
“This isn’t something that’s just come out in the last couple of years,” said Mike Barley, chief public affairs officer with skill games manufacturer Pace-O-Matic. “Skill games have been baked into the economies of local businesses for a while now.”
Meanwhile, casino operators insist that the state level the playing field and subject skill games to the same high tax rates and strict regulations as other gambling products.
The currently untaxed and unregulated games are widespread across the Commonwealth, with estimates suggesting there are more than 70,000 in operation statewide, generating hundreds of millions in revenue.
Senate Republicans, led by Majority Leader Joe Pittman and Sen. Chris Gebhard, have introduced legislation to regulate the machines under the Pennsylvania Gaming Control Board. Senate Bill 756 proposes a 35% tax rate, license requirements, and limits on the number of machines per location.
“We are in the first three innings of the game,” Gebhard acknowledged, speaking of the process to bringing skill games under regulation. “We have a tremendously long way to go.”
Supporters of the bill say regulating skill games would provide a new revenue stream without raising income or sales taxes and would give the state more oversight to crack down on bad actors.
The House, controlled by Democrats, has not yet acted on the Senate proposal, with budget negotiations remaining stalled. Shapiro has said he wants a deal on skill games as part of the final budget package, but with the fiscal year ending June 30, lawmakers have little time to reach an agreement.
