Pennsylvania Senate Revives Effort to Regulate Skill Games

Pennsylvania are renewing their focus on the regulation and taxation of skill games, slot-like machines that have become common fixtures in bars, restaurants, and convenience stores statewide. Unregulated and untaxed, these machines are at the center of a debate that encomes revenue generation, legal ambiguities, and competing gambling interests.

Pennsylvania Senate leaders, including Senate President Pro Tempore Kim Ward (R., Westmoreland) and Senate Majority Leader Joe Pittman (R., Indiana), issued a memorandum emphasizing the need to regulate and tax skill games. According to Senate Republicans, taxation could address declining tax revenues and vital funding initiatives, such as those for public transit agencies like SEPTA.

“I continue to default to this issue because, at least in concept, it’s the only revenue stream I’m hearing about that seems to have broad interest,” Pittman stated in December, highlighting the bipartisan appeal of tapping into this untapped financial resource.

Stakeholders and Competing Interests

The controversy surrounding skill games is fueled by various stakeholders’ conflicting interests. Operators of skill game machines argue that they provide critical financial to small businesses and social clubs. The machines were deemed legal by a 2023 appeals court ruling that categorized them as games requiring some level of skill, thereby excluding them from the purview of state gambling laws.

In contrast, casino operators perceive skill games as a form of unregulated competition and advocate for either strict regulations or outright bans. The casino lobby has proposed tax rates on skill games equivalent to the 50% levied on their own slot machines and has called for enhanced monitoring, including video surveillance of devices.

Additional players in the debate include the horse racing industry, the state lottery, and producers of video gaming terminals (VGTs), all of whom have stakes in determining the regulatory framework for gaming devices in Pennsylvania. VGTs, for example, are subject to a 52% tax rate and limited to specific locations like truck stops. Matthew Hortenstine, legal counsel for VGT manufacturer J&J Ventures, argues for regulatory parity among all gaming devices to foster a fair market.

Shapiro istration’s Role and Challenges Ahead

Governor Josh Shapiro has voiced for regulating skill games, framing it as “unfinished business” from last year’s legislative session. In 2023, Shapiro proposed oversight by the state’s gaming control board and a 42% tax rate, slightly below the tax rate applied to casino slots. Though the proposal ultimately stalled, he projected that the tax could generate $150 million in the first year, with annual revenues increasing over time.

The Pennsylvania Senate’s memo mirrors some of Shapiro’s earlier recommendations. It proposes limiting skill games to a set number of devices in liquor-licensed and lottery-licensed establishments, ensuring regulation by the gaming control board, and instituting fair taxation. However, the specifics of the tax rate remain undefined.

Despite potential bipartisan , lawmakers must reconcile differences among stakeholders. Skill game industry representatives argue that a 42% tax rate, like the one Shapiro suggested, is unsustainable and advocate for a lower rate. Industry lobbyist Mike Barley has pushed for oversight by an independent regulator rather than the state’s gaming control board, citing past biases toward casino interests.

Balancing Financial Needs and Legislative Complexities

The revived debate occurs amid Pennsylvania’s slowing tax revenue growth and looming financial concerns. With the state’s $3 billion surplus expected to diminish by 2026, legislators are under pressure to secure additional revenue streams. Senate Republicans are calling for decisive action to avoid reliance on the rainy day fund or implementing cuts to essential programs.

However, the divided General Assembly may complicate progress. House Democrats, representing diverse constituencies such as Philadelphia, have signaled a preference for localized regulatory authority, potentially introducing further obstacles to statewide agreements.

As discussions advance, all parties—including casino operators, skill game advocates, and other gaming industry stakeholders—are poised to influence the outcome of legislation. Lawmakers will need to balance these interests with Pennsylvania’s fiscal realities to resolve the contentious issue.

Source:

“Pennsylvania: Top lawmakers revive debate over unregulated gambling machines”, cdcgaming.com, January 17, 2025.