USA: Pennsylvania budget and the skill games debate

Garance Limouzy July 15, 2024

In Pennsylvania, Governor Josh Shapiro signed the new budget that does not include his proposal to regulate and tax skill game machines.

In February 2024, the Democratic governor of Pennsylvania presented a proposal for the new budget. Part of it was a new tax on skill game machines that was expected to raise about $150.4 million for the state, by imposing a 42 percent tax on the machines. It is estimated that in Pennsylvania, there are tens of thousands of these machines operating in gas stations, bars, and convenience stores.

Skill games untaxed, unregulated

This tax aligns with how the state’s 17 casinos are taxed. Slot machines, for instance, are taxed between 48 and 54 percent.

Currently, skill games remain untaxed and unregulated under the law, as they are not classified as gambling activities. However, many argue their similarity to slot machines due to their financial nature and the role chance plays in game outcomes.

Pace-O-Matic, one of the main companies that produce these skill game machines, claims they don’t constitute gambling as the games “require interaction and predominant skill to play.”

Governor Shapiro’s proposal to tax these machines at rates akin to those in the gambling industry reflects his intention to oversee the market for skill game machines. Had his proposal been incorporated into the budget, these machines would have fallen under the regulation of the Pennsylvania Gaming Control Board.

Intense lobbying

Pace-O-Matic reportedly employs 20 lobbyists, working against any attempt to change taxes on the skill machines, with expenditures totalling $1.8 million in 2023.Additionally, the company donated $446,000 to politicians’ campaign funds during the same year. In 2022, Pace-O-Matic also sponsored an all-expenses-paid trip to a Wyoming rodeo for state lawmakers.

On the other side, championing the taxation of skill machines are the casinos, which view untaxed machines unfavourably as they divert millions from their regulated games. Despite being prohibited from making political donations since 2018, casinos retain substantial political influence. In 2019, Pennsylvania’s largest casino acknowledged ghostwriting a senator’s bill intended to outlaw skill games.

Abandoning regulation of skill games

Upon signing the new budget, Governor Shapiro, a Democrat, ultimately shelved his proposal to regulate skill machines—for the time being. His $47.6 billion budget package prioritises increased funding for education and transportation compared to previous allocations.

“Everyone had to compromise, and we all didn’t get what we wanted but we are all going to come back and fight for things that we believe in,” Shapiro told reporters.

The Pennsylvania Supreme Court to decide

If Shapiro’s budget fails to regulate skill machines, a final decision on their legality is expected. Currently, two bills have been submitted to the state legislature—one seeks to legalise the terminals, while the other seeks to ban them.

In June 2024, the Pennsylvania Supreme Court announced it would determine whether these machines qualify as legal or unlicensed gambling devices. Their ruling is pending.