Gov. Josh Shapiro included Pennsylvania skill games regulation and a tax structure in his FY 2025/2026 budget address on Tuesday. However, his plan is slightly different from what he proposed last year.
The machines have been operating in a gray area throughout the Keystone State for years. Though the Commonwealth Court ruled the games as legal games of skill in December 2023, the machines are still unregulated.
Even the manufacturers of the games, Pace-O-Matic (POM), has been seeking regulation for years. However, Gov. Shapiro proposed a 52% tax on the revenue, which nears the price Pennsylvania casinos are paying on slot revenue.
Details on Gov. Shapiro’s skill games plan
Gov. Shapiro has long been in favor of regulating skill machines in Pennsylvania. On Tuesday, he unveiled his plan to do so for the upcoming fiscal year, which starts on July 1.
Gov. Shapiro estimates there to be 70,000 machines statewide. The unregulated skill games are hurting two critical areas in the Commonwealth, according to Gov. Shapiro’s budget address as prepared for delivery:
“Every time somebody puts a buck into one of those unregulated machines, it undermines the lottery and the critical services it funds for our seniors like prescriptions and meals.
“The Pennsylvania Lottery lost an estimated $200 million over the last 5 years, primarily due to these unregulated skill games.”
Gov. Shapiro’s press release describes an outline, which shows how the machines will be regulated and taxed. He came up with the following plan:
- The proposal will allow 30,000 total combined Video Gaming Terminals and skill game machines in establishments in 2025-26, increasing incrementally to 40,000 machines by 2029-30.
- Each establishment will be permitted to have a maximum of 5 machines.
- Gross terminal revenues will be taxed at a rate of 52%, with 47% to the General Fund to strengthen our Commonwealth and 5% to the Lottery Fund to fill the funding gap for older adults that skill games caused in the first place.
- This proposal is projected to generate $8 billion in new revenue for the Commonwealth over five years.
Gov. Shapiro has the Pennsylvania Gaming Control Board (PGCB) regulating the machines.
Tax rate is almost as high as Pennsylvania slots
Gov. Shapiro proposed a 52% tax on skill games, which comes extremely close to what casinos in Pennsylvania pay. Properties pay a 54% on slot revenue back to the Commonwealth.
Gov. Shapiro’s plan this year is a little different. He only proposed a 42% tax last February and disclosed the amount many machines an establishment can possess.
Pennsylvania casinos are likely happy to see that Gov. Shapiro taxed the machines very closely to its own slots. Back in July, 12 casinos filed a complaint to the Supreme Court, arguing that taxes on slot machines are unconstitutional because of the lack of oversight skill games have. By doing so, those properties hoped for one of three outcomes:
- Remove 54% tax rate casinos pay to the Commonwealth
- Tax skill games at the same 54% rate
- Ban skill games altogether
Gov. Shapiro’s stance definitely favors the casino industry. POM, on the other hand, was hoping for a lower tax rate to help small businesses in the state. Senator Gene Yaw and Representative Danilo Burgos have each written memos that support a 16% tax on the machines.
Senate President Pro Tempore Kim Ward and Senate Majority Leader Joe Pittman also support skill games regulation. However, neither presented a tax structure.
While many lawmakers and politicians are on-board with regulation, agreeing on a percentage is the next hurdle.
