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A new proposal in the Pennsylvania House is aiming to resolve one of the state’s longest-running gaming controversies: how to classify and regulate skill games.
House Bill 2046, introduced earlier this week by Rep. Danilo Burgos, creates a formal regulatory structure for the devices. It also is delivering a sizable tax cut to the state’s Category 4 mini-casinos.
Together, the two measures make HB 2046 one of the most ambitious Pennsylvania gambling regulation and policy changes in recent years.
Legislators move to end legal ‘gray’ area
For nearly a decade, Pennsylvania’s skill games have operated in a legal limbo. However, the Commonwealth Court did rule the games as legal back in 2023.
The machines are widely distributed in bars, restaurants, social clubs, convenience stores and fraternal organizations. They are not regulated or taxed as of yet, unlike retail and Pennsylvanua online casinos.
HB 2046 defines a skill game as a device where skill, not chance, is the “predominant factor” in determining a player’s outcome. Machines meeting that standard and complying with state regulations would be expressly legal.
The bill assigns oversight to the Pennsylvania Department of Revenue, which would handle licensing, background checks, enforcement and tax collection. Skill game systems would be required to undergo testing by independent laboratories to verify that skill is the primary determinant of results.
Importantly, the legislation draws a clear line between skill games and traditional gambling. Any certified skill game would not be considered a slot machine, gambling device, or lottery product under Pennsylvania law.
High licensing fees signal tight state control
HB 2046 lays out a three-tier licensing structure to distribute and operate skill games. The fees reflect the state’s intent to tightly regulate the market.
- A $1 million initial license for distributors
- A $100,000 initial license for operators
- A $1,000 license for establishments
Machines would also face strict technical standards, which would be:
- $5 maximum cost per play
- $5,000 maximum prize, on-screen disclosure of rules, and mandatory internet connectivity for data reporting
Revenue from the machines would be divided among the parties involved: 40% each to operators and establishments, and 20% to distributors.
Category 4 casinos would see major tax cut
While the skill game provisions are likely to draw the most attention, HB 2046 also includes a substantial change to the casino tax structure. The bill reduces the daily tax rate on gross terminal revenue for Category 4 casinos from 50% to 32%.
Supporters argue that smaller casinos, often located in rural or suburban areas, have struggled under Pennsylvania’s steep tax environment. A rate cut could help maintain jobs and keep the properties competitive.
Current skill games bills on the table
The debate over the legality of the machines is not over just yet. The Pennsylvania Supreme Court is hearing the case this week.
Despite that, there are still lawmakers, along with Gov. Josh Shapiro, attempting to regulate and tax the games. They could be an important source of revenue for the state.
Shapiro has been on the record of wanting them taxed at 52%. However, revenue was not included in the state budget that was signed last week.
There are other bills introduced that have a tax and regulation framework on skill games:
- Sen. Gene Yaw: Introduced SB 626, which enacts a 16% tax on the machines
- Sen. Gene Yaw: Introduced SB 1079, establishing fees
- Sen. Chris Gebhard: Introduced SB 756, which includes a 35% tax on the machines
- Rep. Kerry Benninghoff: Introduced HB 1619, which would place no additional tax on the games
A debate years in the making
The bill is expected to draw significant debate from competing interests: casinos wary of skill-games expansion, small business groups that rely on machine revenue, and lawmakers grappling with how to regulate a rapidly evolving gaming market.
If HB 2046 advances, it could mark the most far-reaching shift in Pennsylvania’s gaming policy since the legalization of online gambling in 2017.
