To Legalize or Not to Legalize? PA Senate to Address VGT Expansion, Skill Games Legality

Posted on September 25, 2020 - Last Updated on October 26, 2020

Consider the innocuously labeled SB 1256 the opening salvo of the Pennsylvania budget battle: Part Two.

When the Pennsylvania Senate left Harrisburg for their home districts on Sept. 22, lots of unfinished business remained. Chiefly, that’s passing a state budget for the rest of the fiscal year after having approved a stopgap spending measure at the end of May covering only part of the year.

So brace yourselves for a dark and bumpy ride.

The state’s second budget season commences on Oct. 5. The biggest and heaviest lift is passing a budget during November, likely not until sometime after Election Day on Nov. 3. And a reminder: PA has a long, strange tradition of sometimes bizarre last-minute deal-making on the eve of passing a budget.

As the Pennsylvania Capital Star put it in a recent opinion piece:

“A fall debate on the commonwealth’s budget is going to be painful for everyone in Pennsylvania. Relations between the Administration and the Republican majority in the General Assembly are frayed, making negotiations difficult.”

Senate holds a hearing on VGTs and skill games bill Oct. 6

As part of the windup, the Senate goes back to work in the capital on Oct. 5. And while it’s not strictly a budget measure, there’s a much-anticipated hearing the next day on an important bill, Senate Bill 1256.

That’s pet legislation of Sen. Jake Corman, the Republican majority leader (pictured, lead image). The 29-page legislative proposal focuses on expanding video gaming terminals, or VGTs, and expressly legalizing games of skill.

But the bill assigns no taxation level to the machines it seeks to allow and does not state how many devices might be allowed.

SB 1256 gets first hearing in public after a lull

Through July, Republicans secretly discussed the bill behind closed doors. But it failed to gain traction. Despite the shroud of backroom secrecy, Spotlight PA scrutinized some of the machinations.

Corman had characterized the bill to Spotlight as a way to control and license the proliferation of illegal gambling machines in PA. He claimed expanding VGTs’ presence was somehow a matter of fairness, given the bill’s aim to widely allow skill games.

He also said the move would raise revenues but never named an amount.

Corman now has a casino coming to his district

Since Corman spoke to Spotlight in late June, there’s been one significant change and two additional developments.

First, a mini-casino license was auctioned off in his Centre County district for $7.5 million to Philadelphia real estate development and financial consultant Ira Lubert.

Next, Spotlight has written more recently about Corman and a so-called “dark money” fund overseen by a lobbyist he’s connected with. And then there was also his hiring of a lobbyist with deep ties to out-of-state VGT makers to lead his staff.

Meanwhile, the VGT and skills games bill has lain dormant since July.

That’s about to change.

Senator from Philly suburbs plans a hearing

Republican state Senator Thomas Killion‘s Community, Economic and Recreational Development Committee is holding a hearing on Bill 1256 beginning at 10 a.m. on Oct. 6.

Killion, who represents part of the Philadelphia suburbs in Delaware and Chester counties, is running for re-election in November. He did not respond to a request for comment. Neither did the committee’s co-chair, state Sen. Lindsey M. Williams, a Democrat who represents the Pittsburgh area.

Casinos and POM hate SB 1256

Proving that politics makes for strange bedfellows, all 13 PA casinos, which include the yet-to-open Live! properties, have opposed the Corman bill, but then so has Pace-O-Matic, the PA company that makes and distributes Pennsylvania Skills games.

The industry letter went out on Sept. 17 and was signed by the leaders of casino properties employing more than 20,000 Pennsylvanians. The casinos are:

  • Mohegan Sun Pocono
  • Harrah’s Philadelphia Casino and Racetrack
  • Meadows Racetrack and Casino
  • Hollywood Casino at Penn National Race Course
  • Valley Forge Casino Resort
  • Rivers Casinos in Pittsburgh and Philadelphia
  • Parx Casino
  • Presque Isle Downs & Casino
  • Mount Airy Casino Resort
  • Wind Creek Bethlehem, Lady Luck Casino Nemacolin
  • Live!

Casinos’ position on SB 1256

In part, the casinos’ letter opposing the bill reads:

“Expanding VGTs to liquor licensees would result in as many as 85,000 gambling machines being added to the state — which is more than three times the current number of slot machines in all of Pennsylvania’s casinos combined. Similarly, legalizing (and thereby rewarding) the currently illegal skill game slot machines that are prevalent in bars, convenience stores, gas stations and other businesses would cause tremendous damage to our industry and the nearly 20,000 Pennsylvanians we are proud to employ, as well as negatively impact the Pennsylvania Lottery and the public interest. SB 1256 does exactly that.”

The letter also points out the recent economic losses the licensed casino industry — and the state — are still struggling with:

“Collectively, casinos suffered approximately $968.8 million in revenue losses from slot machines and table games (due to the virus shutdowns), $424.2 million of which would have been payable to the Commonwealth.”

Casinos reference “good faith” by the state

Additionally, the letter claims:

  • “Stores, golf courses, microbreweries and a variety of other businesses could all potentially become miniature casinos.”
  • “This bill would come at the expense of the Commonwealth in the form of lost tax revenue, gaming industry job losses and lost local share revenue.”

The letter concludes by pointing out the Commonwealth is a better than 50% stakeholder in the casino industry via fees and tax revenue, and finally, that the casino license holders invested in PA with the state “a good-faith partner.”

Legislative leaders mum on SB 1256

All members of the legislature got the letter.

But the letter addressed Corman in particular, as well as:

  • Senate President Pro Tempore Joseph Scarnati III
  • Senate Democratic Leader Jay Costa
  • Assembly Speaker Bryan Cutler
  • House Majority Leader Kerry A. Benninghoff
  • House Democratic Leader Frank Dermody

PlayPennsylvania sought comments from all of the legislative leaders. None responded.

But a spokeswoman for Scarnati referred the request back to Corman. “Any questions regarding VGTs and skill games would be best directed at Senate Majority Leader Corman’s office,” she said.

Scarnati is retiring at the end of the session in December. Corman is seen as his likeliest successor should the Republicans maintain their majority in the PA Senate.

Wolf also stays quiet

Governor Tom Wolf, a Democrat who is frequently at odds with the Republican-led Legislature, has expressed quiet opposition to expanding gambling further as contemplated in the bill.

His spokesperson did not respond to a request for comment.

Pennsylvania Skills game distributor has its say

Pace-O-Matic of PA, or POM, hates the bill.

The Williamsport company, which distributes Pennsylvania Skills machines, has been taking its opposition to rival skill games and VGTs to the streets. POM is outing what it says are illegal casinos openly operating in small towns around the state. POM is holding press conferences in front of the businesses. Dossiers on those businesses were handed off to district attorneys in Lancaster, Schuylkill and Beaver counties recently.

POM’s pitch is that its games are legal and its rivals’ are not. That’s because the Beaver County Common Pleas Court six years ago found that an element of skill was necessary to win the three games found on one seized POM device.

For a time, POM used that court win and a subsequent injunction as it distributed more machines and even sued a competitor, saying the rival did not offer a skill game.

But then another court in November 2019 labeled skill games as slot machines. The enforcement injunction was lifted in January 2020. POM has appealed the lifting of the injunction, but that case is plodding through the courts.

PGCB and PA State Police take stances against skill games

The Pennsylvania Gaming Control Board (PGCB) has definitively labeled skill games, including POM machines, as illegal slot machines under the state’s gaming laws.

The PA State Police unequivocally say all gambling devices outside casinos, other than licensed truck stop VGTs, are illegal and subject to seizure.

POM continues, though, to try to differentiate itself from rival wagering device companies, most recently at a Harrisburg press conference.

POM: It’s not us, it’s those other guys

Mike Barley, a spokesman for POM, issued a written statement to PlayPennsylvania when asked about SB 1256:

“While we believe the regulation of skill games will greatly benefit small businesses, restaurants, bars, fraternal clubs and the Commonwealth, SB 1256 promotes the widespread proliferation of VGTs on every corner of Pennsylvania. This legislation would kill the legal skill game industry and countless Pennsylvania small businesses, many [of] which are multigenerational family businesses, in the coin-op industry. SB 1256 puts the interests of large out-of-state companies over these family-owned small businesses.

“While Pennsylvania Skill games, powered by Pace-O-Matic, have been adjudicated legal and require skill, a VGT is a slot machine which directly competes with the games already offered in casinos. Illegal VGTs, masquerading as ‘skill games,’ are already on the street, many in unregulated mini-casinos, and were recently seized by the District Attorney of Berks County.

“The claims that the lottery or casinos have lost revenue due to skill games ring hollow when you examine the numbers. Before the COVID-19 pandemic, the revenues related to casinos and lottery were at record highs. That was at the same time the revenue for skill games [was] growing. We contracted with an independent economist who reviewed the data and found that our games have not had a negative impact on either the casinos or lottery revenues. The lottery’s study was conducted internally and the details have not been released.”

Lead image credit: AP Photo/Matt Rourke

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Kevin Shelly

Kevin C. Shelly is an award-winning career journalist who has spent most of his career in South Jersey. He's the former assistant city editor of The Press of Atlantic City, where he covered the casino industry and Atlantic City government as a reporter. He was also an investigative, narrative enterprise, and features reporter for Gannett’s Courier-Post.

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