Last week, the Pennsylvania Supreme Court ruled in favor of businesses that have been denied gaming licenses by the Pennsylvania Gaming Control Board (PGCB) on the basis that they have hosted unregulated skill machines. The PGCB has taken the position that skill games are illegal gambling and had been denying licenses to those that had offered them, citing a violation of a “good character” clause in the licensing regulations.
Despite that stance by the PGCB and the Pennsylvania casino industry, state courts have found that the games don’t meet the legal definition of gambling. Lawmakers, meanwhile, have been at odds over whether to ban the machines or regulate them, leaving their official status in limbo.
The PGCB conducts a deep background check for any entity seeking to obtain a gaming license in the state, including would-be video gaming terminal operators. The “good character” language is part of those background check requirements.
The Supreme Court ruled that the controversy surrounding the games does not reflect on the character of those offering them. “Good character,” in this context, is generally understood to mean abstaining from activities that are illegal or widely considered unethical. The Supreme Court’s stance was, effectively, that there are enough differences of opinion about skill games that the businesses might be acting in good faith, believing the machines to be legal.
Judge rules PGCB rules are ‘unfair’
Skill games have been an extremely hot topic in the gaming industry for several years in the Keystone State. And as of now, the games are considered legal, thanks to a decision from the Commonwealth Court made back in December 2023.
Lawmakers, and Gov. Josh Shapiro, have attempted to regulate and tax the games, but haven’t come to an agreement, yet. Since the games are legal, Justice David Wecht wrote that business owners may not believe they are doing anything wrong, according to the Altoona Mirror:
“The industry that has sprung up around them involves thousands of Pennsylvanians who are under the impression that they are operating fully within the bounds of the law. They have been led to believe this through court rulings and through the representations of the device manufacturers and their lawyers.
“Given this landscape, it is reasonable for these individuals to believe that they are doing nothing wrong. It is, thus, excessive and unfair for the Board to declare that every individual involved in this industry lacks ‘good character, honesty and integrity’ merely due to their involvement in the industry.”
The justices at the hearing wrote that the PGCB can look at other measures to determine licensing status for businesses.
Proposed tax rate is almost as high as casino slots
Gov. Shapiro is in favor of taxing the machines. He proposed a tax structure in each of his last two fiscal year budget addresses. In his most recent briefing last month, Gov. Shapiro targeted a 52% tax on the game.
That number comes close to what Pennsylvania casinos pay in taxes, which is 54%. Back in July, properties filed a complaint filed a complaint to the Supreme Court, arguing that taxes on slot machines are unconstitutional because of the lack of oversight skill games have.
However, there are other frameworks that tax the machines as low as 16%. Those efforts are led by Sen. Gene Yaw and Rep. Danilo Burgos.
Though the games are legal, the Pennsylvania Supreme Court is set to officially rule on the matter at some point in 2025. It’s possible the highest court can make them illegal, which would make the tax discussion moot.
