Skill Games Save Small Biz Says PA Senator; Casinos and Others Rip The Untaxed, Unregulated Machines

Written By Katie Kohler on November 15, 2021

The ongoing battle about skill games in Pennsylvania continued at the different locations at the state capital last week.

It was a tale of two Harrisburgs on Nov. 10. At the State Capitol Media Center, Sen. Gene Yaw (R-23) and Rep. Jeff Wheeland (R-83) held a press conference to announce legislation to regulate and establish an additional tax on video skill games.

PlayPennsylvania previously reported in September that legislation could be on its way.

At the monthly Pennsylvania Gaming Control Board meeting held earlier on the same day and within walking distance, representatives from Penn National Gaming were given approval to remove slot machines from two Pennsylvania casinos. The main reason – the proliferation of unregulated and untaxed skill games across PA.

Senator says skill machines are saving small businesses

Sen. Yaw contends that skill games serve as an important part of Pennsylvania’s small business economy and are helping get them through the coronavirus pandemic. The Skill Video Gaming Act (SB-950 ) calls for regulation, enforcement and additional taxes on skill games.

“If you want to know why legal video skill games are important, all you have to do is walk into any market in Western Pennsylvania, family owned restaurant, VFW or bar,” said Yaw. “They are allowing these businesses to provide health insurance for their workers, increased salaries, and in some cases, keeping the doors open.”

Sprankles Neighborhood Markets has three locations in Western Pennsylvania. Owner Ryan Sprankle says one of the keys to their growth has been Pennsylvania Skill games by Pace-O-Matic. Revenues from the skill games resulted in increased wages and health benefits.

“We have a full staff and a ten-person waiting list for employement,” said Sprankle.

The only complaints about the Pennsylvania Skill games, according to Sprankle, despite having the six machine limit, sometimes people have to wait since all are filled.

Taxing skill games in PA

A draft of the bill has yet to be finalized. According to PennLive, in Yaw’s legislation, skill games would be taxed at a rate of 16% on net terminal revenue which is the money left after customer payouts. Yaw projected additional tax revenues of about $250 million annually for the state.

Where would the money from taxes on skill machines go?

  • 56% to the state including a 6% split for Pennsylvania State Police Bureau of Liquor Control
  • 22% counties (local shares divided by game profits from each county and municipality)
  • 22% municipalities

Profits from skill games split:

  • 40% to the establishment that houses the skill games
  • 40% to the operator who leases the games
  • 20% to the distrubuter

Pennsylvania casino tax rate

Pennsylvania casinos are subject to the highest effective tax rate in the country.

Land based casinos tax rate

  • 54% on slot revenue
  • 16% on table game revenue
  • 34% on electronic table games

Pennsylvania iGaming tax rate

  • 54% on online casino slots
  • 16% on online table games
  • 16%on online poker

What are Pennsylvania skill games?

Pennsylvania Skill games look a lot like slot machines. They have touchscreens, you insert your money and select the game you want to play.

Pace-O-Matic develops the skill games. (i.e: EA Sports develops Madden 2022, Pace-O-Matic produces the games that Pennsylvania Skill offers.)

Williamsport, PA-based Miele Manufacturing is the exclusive distributor of Pace-O-Matic Pennsylvania Skill Games. Miele Manufacturing is located in the legislative district of Yaw and Wheeland.

What is the difference between a game of skill and a game of chance?

Games of skill, hence the name Pennsylvania Skill, require some level of physical or mental skill to win.

Games of chance are random, like slots at a casino.

Are skill games legal in Pennsylvania?

In 2014, the Beaver County Court of Common Pleas ruled Pennsylvania Skill games powered by Pace-O-Matic are legal. They returned to court various times, but no ruling yet deemed the games illegal.

Yaw said that due to the popularity of Pennsylvania Skill machines, there’s now an influx of knockoffs using the PA skill name or close variation.

Representative Danilo Burgos (D-197) said during the press conference that in Philadelphia, the “the black box” causes problems and other machines get confused with Pennsylvania Skill games.

Wheeland is running a companion bill in the House of Representatives . He added that Pace-O-Matic is working on developing an app to help law enforcement be able to identify a legal machine versus an illegal skill game

So, what’s the problem?

There have been various points of contention surrounding skill games. With the various court rulings and sporadic enforcement, some say skill machines operate in a “gray area.”

There have been some reports of children with parents at the games and that unlicensed machines are magnets for crime.

There have been a number of break-ins and crime at businesses that have the machines including an early November murder in Kensington.

The Pennsylvania Lottery says that skill games cut into lottery revenue which benefits older Pennsylvanians.

Commented Yaw:

“We’ve found that these games are a good  complement to the (Pennsylvania) Lottery and that most stores saw no decrease in lottery sales since the games were installed. They’ve had record sales (the PA Lottery).”

Casinos say skill games are reason for slot removal

A few hours before Sen. Yaw’s press conference, the Pennsylvania Gaming Control held their monthly meeting.  Hollywood Casino at Penn National Race Course and Hollywood Casino at The Meadows were granted approval by regulators to remove a number of slot machines. Representatives for the casinos (Mountainview Thoroughbred Racing Association (Penn National Gaming), said one of the main reasons for the request to remove some slot machines is the proliferation of unregulated, untaxed gambling machines across Pennsylvania.

Previously,  Harrah’s Casino Philadelphia and Mount Airy Casino – also have cut down on the number of slot machines.

Adrian King, of Ballard Spahr representing Penn National Gaming said:

“Penn National contends that skill machines have undoubtedly contributed to slot count reduction being necessary. Skill games are a type of slot machine. This isn’t just a Penn National problem,” he continued. “It comes as a real price to casino operators who have made vast investments in their properties and to the Commonwealth which can’t collect its 52% tax rate on legal casino slot machine revenue.”

“Skill games are illegal no matter who makes them”

Peter Shelly, a spokesperson for Pennsylvanians Against Illegal Gambling (PAIG), commented to PlayPennsylvania:

“Everybody knew that legislation was coming. There is no question that skill games are illegal no matter who manufactures them. To suggest the (Pennsylvania) Lottery isn’t losing millions of dollars defies the state’s data and is ludicrous. Skill games are impacting the Lottery and programs the lottery benefits. There is is a reason the Office of Attorney General and Pennsylvania State Police keep confiscating these machines, they are illegal. It’s going to be an issue next year and we are looking forward to the debate.”

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Katie Kohler

Katie Kohler is a Philadelphia-area based award-winning journalist and Managing Editor at PlayPennsylvania. Katie especially enjoys creating unique content and on-the-ground reporting in PA. She is focused on creating valuable, timely content about casinos and sports betting for readers.

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