Pennsylvania skill games have been a lightning rod of a topic within the state over the last several years. It’s about to get even more interesting, as the Pennsylvania Supreme Court granted a Petition for Allowance of Appeal from the Commonwealth of Pennsylvania. In other words, the Supreme Court will determine the legality of the machines.
Back in December, the Commonwealth Court ruled the games as legal, which finally gave some clarity on the issue. However, the question of legality is back in play.
“We remain confident in the merits of our case, as their legality has been upheld unanimously by the Commonwealth Court as well as in every court where the legality of our games has been challenged,” Pace-O-Matic (POM), a Georgia-based skill games manufacturer, told PlayPennsylvania on Thursday.
“Our attorneys will continue to defend the legality of our skill games, which support local small businesses and fraternal clubs across the Commonwealth.”
Banning skill games could change the gambling industry in Pennsylvania, in favor of PA casinos. It would also eliminate the tax revenue Gov. Josh Shapiro has already allocated over the next several years.
Supreme Court hearing is a win for regulated industry
POM is on one side of the equation, where it has to go through another court case to determine the legality of the games. This comes even after the Commonwealth Court deemed the machines as legal.
The other side, which is the regulated gambling industry, has to be elated over the latest news. Parx CEO, Eric Hausler, has been one of the strongest advocates against skill games in the state. Although he has not, yet, responded to PlayPennsylvania‘s request for comment, he’s made his position clear in the past.
“We continue to believe that the games in operation today are essentially slot machines,” he told us back in February. “We still believe that the old adage applies: if it looks like a duck, walks like a duck and quacks like a duck, it is a duck.”
Hausler did mention his confidence in the Supreme Court hearing the case at some point, and in the end, he was right. The highest court in the state is going to address the following two issues, according to a court order:
“Does an electronic slot machine cease to be an illegal ‘gambling device,’ governed predominantly by chance, if the machine’s manufacturers embed into its programming a so-called “skill” element that is almost entirely hidden from view and is almost impossible to complete?
“Should gambling statutes governing ‘slot machines’ be read in pari materia to supply an appropriate definition of the term?”
Pari materia is Latin for “on the same subject matter.”
Banning skill games would jeopardize tax revenue
Many in the regulated industry had come around to the fact that skill games weren’t going anywhere. Hausler even soften his stance.
“A rigorous regulatory and tax structure for skill games should remedy many of these concerns and put sensible limits on the location of these games,” he said in February.
Berks County District Attorney, John Adams, told PlayPennsylvania last month the strain skill games have put on law enforcement. However, he did not call for a ban of the machines.
“State legislation needs to act and it needs to act now to bring regulation and taxation to the state,” he said. “Every day we don’t do something, we’re losing millions in tax revenue.”
Adams is right. Under Shapiro’s 42% tax structure, the Independent Fiscal Office (IFO), a government agency that provides revenue projections and analysis, predicts the state could generate $421 million from skill games by FY 2028/2029. Shapiro’s office projects $317.9 million by the same period.
Another bill proposed by Pennsylvania Senator Gene Yaw (R-23), which includes a 16% tax rate, estimates around $300 million in annual tax revenue from skill games.
Either way, a large chunk of money for the state will be taken away should the Supreme Court ban the machines. To POM’s credit, it has a perfect record in court cases to this point. It’s certainly confident going into perhaps the biggest decision yet.
How banning skill games could potentially help Keystone State casinos
Hausler is one of the biggest names in the industry that has vehemently opposed the legality of skill games. While POM has been on the record stating its machines have “no impact” on the Pennsylvania casino industry, Hausler provided evidence to the contrary during a GOP policy committee last month.
Excluding the pandemic year of 2020, Pennsylvania slot revenue has increased only 4% since 2018, despite the addition of five new casinos. Surrounding states where skill machines aren’t present have experienced the following increases:
- Ohio: 31%
- Maryland: 22%
- Delaware: 21%
- New Jersey: 16%
- Ohio: 16%
The average improvement of the states above is 21%, which Pennsylvania doesn’t come close to.
Hausler also pointed out an 11% increase in slot revenue per day after Virginia banned skill games in last November.
“In Pennsylvania, an 11% increase in slot win per day would translate to more than $150 million of additional tax revenue to the Commonwealth per year at our 54% tax rate,” he told the committee last month.
Hausler presented interesting numbers to support his argument, while POM’s machines certainly help small businesses. It’s now up to the Pennsylvania Supreme Court to determine the fate of skill games.
