PA Casino Slots Dwindling, But Are Unlicensed Gambling Devices to Blame?

Posted By Kevin Shelly on September 17, 2021

Unregulated gaming devices proliferating across Pennsylvania are cutting into player demand – and state revenue – according to comments at a Pennsylvania Gaming Control Board (PGCB) Wednesday.

Under oath, two senior Mount Airy Casino executives cited unfair competition from unlicensed gambling devices as a major reason there is lessening demand for their slots. They explained that the regulatory body allowed them to eliminate 130 older and less-used slot machines.

Frank Leone, the casinos’ chief operating officer, said the unregulated machines have had a “material effect on land-based slots.”

A legal representative for the casino told the board unregulated games numbers “can range from 20k-50k across the Commonwealth. There is no question in my mind it has a negative impact on land-based slot revenue.”

By contrast, PA casinos have about 22,000 licensed slots in action.

Other properties reducing slot counts

Harrah’s Philadelphia removed 563 slots in July, though they pointed to increased competition in the Philadelphia region.

At least two more casino properties, Penn National’s Hollywood Casino in Grantville, north of Harrisburg, and The Meadows in Southwest PA, are also lined up to seek reductions in slot counts from regulators.

If all reductions requested so far are eventually granted, it will mean more than 1,200 fewer machines in play this year.

Casino slot recovery lagging. Some blame unregulated machines

Later in the same Wednesday gaming board meeting, Kevin O’Toole, executive director of the PGCB, said casino slots lag behind the increased business seen at casino table games. That suggests the issue is competition from unlicensed machines.

PGCB lawyer Cyrus Pitre said there’s been “a material effect” across the board attributable to unlicensed devices in competition with casino slots for gambling dollars.

Commissioner Mike Musttio and Chairwoman Denise Smyler both said the board should examine the issue further in the future.

Legislature has yet to tackle the unregulated machines issue despite hearings

Sen. John Yudichak, an independent who chairs the Community, Economic & Recreational Development Committee, which oversees most gambling legislation, has said tackling unregulated machines is a priority. He did not respond to a request for comment Wednesday

Sen. Jake Corman, the former Republican majority leader and now President Pro Tempore of the State Senate, has agreed with Yudichak, who caucuses with the Republicans.

The Senate meets for voting sessions beginning Sept. 20 following the summer recess.

But Community, Economic & Recreational Development Committee has nothing on its calendar about gambling so far.

State Sen. Amanda Cappelletti, a Democrat from the Philadelphia suburbs and the minority chairwoman of the committee led by Yudichak, said Wednesday she is unaware of any legislative plans.

Sen. Fontana believes legislative discussion brewing ‘behind the scenes’

State Sen. Wayne Fontana, a Democrat from near Pittsburgh, handicapped what’s brewing:

“There’s a lot of behind-the-scenes conversations. Nothing is scheduled yet. But the door is open. And the Republicans have their own battles (over how best to proceed with legislation). My impression though is the horse is out of the barn.”

Fontana said while there is a bi-partisan consensus for “regulation and oversight,” he added regulation alone doesn’t address fairness.

“I’m not sure that’s good enough. There’s a difference. I don’t know how you legalize the machines without matching the taxes.”

Casinos pay 54% in taxes on slot revenue.

The distributor of Pennsylvania Skills machines, for instance, has talked to legislators about the regulation of devices, but with a far lower tax hit.

PA Skills ‘working with lawmakers to regulate and implement an additional tax on legal skill games’

Mike Barley, a spokesman for the Pennsylvania Skills machine distributor Pace-O-Matic, one type of unregulated machine, said:

“Pace-O-Matic and Pennsylvania Skill have raised the issue of illegal VGTs flooding the market numerous times. We held press conferences exposing mini-casinos and have alerted prosecutors and law enforcement.

“We understand the frustration being expressed by casinos regarding this issue, especially with regard to the mini-casinos that are operating with dozens of illegal VGTs. Unlike the illegal VGTs attempting to masquerade as skill games, Pennsylvania Skill games have been ruled a legal game of predominant skill in a County Court of Common Pleas. We currently have brought litigation to Commonwealth Court to solidify our legal status.

“Concurrently, we are also working with the state lawmakers on plans to regulate and implement an additional tax on legal skill games. We believe this tax could generate hundreds of millions of dollars in additional tax revenue to the Commonwealth. This is in addition to the record profits the state is reaping from the casino and lottery.”

No notable recent enforcement against unregulated machines

A spokesman for the PA State Police said there had been no recent enforcement actions. Enforcement against unauthorized machines generally happens with the assistance of the PA SP.

Ironically, one unauthorized games case from February at the Sinners Swing Gentlemen’s Club in Northeast PA involves a trooper once assigned to the Bureau of Gaming Enforcement.

The case against Robert E. Covington Jr. remains pending. Promoting illegal gambling and allowing prostitution at the club are his charges.

PGCB lifted a license for an operator who switched to unregulated machines

Illustrating the problem, Snow Shoe Travel Plaza operator Kiran Grewal had her video gaming terminal license yanked at Wednesday’s PGCB meeting.

She went instead with unlicensed, untaxed, and unregulated machines at her location near State College.

Earlier this year, Commonwealth Gaming, previously her licensed game supplier, blamed non-enforcement by the state for issues crimping their business.

One of Yudichak’s constituents was murdered last December in an incident involving an illegal video poker gambling machine in a convenience store. The case is pending.

Lead photo by Katie Kohler.

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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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