Skill-Based Gaming Machines Spark Revenue Clash with Pennsylvania Casinos

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It’s an ongoing debate that continues to simmer in the Keystone State: the clash between traditional casinos and the increasingly popular skill-based gaming machines popping up in an array of establishments from bars to grocery stores. Pennsylvania boasts a thriving commercial gaming industry that includes 17 brick-and-mortar casinos engaged in online gaming, sports betting, and fantasy sports. This May saw an all-time high in gross gaming revenue (GGR), raking in an impressive near to $521 million.

Pace-O-Matic (POM), a Georgia-based software company that created the operating system for Pennsylvania Skill games, issues press releases singing the praise of the casinos for their exceptional month while staunchly advocating for its own place within the industry. “Our success demonstrates that there is no animosity between casinos and the small businesses capitalizing on skill games. They are both proving to be successful within their respective niches,” stated POM spokesperson Mike Barley.

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Soon, the legality of these skill games will be under scrutiny as the state’s Supreme Court is set to review their current standing. The general consensus has leaned towards regarding them as lawful enterprises since they are skill-based, not simply chance-based like traditional gambling machines. The contention revolves around a distinction in the state’s Gaming Act, and State Attorney General Michelle Henry will appeal this argument in an upcoming hearing.

However, the state’s flourishing casino industry begs to differ. They consider skill games as clear competitors in acquiring customers. Last week Parx, the wealthiest casino in Pennsylvania, announced it’s postponing a $100 million hotel construction project until a verdict on the legal status of skill games has been reached. They currently operate with a smaller, adjacent hotel for patron lodging.

Barley responded, accusing the casinos of purely profit-driven motives. “The casino industry’s monthly revenue of $521 million is not enough. They’re clutching at the prospect of hurting small businesses, American Legions, volunteer fire companies, and other venues that heavily rely on the income generated from our skill games,” he maintained.

Proponents of skill games, which currently operate without regulatory oversight and are not subject to taxation, have appealed to state legislators to pass laws that would create a regulated environment for these machines. Legislators are on the fence, with a proposed tax of 16% on gross revenue from skill games stalled in the state capital amidst the legal dispute. A more aggressive proposal comes from Governor Josh Shapiro suggesting an eyebrow-raising tax rate of 42%.

Barley defended the cause of maintaining a lower tax, citing it as a vital factor for the machines to continue supplying much-needed financial resources to small businesses, especially ones battling inflation. “The businesses currently utilizing our machines couldn’t afford to pay taxes at the same rate as the wealthy casinos. Despite being aware of this reality, casinos choose to ignore it,” added Barley.

The battle over the legality of skill games entered a new phase late last November when Pennsylvania’s Commonwealth Court backed a prior decision asserting that these games don’t qualify as gambling. The court clarified that unless chance is the dominant factor determining a game’s outcome, the machine couldn’t be considered a gambling device. Despite the decision, Henry is hopeful that the state’s Supreme Court will overturn this ruling and classify these games as illegal gambling machines.