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Pennsylvania Supreme Court to Rule on Legality of Skill Games

Pennsylvania's Supreme Court will decide if skill games are illegal gambling devices or legal skill-based terminals. This ruling could significantly impact the state's gaming regulations and industry tax revenue.
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Branimir Ivanov | Senior News Contributor

Updated: Jun 26, 2024

Legal Battles Continues

Harrisburg, PA — The Pennsylvania Supreme Court is poised to make a critical decision on the legality of skill games, which could significantly impact the state’s gaming industry and regulatory framework. This follows a lengthy debate among state courts, lawmakers, and industry stakeholders about whether these machines constitute illegal gambling or legitimate gaming based on skill.

 

  • Decision Impact: The Pennsylvania Supreme Court’s ruling will determine if skill games are considered unlicensed gambling devices or legal skill-based gaming. This decision could reshape the regulatory landscape for skill games in Pennsylvania, impacting both the gaming industry and state tax revenues.
  • Stakeholder Conflict: The PA casino industry and the Pennsylvania Lottery argue that skill games are illegal and reduce their revenues, as casinos are heavily taxed on slot machine revenue while skill games currently pay no similar taxes. Conversely, machine makers and retailers claim these games are legal and represent a different market.
  • Legislative Uncertainty: Legislative attempts to regulate skill games, such as the vetoed Skill Games Bill (SB 212), have been contentious. Governor Youngkin’s veto has left the regulatory status of these games unclear, mirroring similar legal debates in other states, including Virginia, Texas, and Kentucky.

 

Skill games, which are cash-paying electronic terminals resembling slot machines, have become increasingly common in Pennsylvania’s convenience stores, bars, and other small businesses. These machines have sparked controversy due to their resemblance to traditional gambling devices, with significant implications for both legal and regulatory frameworks in the state.

In December, the Commonwealth Court unanimously ruled in favor of the legality of skill games, determining that these machines are based on player ability rather than pure chance, differentiating them from slot machines. However, this decision did not resolve the broader debate, leading to an appeal to the Pennsylvania Supreme Court.

The appeal, brought by the Attorney General’s (AG) office, argues against the Commonwealth Court’s ruling, maintaining that skill games should be classified as illegal gambling devices. The Pennsylvania Lottery and the state’s casino industry, which pay a nearly 54% tax on slot machine revenue, have opposed the proliferation of skill games, arguing that they create an unfair market imbalance by avoiding similar tax obligations.

The PA casino industry contends that skill games operate outside the regulated gambling framework, leading to revenue losses for both casinos and the Pennsylvania Lottery. According to the AG’s office, the rise of these machines in corner stores and bars has led to a significant proliferation of unregulated gambling, as reported by CBC News.

A pivotal issue in this debate is taxation and regulatory oversight. Casinos argue that skill games, which currently do not contribute to the state’s tax revenue in the same way as slot machines, undermine the competitive landscape. Conversely, machine manufacturers and retailers argue that skill games are legal and represent a legitimate business model that should not be subjected to the same regulatory constraints as traditional gambling devices.

The American Gaming Association (AGA) estimated that in 2022, there were at least 67,000 skill game terminals in Pennsylvania, more than any other state. This widespread presence underlines the potential economic impact of the Supreme Court’s forthcoming decision.

 

Legislative Efforts and Future Implications

Efforts to establish a regulatory framework for skill games have faced significant challenges. A notable attempt was the Skill Games Bill (SB 212) aimed at creating a structured regulatory environment and tax system for these devices. Despite passing both the Pennsylvania Senate and House of Delegates earlier this year, the bill was vetoed by Governor Glenn Youngkin, who sent it back to the General Assembly with amendments that were ultimately rejected.

Governor Youngkin’s veto, coupled with the Virginia Supreme Court’s re-establishment of a skill game ban in late 2023, has left Pennsylvania without a clear legislative path forward on this issue. This situation mirrors ongoing legal debates in other states, including Texas, Virginia, and Kentucky, where similar disputes about the legality and regulation of skill games persist.

Conclusion

As the Pennsylvania Supreme Court prepares to hear the case, stakeholders from various sectors await a definitive ruling that could set a precedent for the future regulation and operation of skill games in the state. A decision to classify these machines as illegal gambling could lead to their removal from numerous small businesses and impact state tax revenues. Conversely, upholding their legality could cement their place in the gaming landscape but would necessitate a robust regulatory framework to address industry concerns and ensure equitable competition.

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