The issue of the legalization of unregulated so-called “skill games,” slot-like machines that have proliferated in a variety of locations in several states, is front and center again in Pennsylvania and Virginia.
In Pennsylvania, Governor Josh Shapiro delivered a fiscal 2024/2025 budget that includes funding for the regulation and taxation of tens of thousands of the regulated games in the state, which have been battled by the regulated casino industry, the American Gaming Association and the Association of Gaming Equipment Manufacturers as illegal slot machines.
While many lawmakers have pushed a total ban on the games—which are located, in many cases, in businesses open to children—a powerful lobby from skill-game manufacturers, headed by Georgia-based Pace-O-Matic, has pushed legislation to legalize and tax the games.
Pace-O-Matic has won two court challenges in the state involving attempted seizure of the games as illegal, and state Senator Gene Yaw has introduced bills the last two sessions to legalize and tax the machines, and to restrict play to adults. Yaw has said his bill will protect the livelihood of small business owners who depend on the revenue from the machines.
While those bills failed to reach a floor vote the past two years, Yaw has pledged to introduce similar legislation this year, and Shapiro’s budget statement assumes passage of the bill.
While the court cases held the skill games do not fall under the purview of the Pennsylvania Gaming Control Board, Shapiro’s budget message says they would be put under the board’s regulatory control.
The statement proposes “a tax of 42 percent on the daily gross gaming revenue from electronic gaming machines that involve an element of skill and are regulated by the Pennsylvania Gaming Control Board (PGCB). This budget assumes the board collects the tax and deposits the money into a restricted account, which is then transferred to the General Fund. Estimates assume an effective date of July 1, 2024, with initial revenue collections realized in 2024-25.”
Shapiro estimates the games could generate more than $150 million in tax revenue next fiscal year, and more than $313 million in subsequent years.
Casinos remain vehemently against the action, but last month, Pace-O-Matic Chief Public Affairs Officer Mike Barley pointed out that casinos have generated record revenues in recent years while the skill games were in operation.
“It’s time for casinos to stop lobbing attacks against skill games,” Barley said, according to PlayPennsylvania. “These revenue numbers are the latest proof that skill games have no impact on casinos’ bottom line… How often do industries come to the legislature asking to be regulated? We want lawmakers to look past this harmful narrative spun by the casinos—that is not backed by facts—and support small businesses by passing common-sense regulation of skill games.”
As Shapiro’s budget message was made public, the borough council of Phoenixville, 28 miles northwest of Philadelphia, was set to vote on approving a new entertainment center that would include multiple skill games.
The council vote on February 13 was to trigger a public hearing on the skill-game parlor proposed by Rocket Amusement in an area of Bridge Street zoned as a theater and entertainment center. The council meeting was held, but the hearing was postponed due to a major snowstorm that day, and no final vote was reported.
Meanwhile, in Virginia, an effort to legalize similar skill games—which were officially banned by the state last year—is moving forward. Small business owners led an outcry for legalization after a court ruling last fall led to increased enforcement of the skill-game ban. Several state lawmakers responded shortly after the 2024 session began last month by introducing several bills to legalize the machines.
Senate Bill 212, which has the backing of the state senate’s president pro tempore, Louise Lucas, would allow up to 15,000 skill games taxed at 22 percent. The bill, however, stalled in the Finance and Appropriations Committee last month after Senator Jeremy McPike questioned its lack of protections for self-excluded gamblers. Ultimately, however, the committee cleared the bill by an 11-4 vote.
Many observers expect that responsible gaming concerns will pose a serious challenge to final passage of the bill.
Finally, state senators in Nebraska have amended a bill legalizing skill games, to increase taxes on games placed at convenience stores and bars.
Among the provisions in LB 685 advanced on a 31-0 vote last week were:
- Distributors would pay an annual fee of $100 for each machine up to a maximum of $5,000 for large distributors.
- Owners would still pay $250 per machine annually, which is the current fee.
- A 5 percent tax on the proceeds from each skill game would be paid to the state, of which 40 percent would be used for property tax relief, 25 percent split between the county and city in which the machine is located, and 10 percent used for tourism promotion. Initially, a tax of 20 percent had been proposed, which is the same rate paid by casino video slots.
- Businesses that have skill games would be required to derive 60 percent of their revenue from sources other than the games. That is an attempt to prevent skill-game casinos that are filled with the machines. Veterans and fraternal clubs would be exempt from that requirement, and their machines would not be subject to taxes.
