Pennsylvania could cash in on ‘skill games,’ but some just want them gone

[*This article was updated at 1:30 p.m., Thursday, Aug. 24, 2023, to correct Jeff Morris’ name.]

Pennsylvania misses out on an estimated $250 million in revenue that could be collected by regulating and taxing so-called skill games that have proliferated across the commonwealth, a state Senate panel heard Wednesday.

And without the oversight of the Pennsylvania Gaming Control Board and the safeguards against crime, addiction, and underage gambling it imposes on casinos and other gaming machine operators, skill games pose a risk to residents, the head of the agency said. 

Skill games resemble slot machines but differ in the respect that a skilled player can theoretically win every time. They’re commonly found in bars, private clubs, laundromats and gas stations.

Georgia-based Pace-O-Matic is a major distributor of the machines, called Pennsylvania Skill, which are manufactured in Williamsport.

The Commonwealth Court has ruled that the games are legal and do not need to be regulated or taxed. It found that the state’s Gaming Act was intended to authorize large-scale slot machine operations involving hundreds of thousands of machines and not apply to devices in taverns or social clubs.

The Gaming Control Board, however, is still litigating its position that they should be treated the same as machines in casinos or declared illegal.

“The legal landscape in which skill-based gaming operates is certainly unsettled and not legislatively determined,” said Gaming Control Board executive director Kevin O’Toole. “To resolve this uncertainty, a legislative determination one way or the other will need to be made.”

The gaming industry, including slots, table games, online betting, and sports betting, generated a record $5.5 billion in revenue in Pennsylvania last fiscal year. 

In addition to paying taxes, casinos must pay into a problem gambling trust fund to help people with gambling addiction or compulsion. And part of the tax revenue goes to local governments in counties with casinos, which helps to pay for law enforcement associated with the casinos, O’Toole said. 

Sen. Gene Yaw, R-Lycoming, whose district includes the maker of Pennsylvania Skill games, has introduced legislation that would require skill games to be licensed, regulated and taxed at a rate 16% of gross revenue. It designates the state Department of Revenue to regulate skill games.

Sen. Amanda Cappalletti, D-Delaware, is seeking co-sponsors for a bill that would ban skill games outright.

Pace-O-Matic says its skill games have become a lifeline for clubs and nonprofit organizations such as VFW Posts and volunteer fire companies that receive a share of profits from the machines.

Attorney Matt Haverstick told the Capital-Star after the hearing Wednesday that Pace-O-Matic would welcome regulation but lawmakers have not passed legislation that would license and tax the machines due to pressure from the casino industry.

Haverstick dismissed the testimony of witnesses who said skill games are a threat to communities as fear mongering by the gaming industry. Pace-O-Matic declined to have a representative testify in the hearing because the committee limited each witness to seven minutes, he said.

Among the committee’s witnesses were Philadelphia City Councilperson Curtis Jones who said he has seen skill machines popping up in nuisance businesses such as corner stores selling liquor by the drink and loose cigarettes.

Jones likened the addition of gambling to already crime-prone areas to throwing a match on gasoline. Crime has increased as winners, who receive their prize in cash, are followed and robbed just down the block after they leave.

Other witnesses discussed the case of a convenience store clerk in Hazleton, Luzerne County, who was murdered in 2020 by a patron who regularly played the store’s skill games and knew that it had large amounts of cash to pay winners.

School children also use the machines, gambling with their lunch money, he said. And while some businesses like taverns have more control over who uses the machines, Jones said he would like regulations to keep skill games out of businesses near schools and churches.

Jeff Morris, vice president of public affairs and government relations for casino operator Penn Entertainment, displayed photos of children playing skills games and noted that even his own daughter was drawn to one when his family stopped at a gas station recently. 

“There are no employees around to see that a child was inspecting what looked to me like the slot machines I see on our casino floors,” Morris said. “Just a wall of machines enticing anyone to try their luck.”

Morris said the skill games aren’t just placed in convenience stores and laundromats to help people while away an idle moment. He played a video from the Facebook page of a business called the Keystone Club in Mechanicsburg, Cumberland County.

In the video, the owner invited patrons to check out the additions to his mini casino with rows of video gambling machines.

Without a coordinated effort to end the proliferation of the machines, Morris said, the problem will continue to get worse.

“Importantly, this does not include licensing and regulating these companies,” Morris said. “Bad actors should not be rewarded.”