The Supreme Court of Pennsylvania has engaged in a protracted legal battle regarding the classification of “skill games” as gambling devices, with stakeholders from both state agencies and the gaming industry presenting their arguments for more stringent regulation.
This case advanced to the apex court following appeals from the attorney general’s office and the Department of Revenue. Widely available in locations like convenience stores and gas stations, these machines currently escape gambling categorization due to their secondary feature that allows players to recover some investment.
Matthew Haverstick, the attorney for manufacturer Pace-O-Matic, argued that this secondary function lets players “recoup 105% of their stake” with each play. In response, the attorney general’s office asserted that the inclusion of skill does not exempt these machines from gambling laws. “It’s insufficient for that skill aspect to be dominant,” remarked Susan Affronti, who represented the attorney general’s office.
Casino operators claim these machines operate beyond the state’s regulatory framework, evading necessary safety measures and the 54% tax applied to slot machine earnings.
Pete Shelly, a lobbyist for Parx Casino, emphasized to Casino Reports that the industry has contributed billions in tax revenue, stating, “You can’t allow outsiders to just set up machines, disregard regulations, avoid taxes, and evade accountability for related issues, including crime across Pennsylvania.”
Public safety concerns have escalated. In a separate case this month, a Philadelphia jury found Pace-O-Matic liable for the 2020 murder of a clerk after a patron, frustrated by losses on an unregulated machine, attempted robbery. Jurors concluded that the company failed to implement adequate safeguards like ticket redemption systems to minimize cash handling risks for clerks.
Testimony during that trial highlighted frequent disputes over winnings. Brian Langan, a compliance officer for Pace-O-Matic, recounted instances where winning players were told: “’Yes, I won $500. Please pay me.’ and then ‘Sorry, we can’t pay right now. The manager isn’t available; you’ll have to return later.’”
Shelly contrasted this with casino practices, stating: “You won’t find $14,000 in cash just sitting around at a casino. The differences are stark. It’s one of the safest environments available.”
This legal struggle follows a 2023 Commonwealth Court ruling, which stated that machines produced by Banilla Games do not qualify as gambling devices. The Supreme Court declined to revisit that decision in 2024. Langan mentioned Pace-O-Matic’s machines: “The so-called loophole discussed in this case is actually the law. Founder Michael Pace cleverly designed the machines to comply with legal standards.”
It is estimated that Pennsylvania houses around 70,000 skill-game machines, nearly three times the number of regulated slot machines, which total approximately 25,000. Regulated machines retain an average of 7.7 cents per dollar, compared to 25 cents for their unregulated counterparts. Last year, casinos accrued roughly $1.2 billion in gaming taxes.
Lawmakers could not reach a consensus on a taxation plan for skill games in the latest budget. Pace-O-Matic claims that roughly 80% of its earnings are distributed to small businesses hosting the machines, while some lawmakers maintain that these devices contribute to job creation and economic development.
Shelly stated that the existing inequalities cannot persist. “Skill games lack necessary measures to prevent underage gambling and mitigate problem gambling. They pay no gaming taxes, which is fundamentally unfair. This model cannot continue,” he asserted.