Pennsylvania: Lawmakers, gaming industry officials disagree over regulation of skill games in the state

A heated argument commenced between the casino industry and lawmakers on Monday over the regulation of so-called "skill" games that have been a point of contention in Pennsylvania. Parx Casino Board Chairman Bob Green addressed the Community, Recreation and Economic Development Committee and said that the scourge of skill games posed an "existential threat" to their business.

The Center Square quoted Green as saying:  “The relentless proliferation of illegal slot machines in convenience stores, pizza parlors, fast food outlets, smoke shops, and even barbers and ladies' hair salons is a serious threat to our continuing and successful partnership with the Commonwealth. What we’re facing here — and make no mistake — is an insidious contortion that is worming its way into our social fabric. And it has to be dealt with.”

Also present at the hearing was gambling leader Eric Schippers, senior vice president of PENN Entertainment. Schippers, along with other gambling leaders, spoke about the tax revenue they sent to the state government via gambling, along with the jobs they created and the investments they made, as being put "at grave risk of significant impairment" owing to skill games.

Schippers added: “The risk is created by the seemingly endless threat of continued cannibalistic gaming expansion in any of its various forms. We are shocked and dismayed that this is once again an issue…once again, the legislature is considering changing the rules in the middle of the game.”

As per the report, Sen. Gene Yaw, R-Loyalsock Township, who sponsored legislation to tax and regulate skills games, said he found the industry’s descriptions offensive. His bill aims to legalize the controversial slot-machine-like games, which differ in that users can affect the outcome. 

“You referred to the skill games as being an ‘infestation,'” Yaw said. “They’re made in my district, and several hundred people work in that industry, and I don’t consider my constituents as working and being part of an ‘infestation’…the four of you sitting there have been the biggest display of corporate greed that I have seen since I have been in the Senate. All you want is more.”

Yaw said that taxing and regulating skill games should be something the gambling industry supports. He crafted Senate Bill 706, which aims to legalize the games in small business and club locations at a 16% tax rate, which is sharply lower than the 54% rate on the slots at 17 Pennsylvania casinos.

Skill game manufacturers also part of the discussion

In a separate hearing on Wednesday, officials from Georgia-based Pace-O-Matic, developer of the trademarked Pennsylvania Skill Game and self-touted as the leading skill games manufacturing in the country, appeared before the committee to seek regulation and taxation of their product.

Pace-O-Matic President Paul Goldean and other Pace-O-Matic officials noted that they are serving a "different" type of customer from the casinos with what they call a very different form of gambling entertainment and that there is plenty of room for both to exist in a regulated environment. 

He further stated that the product would not be economically viable at the casinos’ 54% tax rate because there is no fixed retention amount from players as exists with slot machines.

The company says that its skill games are designed with player interaction features that test their memory and puzzle recognition and reward those better able to master such aspects, making them of skill and not chance.

In contrast, Pace-O-Matic argues casino slots are all games of chance with payouts determined by a random number generator. Lower courts in Pennsylvania have ruled that the skill factor involved in determining winners on the Pace-O-Matic machines means they do not constitute illegal gambling.

“In every court, in every jurisdiction in the commonwealth in which we have litigated the legality of the game, we have won,” said Matt Haverstick, Pace-O-Matic’s attorney, while noting that a decision with wider impact is pending from the state’s Commonwealth Court.

The Pennsylvania Legislature has expanded legalized gambling various times over the years, most recently in  2017 when it legalized online casinos, sports betting, and digital lottery play. At the time, It did not specifically address the topic of skill games, which have grown exponentially over the past decade.