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Pennsylvania lawmakers are deep in budget talks, and now they’re looking at skill games—those gaming machines you see in bars, restaurants, and convenience stores. Over 40,000 of these machines operate across the state, completely outside current gambling laws. Small businesses love them, since they bring in much-needed cash. Casinos? Not so much. They’ve complained for years that skill games compete unfairly with their regulated slot machines.
Now, things might change. Lawmakers are seriously thinking about cutting the number of machines in half—pulling around 20,000 from the market—and bringing the rest under state regulation and taxes. If they go through with it, it’ll be the first time Pennsylvania puts real oversight on skill games.
High-Stakes Tax Debate
Taxes are where the fight gets intense. The state’s draft plan would tax skill games at the same 54% rate as casino slots—52% going to the state, another 2% to local governments. That’s one of the steepest rates in the country. Some lawmakers want to ease up and give small businesses a break, but casino operators are pushing for full tax parity. In their view, if a machine looks like a slot and plays like a slot, it should be taxed like one.
Small business owners say that’s just not workable. They argue that matching casino taxes would kill their margins and force them to pull the machines entirely. Instead, they’ve pitched a 16% tax, saying these games are helping them survive—especially after the hit they took during the pandemic.
A Budget Under Pressure
All this is happening against the backdrop of a huge budget gap—more than $3 billion. The state needs new revenue, and skill games are an obvious target. Regulating and taxing them could bring in hundreds of millions. Lawmakers are also talking about raising taxes on iGaming and online sports betting, which would make Pennsylvania the first state to bump up taxes on its online casino market.
A source close to the negotiations put it plainly: “If we’re taxing skill games, why not help close the budget gap by increasing taxes on other gambling too?”
The industry itself is divided. Casinos want these machines gone, arguing they steal customers and dodge taxes. On the flip side, companies that make skill games—like Pace-O-Matic—are still fighting in court over whether these machines are really games of skill or just cleverly disguised games of chance. Recent rulings haven’t settled things, and the legal status of skill games is still pretty murky. But as more of these machines pop up, the push to regulate them just keeps growing.
Balancing Revenue and Responsibility
Politics is making things even messier. Republicans want any new tax money to go to rural infrastructure. Democrats are focused on funding SEPTA in southeastern Pennsylvania. Neither side seems ready to budge, so the legislation could get held up.
Supporters of regulation say it’ll protect consumers, generate tax revenue, and help keep small businesses and local manufacturers afloat. Critics warn that high taxes will just drive operators out of business and cost people their jobs.
As of early November, no final bill has landed on anyone’s desk, but the pressure’s building. If lawmakers can hash out a deal, Pennsylvania might end up leading the way on how states handle the fast-changing world of skill games—balancing new revenue, consumer protection, and a fair playing field for everyone involved.
Source: SiGMA News
