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So-called “skill games” – video betting terminals that have proliferated inside Philadelphia’s corner stores, bars and gas stations – are illegal slot machines, the Pennsylvania Supreme Court ruled this week.
The justices found that the devices – an estimated 70,000 of which have been installed across the commonwealth – should be subject to gaming regulations and criminal prohibitions on illicit gambling.
Law enforcement must wait at least four months before taking any action, the court ruled, given “the potential disturbance that our correction of the prevailing case law may cause to business owners and other good-faith participants in the industry,” Justice David Wecht wrote in the majority opinion, issued Monday afternoon.
There will also likely be some urgency for legislators to craft a scheme to legalize and tax skill games within the 120-day window, which comes amid state budget negotiations. Proposals to regulate the industry have been repeatedly offered in Harrisburg in recent years, though none have passed.
“The proliferation of skill games is a matter of public safety which must be addressed, and given the timing of this decision, we believe gaming reform is a critical piece of resolving this year’s budget,” said state Senate GOP leaders Kim Ward and Majority Leader Joe Pittman in a joint statement.
Democratic House majority leadership wrote in a statement Tuesday that they "are encouraged that Senate Republicans may now be ready to proceed on bipartisan legislation to regulate skill games, and we look forward to seeing what they can pass in a bipartisan fashion in their chamber."
Gov. Josh Shapiro’s proposed budget, released earlier this year, called for a 52% tax on skill games, a levy his administration says would generate $2 billion in annual revenue.
Pace-O-Matic (POM), the George-based gaming terminal developer behind the “Pennsylvania Skill” brand, favors legislation placing a $500 monthly fee on each device, which would send $300 million a year to the state's coffers. POM is among the parties in the skill game cases that reached the state Supreme Court.
“Sadly, this opinion will have far-reaching consequences, with more than 10,000 Pennsylvania small businesses and fraternal clubs becoming the real victims,” the company said in a statement. “They are now potentially left facing an impossible choice: cease operating these games and lose an important source of revenue, or endure a legislative solution that could bring excessive regulation and crippling taxation, which will force them to cease operating these games and lose an important source of revenue.”
Monday’s ruling is the latest development in a yearslong legal battle over skill games. Previous Commonwealth Court decisions placed the terminals in a gray area, outside the bounds of gaming and criminal statutes.
At the center of the argument is whether a memorization feature, known as “Follow Me” on POM machines, distinguishes skill games from traditional slot machines. Players who lose money on a spin are given an opportunity to recoup their wager through a multi-step sidequest similar to the “Simon” game.
Wecht found those discussions moot, due to a 2017 update to Pennsylvania’s Gaming Act that covers “skill” and “hybrid” slot machines.
City Council has targeted skill games in the past, with some members arguing that the devices attract crime and prey on vulnerable residents.
Dave Sunday, the state’s attorney general, celebrated the ruling; his office argued in favor of overturning the Commonwealth Court decisions.
“Today’s ruling is a significant victory for consumers, taxpayers and the rule of law in Pennsylvania,” Sunday said. “The Supreme Court recognized what our office has argued from the beginning – these machines operate as gambling devices and cannot legally exist without the same oversight, regulation and accountability as other forms of legalized gaming in the Commonwealth.”
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