Pennsylvania Skill Games Should Be Regulated and Taxed, Governor Says

Posted on: February 6, 2025, 08:44h. 

Last updated on: February 6, 2025, 10:19h.

Devin O'Connor @CasinoorgDevinO Read More
Expertise: Asia Pacific Gaming, Commercial Gaming, Legislation, Politics.

Pennsylvania Skill games, the slot-like gaming machines that have thrived inside convenience stores, restaurants, bars, and retail stores across the commonwealth over the past decade, should be taxed and regulated, says Pennsylvania Gov. Josh Shapiro (D).

Pennsylvania Skill games Josh Shapiro
An unregulated Pennsylvania Skill gaming machine is seen in a greeting card store in the same building as the headquarters of the Pennsylvania Attorney General’s Office in Harrisburg on Thursday, Dec. 19, 2019. Gov. Josh Shapiro thinks the controversial gray games should be legalized, regulated, and taxed. (Image: AP)

On Tuesday, Shapiro delivered his 2025-26 Budget Address to the General Assembly and the people of Pennsylvania. The Democrat, who was looked over by Kamala Harris last year to be her running mate, with many political pundits opining that his Jewish faith might have been to blame, is a rising star who is likely to mull a run for the White House in four years.

For now, Shapiro oversees the sixth-largest economy and fifth-most populated state in the country. The former attorney general of Pennsylvania, Shapiro proposed a $51.4 billion budget plan, with a miniscule fraction of the funding set to come from the regulation of the estimated 70K skill games in operation from Philadelphia to Pittsburgh.

Shapiro says the state needs more funding to direct an additional $500 million to the commonwealth’s poorest schools. He also wants to deliver $290 million in added funds to update the state’s public transit agencies, increase student-teacher stipends, and create a standardized tuition rate for cyber charter schools.

Pennsylvania Skill Games Pitch

For the second consecutive Budget Address, Shapiro called on the legislature to send him a bill to regulate and tax skill games. The terminals challenge players to identify winning paylines by tapping on coordinating reel symbols.

This year Shapiro is suggesting a much higher tax than the 42% rate he proposed in 2024. The governor now wants Harrisburg to receive 52% of the skill game revenue.

“Let’s solve more problems together, starting with regulating so-called skill games,” Shapiro told the General Assembly. Republicans control the Senate, while Democrats have a one-seat majority in the House.

If we want Pennsylvania to compete and win, we need to take some of the money going into those slots and put it in our state coffers so we can maintain our reserves and keep building on our progress,” Shapiro said. “These machines have no quality control for the customers and they’re punishing our seniors. Every time somebody puts a buck into one of those unregulated machines, it undermines the [Pennsylvania] Lottery and the critical services it funds for our seniors like prescriptions and meals.”

The Pennsylvania Lottery estimates it’s lost $200 million in revenue over the last five years due to skill games. The state-run lottery primarily benefits older Pennsylvanians.

The state’s casino industry says skill games have also cost slot win and subsequent tax revenue for the state. Most casino slot tax revenue goes to reducing property taxes on homeowners. It also supports horsemen, economic development, tourism, and the local communities where the slot machines operate.  

Skill Game Controversy 

Skill game proponents argue a player can alter their payout rate and therefore the controversial gray games don’t constitute gambling — or at the very least — fall under the scope of the state’s Gaming Act that governs casino slot machines, table games, sports betting, iGaming, and other forms of legal gambling. The machines aren’t currently regulated for fair play, including a minimum payout rate, safeguards against minors accessing the devices, or a criminal’s ability to wash dirty money through the machines.

The skill game industry wants to be regulated to ease those worries and continue to provide small businesses with critical revenue. As the machines aren’t currently taxed, the proceeds are split between the game manufacturer, route distributor, and host establishment.

Pennsylvania’s highly regulated commercial gaming industry contends the games are clever devices designed to sidestep the state’s gaming laws. They also say the machines poach considerable revenue from their slot machines — privileges that were acquired through costly licensing fees up to $50 million for a Category 2 facility and which are subject to a 54%-55% tax.