The Pennsylvania Supreme Court is set to decide whether the electronic game terminals commonly found in convenience stores and bars are unlicensed gambling machines. These terminals, often referred to as “skill games,” are under scrutiny to determine if they should be classified as illegal gambling devices and, consequently, be subject to shutdown.
For years, the state has argued that these devices are illegal gambling machines operating without proper licenses and should be seized by the police. In contrast, manufacturers, distributors, and retailers of these machines assert that they are legal, albeit unregulated games, which are not covered under state gambling laws. The Supreme Court’s decision to hear the case is a pivotal moment that could define the future of these machines under Pennsylvania law, according to Jeffrey Rosenthal, a lawyer representing Parx Casino in suburban Philadelphia.
Pennsylvania’s courts and lawmakers have long debated the legality of these machines, mirroring similar disputes in Texas, Virginia, and Kentucky. This legal battle comes at a critical time as state lawmakers discuss regulating and taxing these devices during their closed-door budget negotiations before the start of the new fiscal year on July 1.
The Pennsylvania Lottery and the state’s casino industry are major opponents of skill games, arguing that these devices are siphoning off significant revenue. Casinos in Pennsylvania are subject to a hefty 54% tax on slot machine revenue, a burden they claim is unfair when skill games, which are proliferating rapidly, contribute nothing in taxes.
Estimating the number of skill game terminals in Pennsylvania is challenging, but the American Gaming Association believes there are at least 67,000 such machines across the state, more than in any other state. According to Attorney General Michelle Henry’s office, thousands of these devices are popping up in corner stores and bars statewide.
The Attorney General’s office has stated in court briefs that the state, along with various courts, government bodies, and private entities, are seeking “clear guidance on the application of the relevant Pennsylvania statutes.” They argue that only the Supreme Court can provide definitive clarity on whether these electronic slot machines, which are designed with a hidden “skill” element, should be classified as illegal games-of-chance gambling devices.
Last year, Commonwealth Court Judge Lori Dumas noted that the initial phase of playing these skill games is similar to the experience offered by slot machines. However, she highlighted that these games also include a memory challenge, which differentiates them from traditional slot machines.
The controversy began in 2019 in Dauphin County when investigators from the state police’s Bureau of Liquor Control Enforcement seized Pennsylvania Skill-branded machines from Champions Sports Bar in Highspire. Although no criminal charges were filed, the bar received an administrative citation. Champions and Capital Vending Company Inc., the owner of the machines, subsequently sued for the return of their machines and money. A county judge ruled in their favor, and the Commonwealth Court upheld this decision.
Chris Carusone, representing Champions bar, emphasized the importance of these machines to Pennsylvania’s bar and restaurant industry. He stated that the machines have been a vital support for businesses recovering from the pandemic. The games allow players to mitigate losses through memory challenges, a feature that the attorney general’s office argues involves minimal skill.
Pending bills in the Pennsylvania Legislature aim to either ban or regulate skill games. The skill game industry is advocating for regulation to protect these machines from seizure. Lawyers for the bar and vending company argued in a Supreme Court brief that the future of skill games is a matter of public policy for the General Assembly, rather than a judicial decision.
