Skill games are slot machines under Pennsylvania law and must adhere to the commonwealth鈥檚 crime and gambling statutes, the state鈥檚 highest court ruled Monday.
However, the ruling says that law enforcement can鈥檛 take any action for 120 days. That gives the legislature a four-month window to decide whether to regulate the machines, which have proliferated across the state in taverns, gas stations, and corner stores despite existing in a legal gray area. An estimated 70,000 machines are operating in Pennsylvania.
Republicans who control the state Senate said the ruling makes addressing skill games a 鈥渃ritical piece鈥� of resolving this year鈥檚 budget, while Democrats who lead the state House said the caucus is still reviewing the decision.
Taxing skill games as part of a regulation scheme could eventually bring in more than $1 billion annually in much-needed revenue, according to the . Should the legislature fail to act, the devices would be subject to seizure by law enforcement.
There were two skill games cases before the court. The justices ruled on both together.
One, a 2019 case in which a bar and skill games supplier filed a petition for return of property after police seized their machines, centered on the question of what the devices are: Do they involve enough luck to be considered gambling, or enough skill that an experienced player can consistently win?
The Dauphin County Court of Common Pleas and Commonwealth Court both ruled in that case that the games are skill-based and therefore not subject to regulations for slot machines.
In the other case, Pace-O-Matic, a major skill games developer and distributor, sued the state to get a judgment about whether the games are legal. Commonwealth Court ruled the state鈥檚 existing law regulating gambling doesn鈥檛 apply to skill games.
In both cases, a majority of state Supreme Court justices said Commonwealth Court鈥檚 interpretation of statutes was 鈥渄eeply flawed,鈥� and the court was 鈥渋ncorrect on both points.鈥�
A skill game, they wrote, is a slot machine 鈥渟everal times over鈥� because it meets the general definition of slot machine in state statute, and because it meets the ordinary English definition of 鈥渁 coin-operated gambling machine that pays off according to the matching of symbols on wheels spun by a handle.鈥� Whether it involves some minor element of skill is irrelevant, they said.
As for whether the Gaming Act applies to skill games 鈥� and not just to licensed slot machines in casinos 鈥� the court said it clearly does, and listed several instances in which the language of the act appears to include entities and facilities that aren鈥檛 licensed.
The court鈥檚 core holding was 鈥減remised upon the court鈥檚 misreading of fundamental aspects of the statutory scheme,鈥� they wrote.
The justices noted that their ruling isn鈥檛 necessarily the final word on skill games.
鈥淣aturally, because all that follows is a consequence of statutory law, our General Assembly also remains free at any time to take whatever legislative action it may deem appropriate,鈥� they wrote, adding that their decision 鈥渄oes not constitute an endorsement of, any particular policy view concerning the proliferation of 鈥榮kill games鈥� throughout our Commonwealth.鈥�
Will the legislature act?
The ruling starts a 120-day clock for legislators to pass legislation legalizing, regulating, and taxing the devices, or to allow a widespread law enforcement crackdown on the market.
State lawmakers have tried for years to come up with a regulatory scheme for skill games. Though there鈥檚 broad consensus that this regulation should happen and that taxation would bring the state needed revenue, a deal has eluded them.
In a statement, state Senate Republican leaders said the games鈥� proliferation is 鈥渁 matter of public safety which must be addressed.鈥� The ruling means gaming reform is now a 鈥渃ritical piece of resolving this year鈥檚 budget,鈥� they said.
A spokesperson for the state House Democrats said Monday they are reviewing the ruling, as did a spokesperson for Democratic Gov. Josh Shapiro.
State lawmakers鈥� greatest hurdle in regulating skill games has been their inability to reach a consensus on the proper rate to tax their gross revenue.
Shapiro鈥檚 proposed budget this year would set the rate at 52% to more closely align with the state鈥檚 existing 55% tax on electronic games and casino slot machines.
State Senate Republican leaders previously introduced a proposal for and reiterated their support for that approach in their statement Monday. Other Republicans argue that rate is too high and .
Complicating talks over the years are wealthy interests鈥� strong preferences: Casinos support a higher tax rate for skill games, and the skills industry argues such a rate would sink them and harm the small businesses and veterans鈥� organizations that depend on the money.
Pace-O-Matic, the skill games developer that was a plaintiff in one of the cases, said in a statement it is 鈥渄isappointed with the decision鈥� and strongly believes the ruling 鈥渄oes not accurately reflect the facts presented.鈥�
Small businesses and fraternal clubs that operate skill games 鈥渁re 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,鈥� the statement continued.
Some lawmakers are also cautioning their colleagues against rushing regulations that don鈥檛 protect public health in the search for easy revenue.
鈥淲hat we are talking about here is the potential largest expansion of gambling in Pennsylvania history since the casinos,鈥� state Rep. Ben Waxman (D., Philadelphia) told Spotlight PA this month. 鈥淎nd we cannot make short-term decisions with really long-term consequences.鈥�
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