The legality of skill games in Pennsylvania has been a hot-button issue for a while now. These machines, common in bars and convenience stores, have, over the years, sparked controversy, legal battles, and now, a roadblock in budget negotiations. With Pennsylvania Governor Josh Shapiro pushing for heavier taxation on skill games in the 2024/25 budget, he is once again stirring up already troubled waters. 

To understand Shapiro’s plans, you need to understand the legality of skill games in Pennsylvania. Skill games very much resemble slot machines in appearance and gameplay. A non-gambler would be forgiven for confusing the two. However, Slot machines are purely games of chance, with jackpots decided by random number generators. Skill games, on the other hand, claim to rely on skill alone to win. This distinction is crucial to their legal status in Pennsylvania. It is also the focus of heated debate. Casino operators argue that skill games should be subject to the same regulations and taxes as the slot games they resemble. Meanwhile, skill game manufacturers claim that the element of skill justifies a separate legal classification.

The debate has some people questioning if the same legal leniency granted to skill games should apply to highly strategic casino games like blackjack or poker. While chance plays a role in these games, it is well-known that skilled players tend to win more often than novices. If skill is the defining factor of legality then why shouldn't blackjack mobile options, for instance, be fair game? After all, reputable platforms are plentiful online, and Sergio Zammit says they are the best way to play one of the world’s favorite card games, blackjack, from anywhere.

Weighing in on the issue with his own agenda, Governor Josh Shapiro has proposed regulating skill games in his 2024-25 budget proposal. He plans a 42% tax on the revenue from skill games and intends to put the Pennsylvania Gaming Control Board (PGCB) in charge of overseeing the industry. Shapiro believes doing so will generate roughly $150 million in tax revenue for Pennsylvania per year. But the expected financial benefits for the state have not stopped Shapiro's proposal from stalling in budget negotiations. Complicating the governor's plans are the competing interests of various influential parties. 

Skill game manufacturers are fighting hard for much lower tax rates, around 16%. Senator Gene Yaw has proposed legislation advocating for this tax structure. An unsurprising move considering Yaw’s district is home to a notable skill game manufacturer: Miele Manufacturing. Others in support of this leniency are quick to point out that skill games are a valuable source of supplemental income for small businesses. They claim heavy taxation could financially harm business owners. 

Opposing this view are casino operators, fearful that skill games' popularity is drawing gamblers away from their slot games. Casinos are already taxed at a rate of 50%  on slot machine winnings, and casino operators are arguing for a similar tax rate on skill games, hoping to level the playing field. Senator Frank Farry has introduced a bill in support of this sentiment.

Beyond arguing the details, there are even proposals on the table for a complete ban on skill games. In fact, some local governments have already taken matters into their own hands. Philadelphia City Council, for example, passed a bill banning skill games within city limits unless the establishment also holds a casino license and a liquor license. 

Despite pressure from local governments and the potential for significant tax revenue, the path forward is unclear. One potential solution could involve a tiered tax structure, with higher rates for establishments with a larger number of machines. Additionally, limitations on the number of machines per location could be implemented to address concerns about oversaturation.

As of right now, with the budget deadline looming, negotiations are in stalemate. If decisions are not made quickly this could be a missed opportunity for Pennsylvania. Skill games clearly generate revenue, but without proper regulations, the state loses out on potential tax income and the ability to ensure fair play for consumers. Finding common ground will require a compromise between the competing interests – the casino industry, skill game manufacturers, and other legislators with diverse priorities.

The debate around skill games in Pennsylvania takes place within a broader nationwide debate about the future of gambling legalization in the USA. Our country is going through a period of dramatic change in gambling law, fueled by several factors. The legalization of online casinos and sports betting apps in many states has created a lucrative market but continues to raise questions about how regulations should be adapted. Cryptocurrency and the emergence of crypto betting sites adds another layer of complexity. 

This period of change presents both opportunities and risks. Pennsylvania's skill game conundrum is one of many important pieces to place in a larger national gambling puzzle.