Legal Blog

Pennsylvania’s businesses have long thrived on the principles of entrepreneurship, self-reliance, and the freedom of minimal government interference. However, that landscape is quickly shifting due to the rise in popularity of skill games.

These devices look similar to slot machines and are often found in bars, gas stations, social clubs, fraternal order halls, and other small businesses across the Commonwealth. Unlike casino slot machines, however, the legality of skill games is currently in limbo, causing conflict in the state legislature and confusion for proprietors.

No one wishes to see their local bartender led away in handcuffs for installing a game, but the legal ambiguity of skill games jeopardizes the livelihoods of business owners and the state’s revenue streams.

Given these stakes, it’s time for clarity and consistent enforcement regarding skilled gaming machines in PA.

Who are the Players in the Game?

The focal point in this controversy is Georgia-based Pace-O-Matic, Pennsylvania’s leading distributor of skill games. According to the company, these games offer a crucial source of income to small businesses and nonprofits such as American Legion posts.

While they are often lumped in with gambling-style slot machines, skill games differ from traditional slot machines in a few ways. One of the biggest differences is that skill games require players to use their hand-eye coordination and reflexes, theoretically giving people a chance to win every time.

Pace-O-Matic has been fighting tirelessly to solidify the legality of skill games in Pennsylvania. They have even taken the bold step of suing entities it claims are influencing lawmakers against its business interests. Despite this aggressive position, the company’s push has largely been stalled due to complex political and ethical issues.

The Lawmakers, The Lobbyists, & The Ethics

Sen. Gene Yaw, a Republican from Lycoming County, recently introduced legislation to regulate and tax skill games under the Pennsylvania Department of Revenue. But questions have been raised on whether there is conflict of interest, as Yaw has close affiliations with the company that builds Pace-O-Matic’s machines and a law firm that has represented the company.

Yaw’s proposed bill would tax skill games at 16% and restrict their placement. According to Kevin O’Toole, executive director of the Pennsylvania Gaming Control Board, Pennsylvania could potentially receive about $250 million in tax revenue from such a tax.

Opposition to Skill Games is Growing

The opponents of skilled gaming machines argue that these games siphon revenue from state-regulated industries and lack safeguards against problem gambling. Some go further to link them with increased crime rates and societal ills.

According to critics, the lack of regulation over skilled games could make it easier for illegal cash transactions, creating a conducive environment for money laundering. There have also been instances of skill game players being robbed of their winnings, raising concerns about public safety.

Perhaps the most controversial aspect of restricting skilled games is the arrest of shop owners who offer them. As reported by WHTM, police departments in the region have attempted to seize these machines. But, these were later stopped by the courts.

Mostly, local government officials and police departments, typically in the lower-income and less populated parts of the Commonwealth, claim they target illegal slot machines disguised as skill games. But do these extreme cases rise to the level of banning skill games outright?

While a push to legalize and tax these games is gaining traction, store owners who offer them are still vulnerable to criminal charges and unjustified scrutiny from local prosecutors and law enforcement.

What Do the Courts Say about Skilled Games?

In 2023, a group of Pennsylvania store owners filed a lawsuit against the Pennsylvania Gaming Control Board (PGCB), challenging their authority to regulate games of skill machines. In August, the Pennsylvania Commonwealth Court ruled that the PGCB lacks the authority to regulate or license skill games, effectively dismissing attempts by the PGCB and the casino industry to intervene in ongoing litigation.

This ruling reaffirms previous judgments from county courts that have declared these games as legal games of skill, criticizing what they view as biased investigations and prosecutions aimed at shutting down these machines.

Yet Confusion & Uncertainty Remain

So, despite being squeezed by already burdensome taxes and other business regulations, Pennsylvania business owners are now caught in the crossfire of a protracted legal battle. To make matters worse, they are now potentially vulnerable to criminal charges due to conflicting court rulings and regulatory positions.

For many business owners, skill game machines are a practical way to generate much-needed post-pandemic revenue. The income stream these machines provide could allow for repairs to the establishment, employee raises, and adding staff.

Suppose you own a small gas station or convenience store in a small Pennsylvania town. You installed a skill game machine in your establishment to boost post-pandemic revenue. Still, you’re now in a precarious situation due to conflicting court rulings and news about other proprietors being raided and arrested for using skill games.

This legal ambiguity jeopardizes your additional revenue stream and hampers your ability to secure loans for business expansion. With no clear guidelines from the state, you, like many business owners, are caught in a confusing middle that stifles development and casts a constant shadow over your livelihood.

Given the state of the economy and overall confidence, Pennsylvania is in no position to limit economic potential. Legislation must bring certainty to this contentious issue, liberating businesses from anxiety over potential prosecution.

Corporate Responsibility & Regulation

It’s worth noting that Pace-O-Matic supports regulation. The company advocates for a legal framework that would eliminate what it describes as a “Wild West,” where operators place dozens of machines in single locations, effectively running mini-casinos. Pace-O-Matic acknowledges the need for order in an increasingly chaotic industry by supporting regulation.

The company has even gone on the offensive, defending its stance and pursuing litigation to uncover lobbyists’ alleged efforts to undermine its business. This aggressive strategy could offer a blueprint for other organizations and stakeholders willing to fight for their interests in an ambiguous legal landscape.

Balancing Economic Benefits & Societal Costs

The conversation around skill games should not be limited to their legality. We should also consider their broader social impact. While small businesses might benefit, questions remain about whether the societal costs, such as potential gambling addiction and crime, outweigh the economic gains. Policymakers need to weigh these factors in their deliberations.

According to State Sen. Amanda Cappelletti, D-Montgomery, who has proposed to ban skill games, “You can go in and find people at all hours of the day putting their money into these machines… The small businesses are succeeding at the expense of the family struggling to make ends meet and putting hope in hitting it big on one of these machines.”

Are You a Business with Legal Questions About Skill Games?

The unfolding drama around skill games in PA is a case study of how legal confusion hurts entrepreneurial endeavors. Given all that’s involved, Pennsylvania lawmakers must clarify this issue, which the courts have repeatedly solidified by providing a fair and regulated environment for skill games.

For business owners, the message is this: stay informed and consult with legal professionals in your area if you’re considering a skill game machine or local authorities have told you are in violation. Your business—indeed, the larger business community—depends on it.

Fineman Defense is based in Philadelphia, with convenient suburban offices in Bucks County, Delaware County, and Montgomery County. As an advocate for small businesses, Attorney Michael H. Fienman represents clients in criminal matters throughout Pennsylvania and New Jersey and relentlessly defends clients in state court, federal court, and before administrative agencies. Attorney Fienman is licensed to practice before the Supreme Court of Pennsylvania, the Supreme Court of New Jersey, the US District Court for the District of New Jersey, and the US District Court for the Eastern District of Pennsylvania