A Pennsylvania state Senator is planning to introduce legislation soon that would regulate and collect taxes from thousands of skill game machines, or “gray machines,” that have been operating in the commonwealth for years with no oversight.
Sen. Gene Yaw (R-23) published a memo to all Senate members on Monday looking for co-sponsors to support his legislation in a state where Pennsylvania online casinos are legal and regulated.
“Skill video games, operated in a regulated environment, will significantly benefit the commonwealth by providing substantial revenue and creating jobs,” Yaw said in the memo. He estimates there could be 20,000 to 70,000 skill game machines already operating in the state.
“All games will be required to be connected to a terminal collection and control system that allows the commonwealth to monitor all transactions and ensure that all taxes are accrued and paid,” Yaw said.
The Keystone State has had iGaming as well as Pennsylvania sports betting since 2018. In the 2022-23 fiscal year alone (thus far, from July 2022 to February 2023), PA sportsbooks have brought in more than $5 billion in handle (or amount wagered) and more than $340 million in gross taxable revenue, while online slots and banking tables combined have been worth more than $949.5 million in gross revenue.
What Are Skill Games?
Yaw explains that a skill game player can affect the outcome of each spin on the machine, as opposed to Pennsylvania online slots options or slots at physical casinos, which are simple games of chance.
“It’s an eye-hand coordination. And are you going to win every time? No. But you have the opportunity to do that unlike slot machines, which are games of chance,” Yaw said in a Vimeo video introducing his legislation.
“Upon passage of this legislation, experts estimate that approximately $300 million in annual tax revenue will immediately flow to the commonwealth,” Yaw added.
One of the largest skill video game manufacturers is in Yaw’s district.
“Pennsylvania’s skill game terminals are manufactured right here in Lycoming County and the finished products exist in fraternal clubs, veterans’ organizations, and taverns, as well as other local businesses throughout the commonwealth,” Yaw said. “Skill games are a piece of the small business economy in our state, and it’s time we recognize the benefits of this emerging industry and offer regulatory support so that we can ensure it flourishes – safely and responsibly.”
The Keystone State has PA casino apps but it is not the only state wrestling over the issue of unregulated skill games.
Kentucky Bans Unregulated Machines
Last month, Kentucky became the first state to pass standalone legislation banning unregulated gambling machines and joined Virginia in taking proactive government action to eliminate the machines.
Pace-O-Matic, one of the largest makers of skill games, filed a lawsuit seeking to block the newly passed law in Kentucky.
Kentucky also recently approved sports betting, meaning that it will join a list of more than 30 states where folks can wager both online and in person on sporting events, just as Pennsylvania residents can use PA sportsbook apps.
Virginia Lawmaker Introduces Proposal
A top Virginia Republican lawmaker introduced a bill this year to legalize skill games in the Old Dominion. The bill failed, which resulted in Virginia effectively banning the machines in the state. But an ongoing legal battle in Greensville County (case# CL21000207-00) has blocked the commonwealth from enforcing the ban, leaving skill games operating in an unregulated space in Virginia.
In February, the Town Council and Planning Commission of Louisa, Va., voted down two Special Use Permits submitted by local businesses seeking to add skill games to their locations.
There are an estimated 9,038 skill game machines in the Commonwealth of Virginia.
“When so many small businesses, including bars, restaurants, and fraternal and veterans clubs are struggling due to the economic strain caused by the COVID-19 pandemic, skill video games are keeping them afloat by providing them with supplemental revenue,” Yaw said.
Yaw believes his bill in Pennsylvania will address both the need to clean up the market and rid the state of illegal gambling, provide the state with tax revenue, and support small businesses by giving them access to an additional revenue stream.
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