Pennsylvania eyes regulating skill games for revenue boost
Lawmakers in Pennsylvania are considering a proposal to reduce and regulate skill-based gaming machines as part of ongoing budget negotiations. These machines, found in bars, restaurants, and convenience stores, currently operate outside the state’s gambling laws. With over 40,000 in use, they’ve become a source of revenue for small businesses but have drawn criticism from licensed casinos. As reported by Casino Reports, sources suggest the state may move to eliminate half of the machines and introduce stricter oversight for the rest.
Debate grows over skill game regulation
Legislators are debating a proposal to cut the number of skill-based gaming machines in half by removing some 20,000 of them from use. The remaining devices would be subject to state oversight and levies akin to those levied on slot machines in casinos. If approved, regulated machines could be placed in licensed venues such as bars, taverns, veterans’ and fraternal organisations, lottery retailers, and other approved locations.
Proposed tax structure
The current proposal would apply the same tax rate to regulated skill-based games as casino slot machines, 52 percent to the state and 2 percent to local governments, totalling 54 percent. This rate is among the highest in the US for slot revenue.
If skill-based games are officially controlled, some lawmakers have proposed reducing the rate. Representatives of the casino sector, however, are adamant about equal treatment, claiming that slot machine-like devices need to be subject to the same taxes. According to a representative for the industry, tax parity is necessary for equity and uniformity in regulations.
Lawmakers seek new revenue streams
Pennsylvania is facing a budget deficit exceeding $3 billion, prompting lawmakers to explore new revenue sources. One proposal under discussion involves regulating and taxing skill-based gaming machines, which could generate hundreds of millions in revenue. In addition, lawmakers are considering increasing taxes on online gambling, including iGaming and sports betting. If approved, Pennsylvania would be the first state to raise taxes on its online casino market.
A source told Casino Reports: “What’s now being discussed to fill the budget gap is taxing skill-based gaming. As part of that discussion, they’re saying, ‘If we’re going to tax skill games, let’s also help close the budget gap by increasing taxes on other forms of gambling.’”
Industry divided on regulatory approach
Casinos in Pennsylvania have long opposed unregulated gaming, arguing they divert customers and revenue while avoiding the taxes casinos are required to pay. Casino operators contribute tens of millions in monthly taxes and are pushing for either equal taxation or removal of the machines.
On the other side, small businesses such as bars and convenience stores say the machines are vital for financial stability, especially after the pandemic. They argue that a 54 percent tax rate, equal to what casinos pay, would be unsustainable and are proposing a lower rate of 16 percent.
Did you know Pennsylvania generates more gaming tax revenue than the two other largest commercial gaming states of New Jersey and Nevada combined?
— Pennsylvania Gaming Control Board (@PAGamingControl) April 15, 2025
In 2024 alone, Pennsylvania brought in $2.67 billion in tax revenue from commercial gambling — leading the nation.
This funding… pic.twitter.com/DokfN8jzYC
Campaigns target regulatory loopholes
Pace-O-Matic has been involved in long-running legal conflicts with state regulators and casino operators. The central issue is whether skill-based games should be taxed and regulated like slot machines. Court rulings have been mixed, leaving the legal status of these machines unresolved.
Legislators are still at odds over how to distribute the ensuing tax income, despite the growing support for regulating skill-based games. Republicans support rural infrastructure projects, while Democrats support funding upgrades for the Southeastern Pennsylvania Transportation Authority (SEPTA). This dispute may impede the advancement of legislation.
Community and economic impact
The ongoing budget impasse is affecting public services, including education and social programmes. Regulating skill-based games is seen by some lawmakers as a way to generate revenue and avoid deeper cuts. Regulation could protect jobs linked to the manufacturing and operation of skill-based machines. However, small businesses are concerned that high taxes could reduce profitability and lead to job losses.
As of early November, no final proposal has been introduced. If lawmakers reach an agreement, Pennsylvania could become a model for other states dealing with similar issues. If not, the unregulated market is likely to continue operating without oversight or taxation.
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