Pennsylvania Supreme Court to Rule on Legality of ‘Skill’ Games Sweeping the State
The fate of approximately 80,000 slot-like games operating in bars and convenience stores across Pennsylvania hangs in the balance as the state’s highest court prepares to hear arguments this week. The central question: do these games constitute illegal games of chance, or are they legal due to an embedded element of skill?
The legal battle pits the established casino industry and the Pennsylvania Lottery against bar owners and the companies distributing these increasingly popular “skill games.” The dispute centers on whether the games, which resemble traditional slot machines, can be legally differentiated by the inclusion of a “skill” element – often subtle and difficult to discern – within their programming.
In 2023, a Dauphin County judge ruled that seized skill games were distinct from slot machines and therefore legal, a decision upheld by Commonwealth Court Judge Lori Dumas. However, the Supreme Court’s review will focus on two key inquiries: can an electronic game be considered a game of chance if manufacturers attempt to incorporate a hidden and nearly impossible-to-complete skill element? And should existing gambling statutes governing slot machines apply to these new types of games?
The ambiguity surrounding the legality of skill games has created a legislative stalemate. Governor Josh Shapiro has urged lawmakers to formally regulate the games, proposing a 52% tax on gross revenue, projected to generate approximately $370 million annually for the state. However, this measure was not included in the recently signed budget deal.
Several alternative legislative proposals have emerged, but have failed to gain traction. Senate Bill 1079, introduced last week, proposes a $500 monthly fee per machine, aiming to generate around $300 million per year. Previously, Senator Yaw had suggested a 16% tax rate on gross profits, while Senate Bill 756 outlined a 35% tax on gross terminal revenue. Despite these efforts, the games continue to operate without state taxation or regulation.
The proliferation of skill games has sparked concern within the traditional gambling sector. Both the Pennsylvania Lottery and casinos argue that these games are diverting customers and impacting their revenue. The Lottery, for example, reported a $130 million profit decrease in the 2024-25 fiscal year, despite still generating over $1 billion in profit. However, proponents of skill games point to the casino industry’s record revenue, fueled by the rapid growth of online gambling, as evidence that the market can accommodate multiple forms of gaming.
Recent legislative changes, such as House Bill 1050 (Act 37), which reduced the Lottery’s required profit contribution from 20% to 10%, demonstrate an attempt to adapt to the changing landscape and attract more players with larger prizes. The Lottery has also been impacted by a lack of large jackpots in multi-state draw games, which saw a $300 million revenue decline between 2023-24 and 2024-25.
The Supreme Court’s decision will have significant implications for the future of gaming in Pennsylvania, potentially opening the door to a new, largely unregulated market or reinforcing the existing legal framework. The outcome will undoubtedly shape the ongoing debate over the balance between chance, skill, and state revenue.
