The Pennsylvania Gambling Landscape Will Include Skill Games

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Pennsylvania may be a step closer to settling the debate over whether skill games should be legal in the state. Governor Josh Shapiro unveiled his proposed budget for the fiscal year 2024/2025 yesterday at the Capitol Rotunda in Harrisburg, bringing attention to his plan to regulate skill games in Pennsylvania, starting in July.

Significant Tax Revenue

The ongoing debate surrounding skill games seems to be nearing a resolution with Shapiro's announcement. Instead of facing a ban, skill games are set to be formally integrated into the state's gambling landscape, subject to taxation.

This proposed budget is not yet set in stone, serving as only a framework presented by Shapiro. However, the news comes as a disappointment to retail and online casinos in Pennsylvania, which had pushed for a complete prohibition of skill games.

Related: Pennsylvania Casinos Begin Supreme Court Battle over Skills Games

Governor Shapiro's decision to include skill machines in the FY 2024/2025 budget follows a ruling by the Commonwealth Court just two months ago, affirming the legality of these games. The proposed tax structure outlined in the budget includes a hefty 42% tax on the daily gross gaming revenue from skill-based electronic gaming machines regulated by the Pennsylvania Gaming Control Board (PGCB).

Under the proposed regulation, Pennsylvania skill games would fall under the jurisdiction of the PGCB, a responsibility the board had expressed interest in during a policy hearing last August. Revenue collected from this tax is expected to be directed to the General Fund after being deposited into a restricted account, with initial collections anticipated to begin in the 2024-25 fiscal year.

While the budget is still subject to revisions and finalization, there is growing momentum for the regulation of skill games in the state, with expectations leaning towards a sooner rather than later implementation.

Pace-O-Matic Comes Out on Top

The inclusion of skill games regulation opens up a new dimension in Pennsylvania's gambling market, alongside existing retail and online casinos. This development particularly benefits Pace-O-Matic (POM), a Georgia-based skill games manufacturer, which has been advocating for regulation. POM's Chief Public Affairs Officer, Mike Barley, welcomed the move, expressing hope that Pennsylvania would embrace the regulation of skill games.

Governor Shapiro estimates that regulated skill games could generate over $150 million in tax revenue in the next fiscal year alone. By FY 2025-2026, this figure could more than double to exceed $313 million in tax earnings.

Despite concerns from some quarters, the retail and online casino industries are unlikely to be significantly impacted by the regulation of skill games. Both sectors have been experiencing robust growth, with retail casinos reporting record slot revenue of $2.5 billion in 2023, and Pennsylvania online casinos achieving a yearly record of $2.1 billion in revenue.

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