Casino lawsuit seeks skill game tax parity

(The Center Square) – Twelve casinos filed a lawsuit last week demanding that unregulated skill game operators pay the same 54% tax rate applied to slot machines. 

While the industry claims this would make the levy constitutionally fair, critics argue it’s another tactic meant to squash their competition.

The turf war between Pennsylvania’s 17 casinos and roughly 67,000 unregulated skill game terminals in social clubs, convenience stores, gas stations, and bars has grown more heated in recent years as one of the latter’s major manufacturers – Pace O’ Matic – seeks legal distinction from “games of chance.”

In the lawsuit, the casinos note, “There is no basis for requiring licensed entities to pay about half of their slot machine revenue to the Commonwealth while allowing unlicensed entities to pay no tax on such revenue.”

Skill games supporters say winning comes through mastery, not sheer luck, making them entirely separate from traditional gambling devices.

While game manufacturers vary, those familiar with them disagree about the distinction, often likening them to slot machines. Data published by the American Gaming Association last year found that most Americans view them as games of chance.

Critics say the machines equate to an unregulated gambling industry, housed in corner stores, bars, and non-profit clubs with no regulation and very little oversight, opening the door for potential abuse and even addiction. 

Owners of these establishments must comply with age restrictions and shield customers from related crimes, though it’s difficult to do so without specific guidance around enforcement. States like Virginia and Kentucky have seen outright bans on skills games.

Skill games supporters want to see the industry regulated and taxed in Pennsylvania to the tune of 16%, generating an estimated $300 million in revenue for the state.

Gov. Josh Shapiro proposed a 42% tax rate in February, estimated to generate $420 million by 2028-29.

Although neither plan has moved forward, support still exists broadly for bringing the industry into regulation.

According to competing polls conducted this week by CYGNAL for the PA Taverns and Players association, or PA TAP, however, Pennsylvania voters have major support for skills games: 50% of those polled opposed a ban on skills games, and 60% supported the lower 16% tax proposed.

“Polling results show that Pennsylvanians overwhelmingly support a compromise solution that would fairly tax and regulate skill games. They understand the important role supplemental revenue generated from these games plays in supporting small businesses and fraternal clubs,” said Doug Sprankle, President of PA TAP.