Businesses and nonprofits have spent the last few weeks removing their skill games after Pennsylvania lawmakers failed to reach agreement on regulating them ahead of the state Supreme Court’s deadline.
The Pennsylvania Supreme Court ruled in June that skill games are slot machines under state law and that they are unlawful unless licensed. The court stayed enforcement of its ruling for 120 days, giving lawmakers a chance to create a regulatory system.
Last week, the Supreme Court denied requests to extend the Tuesday deadline to remove all skill games.
Starting Wednesday, an estimated 70,000 terminals statewide will be officially illegal, with law-enforcement agencies promising to crack down on businesses hosting the terminals after the deadline.
The Pennsylvania State Police warned last month that all skill games operating as of Wednesday are subject to immediate seizure and business owners may face criminal prosecution.
“With the deadline to shut down skill games nearly here, Pace-O-Matic is complying with the law,” the company said in a statement emailed to CDC Gaming. “Our message to operators and locations has been clear and consistent: follow the law, rely on accurate information and take the necessary steps to ensure games are not available for play.”
Joe Rocca, owner of Rite Touch Distribution in Pittsburgh, told CDC Gaming that 99% of his business was leasing terminals to customers or selling them to distributors, who leased the skill-game machines to small businesses and nonprofits. He said the 1% of business outside of Pennsylvania was “not enough to sustain the business.”
Rocca expects to be sitting on 1,000 terminals once his company completes removing them from local businesses.
“It will cripple the industry forever,” Rocca told CDC Gaming in a phone interview Tuesday. “All of this equipment will end up in landfills or on the used markets.”
The machines have operated without a comprehensive statewide regulatory system for a decade, with licensed operators and the American Gaming Association (AGA) arguing the unregulated machines were simply playing word games to get around the law and regulatory enforcement.
“We are pleased to see the end of this widespread illegal gaming industry in Pennsylvania, one that for years has flagrantly ignored responsible-gaming protocols and consumer protections, while providing zero tax revenue for the Commonwealth,” said Jeff Morris, vice president, public affairs and government relations with Penn Entertainment.
Rocca agreed that skill-game terminals needed to be regulated.
“In my opinion, not in a hair salon or terminals in a mini-casino,” said Rocca, adding he understood casino operators’ frustration over these mini-casinos that have opened across the state. “Maybe that could have been done.”
Supporters say skill games provide a crucial source of additional income for small businesses, bars, taverns, and nonprofit organizations. Rocca explained these terminals allow VFWs and other nonprofits to sell a $2 bottle of beer that costs them $1.25, because the revenue from the machines “allows for the cheap prices.”
“To sell out the entire industry to the casino industry is mind boggling to me,” Rocca said.
According to the Independent Fiscal Office, each terminal can generate $47,000 annually.
“The loss of skill-gaming revenue will have real and immediate consequences for American Legions, VFWs, volunteer fire companies, emergency-service organizations, fraternal clubs, and small businesses across Pennsylvania,” Pace-O-Matic said.
In terms of what could replace the thousands of skill game terminals, some businesses may look to pull-tab machines or become lottery retailers to make up the lost revenue.
“The Pennsylvania Lottery has a network of more than 9,900 retailers across the Commonwealth, ensuring that players have convenient access to our games,” said lottery spokeswoman Ewa Swope. “As skill games are pulled from the market, we do anticipate increased interest in lottery products from both players and retailers.”
Swope said they are also hopeful that business owners and managers who do not currently offer Pennsylvania Lottery games will consider becoming lottery retailers.
“Expanding our retail network allows us to better serve players while continuing to fulfill our mission of generating vital funding for programs that benefit older Pennsylvanians,” she said in an email.
Legislative deadline missed
State lawmakers failed to regulate the games as part of Democratic Governor Josh Shapiro’s budget this year, which proposed to expand the regulation and taxation of video gaming terminals to include skill games.
Under the proposal, licensed establishments could have hosted up to five machines and the terminals would be taxed at 52% on gross revenue. The proposal would have raised $487 million in fiscal year 2026-2027, according to the Independent Fiscal Office.
Meanwhile, two bills, House Bill 2213 and Senate Bill 1079, were introduced in the state legislature, but have stalled in Harrisburg. The bills would establish a $500 monthly fee for every skill-game terminal and set a statewide limit of 50,000 terminals.
The new regulatory structure was estimated to generate $300 million annually in state tax revenue.
“We urge lawmakers to … pass legislation that responsibly regulates and taxes skill games, while protecting the organizations, businesses, and communities that, for a decade, have come to count on this revenue,” Pace-O-Matic said in a statement.
Based in Duluth, Georgia, Pace-O-Matic develops skill-game software and terminals. Besides Pennsylvania, the company operates in states such as Kansas, Texas, and Wyoming.
“We remain hopeful that lawmakers will reach a reasonable, commonsense legislative solution,” the company said. “This is no longer about what might happen. Communities across Pennsylvania are now facing the consequences.”
