In-depth: Pennsylvania hearing debates regulation, legality of skill games

August 24, 2023
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Currently over 50,000 unregulated and untaxed machines exist in the Commonwealth, which is argued to be losing $250m a year.

A Pennsylvania Senate Democratic Policy Committee Hearing has covered the proliferation and lack of regulation surrounding skill games in the state. Both the implication of this activity’s name, as well as the games’ legality, has sparked a heated debate.

Senator Katie Muth presided over the hearing, with an introduction covering what exactly constitutes a ‘skill game’ in the Pennsylvania Commonwealth. Pennsylvania Gaming Control Board (PGCB) Executive Director, Kevin O’Toole, was on hand to clarify the nature and the current amount of regulation on such machines.

O’Toole said of so-called skill games, “These machines are slot machines, regardless of whether they are predominantly skill-based or predominantly chance-based. One of the oldest types of skill machines is draw poker – you’re making decisions – should I stand or hit?

“Memory, or retention, is one type of skill required. You might win if you remember the order of colored balls as they come out of the machine. If you get three cherries in a row, it’s a random outcome that’s supposed to come out a certain percentage of the time, but you don’t know when.”

Senator Amanda Cappelletti summarised the games saying, “Some level of human skill or ability is necessary to receive a payout.”

One designer and distributor of skill games, Pace-O-Matic, was invited to participate in this hearing, but ultimately declined. The company, based in Georgia, develops Pennsylvania Skill Games and has been embroiled in several of its own court hearings in Pennsylvania on whether or not the games are legally skill or chance based.

Though the District Attorney’s office had seized Pace-O-Matic gaming machines from several public locations (including convenience stores and bars), courts in Dauphin County, York County and Monroe County all ruled that the machines constituted games of skill.

Senator Wayne Fontana commented on the nature of the games, “The definition of skill is just smoke and mirrors. Is that skill or is that playing the odds? There’s a lot of things that are not happening in these places. We should be shutting them all down and starting over again. And talking about how they’re all regulated.”

Some of the locations in which Pace-O-Matic’s machines and other skill games are placed include truck stops, restaurants, convenience stores, laundromats, bars and other venues that do not fall under gaming regulations. Senator Cappelletti noted that a higher number of skill game machines were often found in lower-income areas.

O’Toole said of the games’ locations, “The Commonwealth Court ruled that the skill games would meet slot machine regulations if they resided in a regulated gaming facility, but they don’t reside in such facilities, so they are not regulated by the gaming act.”

According to data presented in the hearing, there may be up to 50,000 unregulated, untaxed gaming machines in Pennsylvania. O’Toole said the Commonwealth could benefit by $250m annually if the machines were taxed, and that a tax rate of 16% has been suggested in one bill.

O’Toole said it is the PGCB’s hope that the “thought and care the General Assembly has put into the Gaming Act be put into skill-based gaming, should they decide to regulate and legalize in any context.”

The PGCB also claims that the regulation of the games should be put under its jurisdiction, though accusations have apparently been made that the Board has been directed by the casino industry to target skill games. O’Toole said, “The Board and the industry it regulates are on the same side of an issue; this shows nothing more than that the interest of the two are aligned.”

Jeff Morris, VP of Public Affairs and Government Relations at Penn Entertainment, an operator of four casinos in Pennsylvania, also attended the hearing with a presentation calling for the banning of the games, naming them an “unregulated, unmitigated disaster.”

Morris provided photos of children (with faces blurred) playing skill games in unregulated environments, including one image of his young daughter in a local gas station standing next to such a machine.

He said, “No employees were around to see that a child was inspecting the machines. The legal industry takes consumer protection very seriously, but these operators and their machines are doing the opposite.”

Yesterday, the PGCB announced in a separate release that it approved petitions to ban four adults from all casinos in the state after two male patrons and two female patrons had left minors unattended in vehicles in casino parking lots while they gambled. The PCGB has also created an awareness campaign, “Don’t Gamble with Kids,” to track and reduce incidents of unattended children.

Morris made reference to the fact that Kentucky Governor Andy Beshear banned skill games in his state earlier this year. He added, “Ending the proliferation of these games is essential. This does not include licensing. Bad actors should not be rewarded. The appropriate oversight cannot be provided. Only casinos can provide the strong oversight they need.”

A video shown in the hearing, posted the Facebook page of local business, The Keystone Klub, showed its owner displaying the latest machines in his “mini casino.” The property’s website boasts, “you don’t have to sit at the back of a gas station or a loud, smoke-filled casino to enjoy having fun.”

Chris Cykle, SVP of Government Relations with the American Gaming Association, commented on establishments like this, saying, “They have no respect for the right of state authorities to control gambling if it affects their lucrative business model. Businesses have initiated costly and protracted litigations while they continue to profit on their operations.”

Several members of the public were in attendance at the hearing. According to Morris’ data, 58% of primary voters in Pennsylvania opposed the machines, including 70% of votes aged 65 years or older. Recently in Virginia, however, a coalition advocating for skill games was launched.

When asked by Senator Jay Costa whether the PGCB could regulate the growing number of these machines, O’Toole noted that the Board “without a doubt” would be able to manage the regulation of skill game machines, should it be given the right to do so. “We have all the systems in place.”

State-by-State

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