State casinos and lottery to co-exist with skill game machines

By Kate Northrop

The Pennsylvania Commonwealth Court found that unregulated skill games are legal in Pennsylvania, much to the disappointment of online and retail casinos.

Unregulated skill games are now considered legal in Pennsylvania after a court order from the Commonwealth Court clarified their stance on whether skill games are considered games of chance or skill.

The legality of skill games, as well as what exactly is a skill game, has been disputed in the state of Pennsylvania for years. The debate may not be over yet, but at least a Commonwealth Court has issued a decision that may provide clarity on how the fight might progress.

For years now, skill game manufacturer Pace-O-Matic (POM) has operated in Pennsylvania while simultaneously defending its ability to operate legally in the state. In April, it was announced that POM would face off against six in-state casinos in POM of Pennsylvania v. Department of Revenue, in which the PA Supreme Court would rule on the legality of skill games in the state.

This was after the case was originally brought to light in Dauphin County before the Commonwealth Court. While the Commonwealth Court ruled that POM games are truly games of skill and not chance, we may still see a ruling from the PA Supreme Court that may either solidify the decision or overrule it, if the case is indeed heard.

"In light of our conclusion that the POM machines are not slot machines under the Crimes Code, we need not resolve this further dispute of the parties," the Commonwealth Court said in a court order. "Regardless of which interpretation is proper, because the POM machines are not slot machines, the POM machines are not illegal per se."

"This is a major victory for Pennsylvania Skill, but it's equally a victory for our operators and the thousands of small businesses, volunteer fire companies, and fraternal clubs who have come to depend on the revenue our games provide," POM President and CEO Paul Goldean said in a press release. "This is also a win for many players across the commonwealth who enjoy skill games as a popular entertainment option. Our games have always been legal, and this ruling proves that once and for all."

The Pennsylvania Gaming Control Board (PGCB), the government agency that oversees slot machines and casino gambling in the state, is undoubtedly unhappy with the decision. Skill games are considered unregulated competitors in the gaming industry that detract from lottery- or casino-based revenue. In other words, skill games may produce revenue that would otherwise be controlled by the state.

Casinos have had to remove several slot machines from the floor because the proliferation of skill games across the state was eating into slot machine revenue and reducing the need for slots. Since this summer alone, four casinos have received permission from the PGCB to remove slot machines, with Harrah's Pennsylvania and Mohegan Pennsylvania removing as many as 150 and 120, respectively. However, this is nothing new — casinos have been removing them from the floor since November 2021.

"The skill games have proliferated, and if you do a correlation between that and our volumes going down, there's a direct correlation," Mohegan Pennsylvania President and General Manager Anthony Carlucci said during a PGCB meeting in September.

As strong as a correlation between casino revenue and the proliferation of skill game machines may be, it seems that the PGCB and Department of Revenue must accept the ruling and learn to co-exist. That being said, online regulated casinos have reported record revenues in the last few months, taking in $187.3 million in September and $186.9 million in October.

The last time POM went up against the Department of Revenue was earlier this year, when a separate court order found that the state had wrongfully seized POM's machinery on the grounds that the machinery taken were games of skill, and that the state had "failed to establish that the devices, as designed, are games of chance."

There have been multiple documented incidents in which the state had seized POM skill game property, including a time in May 2022 that saw five devices, 30 weekly accounting documents, a D-Link router box, a NetGear router box, and $5,000 removed from POM's possession. Although the state did not admit to any "wrongdoing," they returned all seized items to POM in every case.

"Every time the legality of our skill games has been called into question, the legal status of our games has been upheld by the judiciary," POM spokesperson Mike Barley said after that court order in favor of POM was issued earlier this year. "Pace-O-Matic stands out among our competitors as the active and driving force seeking additional regulation and taxation. We remain steadfast in our commitment to working with the state General Assembly and asking for legislation providing additional regulation and increased tax money for the state."