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While states like Virginia work to jettison skill games from their borders, some state lawmakers in Pennsylvania contend the games are good for the commonwealth. So they said during a press conference announcing Senate Bill 950 or the Skill Gaming Act (SGA). SGA is designed to regulate and increase taxes on the gaming machines known in the commonwealth as Red, White and Blue, and Pennsylvania Skill – powered by Pace-O-Matic (POM).
Legislators who held a press conference on Wednesday said the machines are a blessing to small businesses, lift Pennsylvania Lottery sales and will generate as much as $250 million a year in tax revenue themselves. Plus, skill games don’t cannibalize other legal forms of gambling – like retail and online casino gaming in Pennsylvania, they said.
Although lawmakers speaking on Wednesday in Harrisburg were announcing legislation they planned to introduce in the Pennsylvania General Assembly, Pace-O-Matic officials maintained that their machines were already legal and had been since 2014. A mechanical version of the Red, White and Blue machine also operates in the commonwealth.
As Miele Manufacturing of Williamsport, which builds and distributes the Pennsylvania Skill machines, said on its website:
“POM of PA and Pennsylvania Skill’s legal status will not change unless there is another legal decision or a change in law by [the] state legislature.”
To that end, State Sen. Gene Yaw began the press conference on Wednesday by discussing that $250 million annual tax revenue figure, increased lottery sales at establishments with skill games and saving Pennsylvanians from illegal, “preprogrammed” games of chance that are cheating them.
“People are being taken advantage of by those types of machines. They think that they can interact with them and they don’t, they can’t.
Yaw said of proposed SB 950:
“It’s a real easy win, in my opinion, for Pennsylvania.”
Nationally, though, skill games occupy a legal gray area. This is true both for retail skill machines like those in Pennsylvania, and online gambling games with a skill element. Skillz, a major developer of the latter, is currently facing a class-action lawsuit over their legality.
Yaw said Pace-O-Matic isn’t a game of chance. If machines aren’t ruled “games of chance,” they may then be classified as gambling devices. That brings up a whole other legal argument, and that’s why there are so many pending court cases around skill games.
Play Pennsylvania wrote last week that a number of retail casinos in the state are removing slot machines. They’re blaming “unregulated, untaxed skill games” for cutting into revenue.
Yaw said SB 950 calls for skill games to be taxed like retail casino table games. Based on statements from Pennsylvania Skill, the $250 million a year the company would generate in tax revenue assumes the business will be taxed at 16% on gross game revenue.
That 16% doesn’t appear to be the current tax rate others pay for table games, though. While that was once the table games tax rate, OPR finds that online casino operators pay 34% on table games. Online poker operators, though, do pay 16%.
Yaw cited a study by Peter Zaleski, Villanova University‘s business school economics department chairman. It found that in 2018 and 2019, the lottery did better in Pennsylvania than in four states with no skill games:
Yaw reiterated the sales lift in Zaleski’s testimony to the legislature last year on behalf of Pace-O-Matic. At that time, the skill games company feared that Pennsylvania legislators would put an end to its legal operations in the state.
In 2020, Zaleski testified:
“Pennsylvania Lottery sales growth exceeded lottery sales growth in the control group states by an average annual rate of 2.2%.”
On Wednesday, a Western Pennsylvania business owner provided anecdotal evidence of skill games’ presence aiding lottery ticket sales.
Ryan Sprankle, who owns Sprankles Neighborhood Markets, said during the press conference that had installed a total of six Pennsylvania Skill machines in his three stores. He said that he was initially worried about the impact they’d have on lottery sales:
“One of the things we were very concerned about was our lottery sales. Lottery commission is a very important part of our budget. Lottery traffic is a very important part of our weekly traffic to the store. So we were concerned about how it would affect that.”
Sprankle now credits the machines for the fact that his stories hit lottery sales bonuses every quarter. He says that overall store traffic is up since installing the machines as well, and that he wishes he could install more. The only complaint he gets from customers about the skill machines is that they have to wait in line to use them.
Sprankle decided to pass that wealth along to his employees, who now earn $3 an hour more, have health benefits and can eat and drink almost anything they want while on shift.
“That’s all made possible by the revenue from the Pennsylvania skill games, by Pace-O-Matic,” he said. “So we’re just extremely happy with what it’s been able to do for us, for our employees.”
At the moment, Pennsylvania Skill machines are the subject of two lawsuits in the Commonwealth Court of Pennsylvania. The plaintiff in both is POM of Pennsylvania, LLC. The defendants are the Commonwealth of Pennsylvania Department of Revenue in one, and Pennsylvania State Police, Bureau of Liquor Control Enforcement in the other.
POM here is Pace-o-Matic, the skill games manufacturer. The suits allege that crackdowns on the machines lacked justification. Meanwhile, a company representative spoke Wednesday in favor of the proposed legislation.
Nicole E. Miele, the public relations representative at Miele Manufacturing and director of Pennsylvania Skill Charitable Giving, said Pennsylvania Skill revenue helps small businesses, fraternal organizations and veterans associations keep their doors open.
However, the Miele site shows many of those businesses owners end up confused:
“In the instance you are visiting the Pennsylvania Skill website due to correspondence sent by the Pennsylvania Liquor Control Board, also known as the PLCB, please know these claims are false. Officials from the Pennsylvania Governor’s office and PLCB have indicated that an operator’s liquor license will not be affected by having Pace-O-Matic’s legal Pennsylvania Skill amusement devices in your establishment. In regards to this decision, POM of PA’s attorney has provided an outline regarding Pennsylvania Skill device’s legal status.”
On Oct. 29, a Pennsylvania Skill statement thanked Clearfield County District Attorney Ryan Sayers for stopping PLCB seizures of the skill games. The gratitude extended to his order to the PLCB to “return pieces of equipment and cash stemming from September raids.”
Part of the confusion stems from the fact that there are other superficially similar machines that aren’t legal. Pace-O-Matic has begun working with law enforcement, supplying them with an app to help determine a machine’s legality, said Pennsylvania Rep. Jeff Wheeland on Wednesday. He’s working on a companion bill in the house that will regulate skill games, but his legislation emphasizes enforcement that will rid the state of illegal games.
Wheeland also believes keeping skill games like Pace-O-Matic in the state will benefit the lottery and casinos. However, he wants to be deliberate about the process.
“We’re going to take this slow, we’re going to get it right”
Fellow Rep. Danilo Burgos seconded that Pennsylvania needs to hold companies accountable so they pay their fair share of taxes. His constituents in Philadelphia have a specific illegal gaming problem.
“We have a huge problem with black boxes.”
The fate of Pace-O-Matic’s machines was just the opposite in Virginia. As of July, the state banned all skill games outside of retail casinos.
As of Wednesday, the site for Queen of Virginia Skill & Entertainment (QVS) – powered by Pace-O-Matic – was still trumpeting the benefits it says its machines had provided the state.
“All totaled, QVS and other regulated skill game businesses will have contributed $130 million to the state in revenue during the fiscal year that ends on June 30.”
At least one skill games advocate is trying to get the machines back at his Virginia truck stops, convenience stores and restaurants. Hermie Sadler, a former NASCAR driver who now owns the businesses with his brother, has filed a lawsuit claiming that the ban is unconstitutional.
The Sadlers’ lawyer – Virginia Sen. Bill Stanley – said on Oct. 12 to a crowd assembled outside of the Greensville County Circuit Court that the case will go to trial there on Dec. 6 to bring the skill games back:
“We’re going to go get this done, and we’re going to win, and we’re going to get those games turned back on come December, okay?”
Stanley didn’t immediately respond to OPR‘s request for comment about the case.
Meanwhile on Wednesday, Yaw emphasized that Pennsylvania is instead trying to fold the skill games into the gaming environment. He says the state will benefit from SB 950’s passage, which will ensure skill games operate fairly:
“We want to regulate them.”