Pennsylvania Grey-Market Games Debate Stalls, Lawsuit Claims Machines Illegally Targeted

April 20, 2022
Back
In Pennsylvania, lawmakers remain far from reaching a consensus over how to handle thousands of “grey-market” machines, also known as skill-based games, which have appeared throughout the state and resemble slot machines but are unregulated.

Body

In Pennsylvania, lawmakers remain far from reaching a consensus over how to handle thousands of “grey-market” machines, also known as skill-based games, which have appeared throughout the state and resemble slot machines but are unregulated.

Some lawmakers believe regulating and taxing the machines that have found their way into mom-and-pop liquor stores, gas stations and bars could generate hundreds of millions of dollars in new tax revenue; however, there is also bi-partisan support for an outright ban.

Republican Senator Gene Yaw has been a proponent of legalizing the games. His district is home to Miele Manufacturing, a manufacturer of so-called skill-based games.

Yaw introduced Senate Bill 950 early in the 2021-2020 session, a proposal to regulate and tax the games, but it remains in the Community, Economic and Recreational Development Committee without a hearing scheduled.

The bill would tax skill-based games at 16 percent, with an initial application fee of $1m for a distributor, $25,000 for a system operator and $500 for an establishment. Yaw also proposes a maximum price to play of $5, with maximum winnings per individual game set at $5,000.

Net revenues would be split with 40 percent going to the establishment, 40 percent to the operator, and 20 percent to the distributor. There could be up to five machines in a store or bar, and up to ten machines in a club, with play limited to people over the age of 18.

In an op-ed posted Thursday (April 14) on his website, Yaw disputed claims that skill games take money away from the state’s lottery and casinos.

“Over the last few years, both the lottery and casino revenues have reported record-high earnings,” Yaw wrote. “Moreover, casino and lottery games are available seven days a week, 24 hours a day, 365 days a year from any remote location by way of a cell phone.”

“It’s hard to understand how casinos and the lottery could experience negative impacts, given these facts,” he said.

For years, Yaw wrote, Miele Manufacturing, one of the distributors of skill games in the state, “have offered to help establish a control system that would provide tax revenue to the Commonwealth exceeding $300m annually.”

As an opponent of the widespread adoption of grey-market games, Republican Senator Robert Tomlinson reminded his colleagues that "these machines remain unregulated.”

“There is no consumer protection provided through monitoring to prevent minors from gambling, assist problem gamblers, regulate payout rates or ensure collection of taxes.”

Tomlinson, who introduced Senate Bill 212, said his legislation provides clarity to the definition of a slot machines by making operating a skill-based game a misdemeanor with a $5,000 fine for those convicted.

Some estimates put the number of skill gaming machines at 20,000 in Pennsylvania, The Pennsylvania Lottery estimates it loses approximately $2,284 per machine, per month.

Tomlinson’s bill has been referred to the Judiciary Committee.

A legislative aide for Yaw did not know when either bill would be taken up, saying that Senate leadership is going back and forth about what they want to do, and even with an appetite to get something done the issue could be delayed until next session.

Pace-O-Matic Claims Games Illegally Targeted

The developer of skill games that are subject to debate in the legislature has filed a new lawsuit contending harassment against it by state law enforcement.

Pace-O-Matic, a company based in Georgia that has distributed games in Pennsylvania, Kentucky, Virginia and other states, filed the lawsuit on April 11 in Commonwealth Court against the Pennsylvania Bureau of Liquor Control Enforcement (BLCE).

In its latest lawsuit, Pace-O-Matic, or POM of Pennsylvania, admitted it distributed skill games under the name “Pennsylvania Skill” to bars, restaurants and convenience stores, as well as fraternal organizations, many of which serve alcohol.

The company said it has spent “significant time, money and energy in building a business in Pennsylvania.” But it claims the BLCE, which is a part of the Pennsylvania State Police, has engaged in coordinated harassment of the operators and location owners of its games.

The suit says that as part of a coordinated and illegal campaign, law enforcement officials collaborated with executives of the casino industry, district attorneys and others to apply pressure on those hosting these games.

Pace-O-Matic argues the games have never been declared illegal gambling machines in the state.

In a 2014 rule, a Beaver County Judge Harry Knafelc cited the level of interactivity between the game and the player in ruling the machines are “not a gambling device.” Knafelc said the machine is not contraband and ordered the BLCE to return three games to the company.

A BLCE spokeswoman was unavailable for comment on Tuesday (April 19).

“This is a clear betrayal of the public trust by a law enforcement agency,” company spokesman Mike Barley said in a statement.

Our premium content is available to users of our services.

To view articles, please Log-in to your account, or sign up today for full access:

Opt in to hear about webinars, events, industry and product news

To find out more about Vixio, contact us today
No items found.