Pennsylvania Legislators Seek Solution To Grey-Machine Expansion

August 24, 2023
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A group of Pennsylvania legislators discussed the proliferation of so-called grey machines during a hearing on Wednesday and expressed a desire for a legislative solution sooner rather than later.

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A group of Pennsylvania legislators discussed the proliferation of so-called grey machines during a hearing on Wednesday (August 23) and expressed a desire for a legislative solution sooner rather than later.

The Senate Democrats Policy Committee held a hearing Wednesday that included testimony from Kevin O’Toole, executive director of the Pennsylvania Gaming Control Board (PGCB), as well as representatives from Penn Entertainment and the American Gaming Association (AGA).

The Democrats are the minority party in the Pennsylvania Senate, but some Senate Republicans have also voiced a desire to address the thousands of unregulated devices, supposedly offering games of skill, that have become ubiquitous in bars and other non-gaming establishments.

Senator Amanda Cappelletti said she is working on legislation to prohibit the machines entirely.

“Since their prevalence across the Commonwealth is already well established, the General Assembly is already a step behind when it comes to the taxation and regulation of the industry,” she said.

Cappelletti said her legislation would be similar to Senate Bill 212, a proposal that was introduced by Republican Senator Robert Tomlinson during the last legislative session.

“In what feels like a rarity in today’s political climate, I couldn’t agree more with the concerns my colleague from across the aisle expressed,” she added.

Senate Minority Leader Jay Costa added that whether or not the legislature elects to prohibit the games, some legislative action is needed, independent of various pending court cases surrounding the legality of the machines.

“I had firsthand experience in terms of what our intent was a few years back when we wanted to ensure or believe that we prohibited skill games from being present in Pennsylvania,” Costa said.

“Clearly that legislative directive, I would call it, was ignored across Pennsylvania and now we have an abundance of skill games.

“Despite that fact, we are where we are, and we need to get our arms around it and resolve it once and for all,” Costa said. “Hopefully, we can figure out what needs to be done, either we’re going to prohibit them or we’re going to permit them.”

O’Toole agreed with the assessment while being careful to assert that whatever decision the legislature made, the PGCB was prepared to act.

“To resolve this uncertainty, a legislative determination, one way or another, will need to be made,” said the state’s chief gaming regulator.

O’Toole was, however, critical of another pending bill that was introduced by Republican Senator Gene Yaw in May.

Yaw’s Senate Bill 706 would see a new division created under the Pennsylvania Department of Revenue to regulate the skill games rather than have the PGCB regulate the devices even though the gaming board has experience of regulating slot machines in land-based casinos as well as video gaming terminals (VGTs) in truck-stop locations.

“It makes absolutely no sense to assign slot-machine regulation to the Department of Revenue,” O’Toole said.

“They are one of the best taxing authorities in the country, but they have no infrastructure to regulate slot machines.

“We go out of our way to establish good communication lines with the VGT establishments and VGT operators, there’s no fighting going on between the regulators and the regulated on the VGT side,” he continued. “So to think that you need to get away from the Gaming Control Board for some reason makes no sense to me.”

O’Toole also rejected accusations that the gaming board was pushing back against the proliferation of grey machines at the behest of the casino industry.

“Nothing can be further from the truth, absolutely false representation,” O’Toole said. “Simply because the board and the industry it regulates are on the same side of an issue shows nothing more than that, in that particular instance, the interest of the two align.

“The casino industry is in direct competition with skill games around the Commonwealth, and the board has very real concerns regarding their safeguards, the public safeguards, taxation and regulation.”

During Wednesday’s hearing, representatives of the casino industry remained as critical as ever of the proliferation of the machines and pushed for a ban rather than a regulatory framework.

“Pennsylvania has been seen as a model nationwide as a gaming industry because of the way that the state had created the law, how regulated it is for 15 years, it’s been incredible,” said Jeff Morris, vice president for public affairs and government relations for Penn Entertainment, when asked about the company’s position on regulating the machines compared to banning them.

“This would completely destroy that model.”

The AGA also released new research on Wednesday in advance of the hearing finding that 65 percent of respondents who were familiar with “games of skill” said that they are no different than slot machines.

“The bottom line is the continued expansion of unregulated gaming machines undermines public confidence in the legal gambling system and threatens Pennsylvania residents, the tax base and AGA members who have invested heavily to create thousands of jobs in the state,” said Chris Cylke, vice president of government relations for the AGA, during Wednesday’s hearing.

“Failure to curb these devices will only encourage further schemes to evade Pennsylvania’s carefully crafted legal gambling system, which will result in more unregulated gaming machines flooding the market, including the opening of unregulated casinos containing hundreds or even thousands of these machines.”

Cappelleti said Pace-O-Matic, the leading manufacturer of the “Pennsylvania Skill” branded machines that often appear in Pennsylvania, was invited to testify during Wednesday’s hearing, but the company declined citing the ongoing legal cases regarding the legality of the machines.

Instead, Pace-O-Matic released a statement “congratulating” the state’s regulated gaming industry on its record revenues reported for the 2022-23 fiscal year that ended on June 30.

“While the lottery and casinos continue to enjoy success year after year, they lob attacks against skill games,” said Mike Barley, chief public affairs officer for Pace-O-Matic. “This, even though there is no proof skill games impact either’s bottom line. Clearly, we are not competition for them, and any assertion that we are is either misguided or intentionally misleading.

“How often do industries come to the legislature asking to be regulated?” added Barley. “Not often, yet that’s exactly what we are doing.

“We are asking lawmakers to look past this harmful narrative spun by the lottery and casinos — that is not backed by facts — and support small businesses by passing commonsense regulation on skill games.”

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