PENNSYLVANIA — The Pennsylvania Supreme Court ruled that skill games are classified as slot machines under state law. Law enforcement is prohibited from taking action against skill game operators for 120 days following the ruling, providing the General Assembly time to pass legislation. If no legislation is passed, law enforcement may seize the devices. The state Independent Fiscal Office stated that taxing skill games under a regulatory framework could generate more than $1 billion in annual revenue.

The state court ruled concurrently on two separate cases regarding the legal classification of skill games. The machines currently operate in taverns, gas stations, and corner stores across the state, with an estimated 70,000 devices in operation. The court added, "Naturally, because all that follows is a consequence of statutory law, our General Assembly also remains free at any time to take whatever legislative action it may deem appropriate."

Pace-O-Matic, a skill game developer, filed a lawsuit against the state to determine the legality of the machines. "We are disappointed with the decision and strongly believe the ruling does not accurately reflect the facts presented." Pace-O-Matic said.

Governor Josh Shapiro is reviewing the court's decision. His proposed budget would set the tax rate on skill game revenue at 52 percent, compared to the 55 percent rate currently applied to electronic games and casino slot machines in Pennsylvania. State Senate Republican leaders previously introduced a proposal for a 35 percent tax rate on skill games and reiterated their support for that approach.

The Office of Attorney General argued that the element of skill in the games does not exempt them from state gambling laws. The office also argued that skill game machines operate as unlicensed and unregulated slot machines. The Dauphin County Court of Common Pleas and the Commonwealth Court previously determined that the machines are skill-based and exempt from slot machine regulations. Skill game machines allow players to wager in increments as low as 25 or 50 cents per play. The machines also feature a follow-the-pattern mini-game that appears after a losing spin to allow players to recover losses. Penn State researchers estimate that approximately 11 percent of adults in the state have played a skill game, and 2.5 percent to 6.4 percent of adults could be problem gamblers.