Pennsylvania Skill Games Ruled Slot Machines, Sending a Billion-Dollar Tax Fight to the Capitol

The Pennsylvania Supreme Court ruled on Monday, June 15, 2026, that the "skill games" scattered across the commonwealth's bars, clubs and convenience stores are slot machines under state law and must follow Pennsylvania's gambling and crimes codes. The court wrote that skill games "are slot machines under Pennsylvania law and must adhere to the commonwealth's crime and gambling statutes," and called the question "a matter of public safety which must be addressed." The decision attached a 120-day window during which law enforcement cannot act, handing the General Assembly a four-month deadline to write a regulatory framework.

The justices consolidated two cases that traced back to a 2019 dispute involving a bar and an equipment supplier. Both lower courts, the Dauphin County Court of Common Pleas and the Commonwealth Court, had found the machines were skill-based and not gambling. The Supreme Court called the Commonwealth Court's reading "deeply flawed" and "incorrect on both points," holding that the terminals fit the statutory definition of "a coin-operated gambling machine that pays off according to the matching of symbols." If lawmakers do nothing before the clock runs, the roughly 70,000 skill-game terminals operating statewide would have to be confined to licensed venues such as casinos. Pace-O-Matic, the games' developer and a plaintiff, said it was disappointed and that the ruling would carry "far-reaching consequences" for small businesses and fraternal organizations, leaving them "an impossible choice: cease operating these games and lose an important source of revenue, or endure a legislative solution that could bring excessive regulation and crippling taxation." The company urged lawmakers to adopt a bipartisan plan charging a $500 fee per machine that would not restrict the terminals to casinos.

The rate is the whole fight

State Rep. Ben Waxman (D., Philadelphia) called regulating the terminals "the potential largest expansion of gambling in Pennsylvania history since the casinos." The competing proposals on the table span a wide band, and the rate decides how much the commonwealth captures.

Shapiro pitched the 52% rate, close to the roughly 54% to 55% levied on casino slots, estimating $369 million in the first year. His broader budget plan counts on nearly $766 million from regulating and taxing the machines, and his administration has said a fully built-out market of up to 40,000 devices could generate more than $2 billion a year. "Everyone knows we need to get this done," Shapiro said in his budget address. "So let's come together and finally get it over the finish line." He has noted that prosecutors across the state pushed for regulation.

The Independent Fiscal Office sized the same question independently. Assuming a combined 40,000-terminal cap covering both skill games and existing video gaming terminals, the IFO projected more than $1.1 billion in tax revenue in the 2027 to 2028 budget year, rising past $1.24 billion three years later, at roughly $58,000 per terminal in the first year. The IFO also broke down who pays: about $905 million would fall on terminal owners, route operators and host establishments, while roughly $370 million would pass to players and patrons through reduced payouts and higher food and drink prices.

Why the licensed market is watching

Pennsylvania already runs one of the largest regulated gaming markets in the US, and the licensed side keeps setting records. May 2026 gaming revenue hit $625.4 million, up 3.9% year on year and the highest monthly total in the state's gaming era, edging the prior $623.1 million record from May 2025. iGaming led at $254.8 million (up 9.4%), slots brought $232 million (up 3.2%), and sports betting produced $52.6 million in revenue on $595.5 million in handle. Tax collections for the month reached $270 million. Hollywood Casino at Penn National topped operators at $115.4 million, up 7.8%.

The licensed casinos have argued for years that untaxed terminals siphon play from their heavily taxed slots. Twelve casinos sued to force the state to tax skill games at the same roughly 54% rate applied to casino slots, and the Pennsylvania Lottery estimates it has lost about $200 million over five years to the machines. Citizens analysts Jorden Bender and Isabelle Slavin named Penn Entertainment as the operator "best situated to benefit from the absence of skill games," citing its four Pennsylvania casinos (Hollywood Casino at Penn National in Grantville, Hollywood Casino York, Hollywood Casino at The Meadows and Hollywood Casino Morgantown) and its iGaming footprint, with Boyd Gaming and Churchill Downs gaining to a lesser extent and online brands such as DraftKings, FanDuel and BetMGM seeing secondary benefit.

There is a direct precedent for how a regulated rollout performs. Act 42 of 2017 legalized video gaming terminals at diesel truck stops, taxed them at 52% of gross revenue and placed them under Pennsylvania Gaming Control Board rules substantively identical to casino slots. By the close of fiscal 2024 to 2025 that program ran 375 terminals across 75 truck stops, generated $41.4 million in revenue and returned $21.5 million in tax. The VGT framework set the structure first and negotiated the rate separately, the same path skill games now face. For operators and the affiliates working Pennsylvania, the unlicensed competitor to regulated slots is now on a 120-day clock, and whether it converts into compliant supply or gets pushed toward casinos depends on the rate the legislature settles. The same enforcement pressure is bearing down on sweepstakes casinos.