The Impact of Unregulated Skill Games on PA's Gambling Industry

caleb tallman
Caleb Tallman


  • Unregulated skill games pose challenges to Pennsylvania's gambling sector, prompting calls for effective regulation and taxation.
  • Policymakers grapple with divergent legislative approaches while considering industry stakeholders' perspectives.
  • Philadelphia's ban on skill games underscores the complexities of regulating this segment of the gambling market.

The growing popularity of unregulated skill games poses an immediate threat to the flourishing gambling market in Pennsylvania, which justifies a closer investigation of the matter. Frank Gamrat, as noted above, provides valuable viewpoints that can aid in understanding the necessity of an urgent solution to maintain the industry's image and longevity. The current study reveals that the complexities of skill games are concerning for policymakers and industry players, necessitating a successful resolution of the issue.

The Controversy Surrounding Skill Games

Skill games present a major point of contention on the Pennsylvania gambling scene. They are currently subjected to heavy scrutiny by the Governor and other stakeholders in the industry due to growing concerns over consumer protection, fair competition, and their impact on traditional casinos. In a libertarian approach to economic development, the lobbying effort seeks to limit the development of a regulatory regime because players should be left to choose what they want to play.

Pennsylvania is in a regulatory dilemma because the current guidelines create a regulatory vacuum. The long-term effects of allowing unregulated activity in the state’s unregulated gambling market are also uncertain. Therefore, Pennsylvania's biggest challenge is its ability to strike the perfect balance that will encourage innovation without presenting too much risk.

Assessing the Impact of Skill Games

Frank Gamrat’s findings help illuminate the situation regarding skill games’ rapid spread throughout Pennsylvania, with an estimated 15,000 machines operating in the state. In the past, implementation would often require years. Still, the current situation raises concerns of a real financial risk to traditional casinos if over a third of the newly introduced machines can take business from retail slot machines. With Pennsylvania’s population declining in certain areas, revenue prospects for the state’s gambling industry are further clouded by demographic shifts. 
It demonstrates the necessity of a proactive approach towards threats to the gambling industry and its economic benefits. However, there is no doubt that the industry remains one of the most economically important for the state after reaching revenue of over $5.7 billion just last year. Slot machines are responsible for substantial wins, indicating the need for detailed foresight and planning to achieve a responsible transition.

Push for Regulation and Taxation

Governor Shapiro and other policymakers have responded to the rise of skill games by proposing to regulate and tax them. Such actions reflect a growing understanding within the state administration that this specific segment of the gambling industry may require regulatory oversight and become another source of revenue. The concerns regarding consumer protection, the fairness of winnings, and possible losses of taxable revenues to unregulated participants may be addressed through regulation.

However, there are multiple challenges on the path to meaningful regulation. First, there is a need to incorporate various stakeholders’ interests that may sometimes contradict. For example, skill game manufacturers and long-time land-based PA casinos have presented different claims over how strict the regulation should be. While some insist on rigorous controls to ensure fair gambling and consumer protection, others warn against stifling the industry through excess regulation. Policymakers must navigate these interests and promote responsible gambling practices while maintaining the competitive landscape.

Divergent Legislative Approaches

Governor Shapiro and Senator Gene Yaw introduced legislation to regulate and tax skill games, but their bills demonstrate differences in scope and nature. Although both bills intend to create a regulatory framework for skill games, they demonstrate distinctions in the level of taxation, a need for licensing, and the enforcement mechanism. Governor Shapiro’s proposal aims to protect consumers while generating revenues for the state. In contrast, Yaw’s bill focuses on minimizing the proliferation of skill games and optimizing the current situation for established casinos.

Such variations in legislative proposals illustrate the broader debate in the gambling industry regarding the need for government regulation. One viewpoint argues that a looser, organically determined policy might better allow the market to settle on an optimal outcome. The opposite position is rooted in the idea that active government intervention is needed to prevent the worst possible outcomes in extreme situations. Therefore, the effectiveness of contemporary regulation depends on the ability to find the balance.

Industry Response and Perspectives

Meanwhile, industry stakeholders hold diverse opinions on the regulation of skill games. Manufacturers such as Pace-O-Matic have supported a regulatory framework to establish a stable market that encourages fair competition and protects consumers from unscrupulous developers. Other industry stakeholders have raised various concerns regarding the potential impact of regulation. In particular, traditional casinos have been wary of multiple-skill games, raising concerns about the loss of profits and the alleged damage to the industry’s reputation.

They cite the former as a reason to oppose skill game development, as it threatens revenue levels. The latter has been framed as an ethical issue, claiming that unregulated developers will ignore the social responsibility practices required of traditional casinos. As such, policymakers have a difficult mission if they wish to satisfy all stakeholders. The regulatory policy should allow for innovation while ensuring it does not endanger the public good.

Philadelphia's Stance on Skill Games

The Philadelphia City Council recently decided to ban skill games on the city's territory. Philadelphia was not the only city in the state or the country to enforce such a ban; however, the backdrop of other skill gaming segments makes the situation much different for the policymakers. The ban was implemented to control the potential harm from problem gambling by restricting the installation of skill games in corner stores and gas stations.

Numerous complaints about the games and the harm they cause to the community preceded the decision. It was also followed by legal disputes and lawsuits, as the ban was deemed to violate the rights of the industry player Pace-O-Matic. This example demonstrates the difficulty of regulating skill gaming for policymakers who need to consider the interests of multiple game participants.

The Path Forward

The regulation of skill games remains a major concern in Pennsylvania gambling industry, with the operators engaging in court battles to challenge the rules established by the state. In this regard, policymakers should respond swiftly and make critical decisions that will determine the future of gambling in the state. Comprehensive regulation should consider fair and responsible gambling, consumer protection, and revenue generation.

Furthermore, consultation with the industry, research, and critical evaluation of the possible impact of given regulation can ensure a regulatory framework supports responsible gambling and creates a fair admiration for gambling activities in the state. Skill games have become one of the most significant segments of the gambling industry in Pennsylvania, and their dynamics have been projected to drive more revenue in the coming years.

Therefore, a balance should be sought between promoting innovative gambling activities and protecting the consumers’ interest from the predatory behavior of operators. Proper regulation and taxation will significantly benefit the state and all players involved.

A huge sports fan; locally, many know me as the guy who does the PA for our high school football team on Friday nights. Having grown up in Michigan, I am a sports fan of all the Detroit teams, and at the college level, I love Michigan State sports. I have covered sports betting, iGaming and casino industry news for many well known websites.