Recent Study Shows Pennsylvania Losing Millions to Unregulated Betting Machines

Derek Blake pic
Derek Blake

The American Gaming Association’s recent study into the damage created by unregulated betting machines estimates that Pennsylvania houses roughly 67,000 illegal machines across the state. The unregulated machines costs Pennsylvania untold millions in lost taxes annually.

The November 2022 report, titled “Sizing the Illegal and Unregulated Gaming Markets in the United States” estimates that the American government lost roughly $13.3 billion in uncollected taxes in 2021 due to illegal and unregulated betting machines and table games.

Unregulated Machines Creates Gray Market in Pennsylvania

Legally, unregulated betting machines, such as the video gaming devices found in countless bars, restaurants, and truck stops across Pennsylvania, have created a legislative headache for state lawmakers.

While state judges have ruled that the machines involve skill, therefore making them technically legal in the eyes of Pennsylvania law, the casino industry has fought to regulate the machines to protect their business interests. The state legislature has joined the casino industry in this fight for regulation due to the millions in lost taxes.

Regulation with regard to Pennsylvania sports betting and casino games reap millions of dollars for the state to fund education and other administrative necessities for the state.

However, recent attempts by Pennsylvania law enforcement to seize the machines have been met with pushback by the company Pace-O-Matic, one of the largest producers of unregulated gaming machines.

A recent seizure in Clearfield County resulted in a lawsuit by Pace-O-Matic against the District Attorney Ryan Sayers. But after the company’s challenge and haggling over the legality of the unregulated machines, DA Sayers agreed to return the money and machines collected in the seizure.

Report Estimates Each Machine Brings in $50,000 Annually

Perhaps the most eye-opening nugget dropped in the AGA’s report is the estimation that each unregulated machine brings in $50,000 in revenue annually to the business hosting the device. 

One of the biggest downfalls of playing an unregulated machine comes with the hold percentage, meaning how much money it keeps against the amount played over time. With casino slot machines, players can expect a hold of roughly 10%, but unregulated machines hold roughly two and one-half times that amount. An unregulated machine can carry a 25% hold rate, making it tough for players to do anything but lose on the gaming devices.

In a press release that accompanied the report, AGA President and CEO Bill Miller said, “All stakeholders—policymakers, law enforcement, regulators, legal businesses—must work together to root out the illegal and unregulated gambling market. This is a fight we’re in for the long haul to protect consumers, support communities and defend the law-abiding members of our industry.”

Derek Blake is a freelance writer that has covered the expansion of legal sports betting in America and the regional casino business for several well-known industry websites. During his writing career, he has written profiles on dozens of athletes and focused on the collision of sports and politics.