Pennsylvania casinos are cutting slot inventory over poor performance, with one placing blame on the unregulated skill game machines found in convenience stores and gas stations. Rivers Pittsburg received permission from the Pennsylvania Gaming Control Board (PGCB) to remove 302 slots from its casino floor. While it acknowledged the need for newer machines, the casino put most of the blame on the widespread availability of skill games, which it says are just unregulated slots.
A recent policy brief by the Allegheny Institute for Public Policy (AIPP) backs the casinos’ allegations. The AIPP argues that the proliferation of skill games could threaten casinos’ revenues. The AIPP is a non-profit research and education organization that aims to defend taxpayers’ interests.
Several PA Casinos Have Removed Slots In the Past Year
While several casinos have taken similar steps, Rivers Pittsburg’s removal of 302 machines is the state’s most drastic scaling-back of slots so far, according to PlayPennsylvania. Last July, Harrah’s Philadelphia reduced its slots count by 150. The following month, two mini-casinos—Hollywood Casino Morgantown and Lady Luck Nemacolin—removed a combined 49 slots.
Rivers isn’t the first operator to blame the skill games industry. Mohegan Sun made the same accusation when it removed 120 slots in September, saying it was a direct result of cannibalization by skill games.
Speaking to the PGCB, Rivers Pittsburgh’s attorney, John Donnelly, argued that casinos and skill games aren’t the same in their impact. He said adding a commercial casino benefits a neighborhood by creating jobs and capital. Skill game machines, he said, do none of that.
Let’s be crystal clear. Those so-called skill slot machines are slot machines. They are defined under the Gaming Act in Pennsylvania dead on as a slot machine, which should be regulated by this board. It walks, quacks and waddles like a duck. They’re ducks.
According to Donnelly, the company’s Virginia property, Rivers Casino Portsmouth, illustrates the opposite effect. Since the Virginia Supreme Court upheld a ban on skill games last November, the Rivers casino saw monthly slot revenue increase to $19 million from an average of $14 to $15 million before the ban.
Skill Game Manufacturer Disagrees
Pace-O-Matic, a leading manufacturer of skill games, disagrees that there’s a problem, let alone that its machines are to blame.
In February, the company’s Chief Public Affairs Officer, Michael Barley, noted that Pennsylvania casinos earned $5.7 billion in revenue last year, up 9.3% from 2022. He added that slot revenue in January was 4.1% higher than the prior year.
The casino industry continues to attack skill games for loss of revenue, yet these losses don’t seem to appear in any of their reporting. While they spin misleading information, we will stick to the facts. The fact is, that skill games are a legal source of income that Pennsylvania’s small businesses rely on every day to make ends meet.
Pace-O-Matic has received support from small businesses that depend on revenue from its machines. The company and its supporters have backed multiple pushes for regulation in the state’s legislature. However, none of those attempts has yet borne fruit.
Lawmakers Are Divided Regarding Skill Games
Pennsylvania’s retail casinos aren’t the only ones experiencing a slowdown. Even Nevada and New Jersey—states almost synonymous with gambling—have been feeling it. Definitively attributing the pinch to any particular cause is harder.
However, the fact is that the skill machines are currently a gray area in Pennsylvania’s laws. In December, an Appellate Court ruled that Pace-O-Matic machines are not gambling devices. Further, the Pennsylvania Supreme Court declined to hear an appeal from state authorities defending a seizure of the games, allowing the machines to operate. These rulings have put pressure on lawmakers to make a decision.
Small business organizations, Pace-O-Matic, and pro-regulation lawmakers want to legalize and regulate skill games. They argue that the machines have become essential to the local economy. Gov. Josh Shapiro is among the political figures in this camp. His annual budget proposal included regulations for machines with a 42% tax, lower than the rates for slots and video gaming terminals.
On the other side of the debate are lawmakers and the casino industry who want to ban the machines. Last year, Sen. Amanda Cappelletti and Rep. Mark Rozzi tried but failed to pass a bill to outlaw skill game terminals. In January, in a petition to the state’s Supreme Court, Pennsylvania Attorney General Michelle Henry supports a ban. She says that the courts have taken an overly narrow interpretation of the definition of a slot machine.
While the state legislature remains deadlocked, some local lawmakers have taken independent action. Days after the Supreme Court allowed the skill games to operate, the Philadelphia City Council banned skill games inside gas stations and convenience stores. As expected, skill game manufacturers and operators responded with a lawsuit.
Time will tell whichever side prevails, but clarity one way or the other will be better for the state than the current gray market situation.
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