Pennsylvania’s gambling landscape is undergoing significant scrutiny as lawmakers grapple with regulating the widespread use of “skill games” — slot-like machines found in bars, convenience stores, and other establishments that are designed to involve a degree of player skill. The rapid proliferation of these machines has polarized lawmakers at a time when regulated online casinos contribute over $100M/month in tax revenue.
The Skill Games Debate: Three Diverging Proposals
There are currently three separate proposal for how to regulate the over 50,000 skill game machines that exist in bars and restaurants across the Keystone State.
The first proposal comes from Governor Josh Shapiro, who is seeking a 52% tax on skill game revenues, closely mirroring the 54% tax applied to traditional slot machines. He argues that the widespread, untaxed operation of skill games is siphoning money away from critical programs like the Pennsylvania Lottery, which funds senior services.
The second proposal comes from Senator Chris Gebhard, who has introduced a bill that suggests a 35% tax rate. His proposal includes licensing fees—$50,000 for manufacturers and $250 per machine for host venues—and calls for the Pennsylvania Gaming Control Board to oversee regulation. The bill would also restrict skill games to locations with liquor licenses or lottery sales.
The third proposal by Senator Gene Yaw advocates for a more lenient 16% tax and places regulatory authority under the Department of Revenue. Yaw’s plan aims to protect the accessibility of skill games in small businesses and community spaces, reflecting his concern for the impact of higher taxes on local economies. In a statemnt, Yaw said:
“These machines aren’t funding corporate bonuses; they’re paying light bills and keeping part-time staff employed,” argues a supporter from the Pennsylvania Tavern Association. “A 52% tax is a death warrant.”
Online Casinos: A Revenue Powerhouse
The state’s online gambling sector has experienced rapid and unprecedented growth, significantly contributing to public finances. In March 2025 alone, online casino operators generated $238.2 million in revenue, resulting in $106.3 million in state tax revenue. April followed closely, with $227.7 million in revenue, marking a 31.3% year-over-year increase.
This continued surge in iGaming revenue highlights the economic benefits of a tightly regulated and taxed system. State officials have pointed to this success as a model for how gambling—when properly overseen—can support public services and infrastructure while providing a safe environment for consumers.
Industry and Community Reactions to Proposed Skill Game Taxes
These differing proposals have generated varied responses among key stakeholders. Casino operators are pressing for tougher regulations on skill games, arguing that the current lack of oversight creates unfair competition and undercuts the investments they have made in licensed gaming operations.
On the other hand, small business owners worry that steep taxes could threaten a vital revenue stream, especially in rural areas where skill games have become a reliable supplement to traditional business income. Manufacturers such as Pace-O-Matic, which designs and distributes many of these machines, have expressed support for regulation in principle but caution that high tax rates could jeopardize the industry’s viability.
With Pennsylvania’s fiscal year deadline of July 1 approaching, the path forward for regulating skill games remains uncertain. The legislature faces mounting pressure to resolve the issue, balancing the interests of large casinos, small businesses, and the state treasury.
The outcome will not only shape Pennsylvania’s fiscal future but could also serve as a model for how other states integrate emerging gaming technologies into established regulatory systems. As the debate intensifies, lawmakers must weigh the benefits of taxation and oversight against the risk of stifling a growing sector that many Pennsylvanians enjoy.
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