Area state legislators weigh in on skill games

May 19—WILKES-BARRE — State Rep. Eddie Day Pashinski this week said there was a time when Pennsylvania restricted casinos and gambling and the state lost billions of Pennsylvania dollars to New Jersey.

"Gambling, drinking, smoking, are a part of our lives — like it or not," said Pashinski, D-Wilkes-Barre. "Therefore let's fairly regulate it. Make sure this industry gives the players a fair shot to win and create a fair return on the peoples investment — back to the people in property tax reductions and improvement grants for countless needs."

The issue of legalizing, regulating and taxing skill games is a hot topic, for sure. Area legislators — those who were willing to offer comments — delineated their thoughts on how the issue should be handled.

Offering comments were: Pashinski, D-Wilkes-Barre; Rep. Jim Haddock, D-Pittston Township; Rep. Mike Cabell, R-Butler Township; Rep. Aaron Kaufer, R-Kingston; and Sen. Marty Flynn, D-Scranton.

Sen. Lisa Baker, R-Lehman Township, declined comment because she said she expects the issue will be part of the overall budget negotiations. Rep. Alec Ryncavage, R-Plymouth, also did not respond.

In Gov. Shapiro's proposed budget

According to City & State Pennsylvania, a multimedia news organization that dedicates its coverage to Pennsylvania's state and local government, including all things politics and public policy:

—Shapiro's budget proposal factors in estimated revenue from the potential legalization of so-called games of skill, which are video gaming machines that currently fall into a legal gray area, as courts have ruled the games currently fall outside of the Pennsylvania Gaming Control Board's purview.

—Revenue estimates from the Shapiro administration suggest that a 42% tax on daily revenue from skill games could generate $150 million in revenue in the 2024-25 fiscal year. The estimate assumes the new framework and tax would begin on July 1, 2024.

—The legalization of skill games is an issue that has generated bipartisan support in the General Assembly, and there could be a willingness in the legislature for regulating the games.

The Legislators

Rep. Haddock said there are many makers of skill games, or closely similar games. He said at least two majority manufacturers have been adjudicated in court to say they are currently legal.

"However, many other manufacturers have machines that are not legal," Haddock said. "These games are flooding our state. This issue is growing exponentially daily — by some estimates we have between 60,000 to 300,000 machines in the state."

This question is of regulation is not new to the state. He said Pennsylvania's history shows there were "one-armed bandits and joker poker" type machines.

"Eventually the state regulated these machines," Haddock said. "Modern day skill games are different — they are just a different type of devices for gambling. Cash-in for cash-out is gambling."

Regarding taxation, Haddock said all other forms of gambling in Pennsylvania are taxed and regulated. He said some of this money is then used for gambling education and treatment.

"The money from regulation of gambling has been used for a host of other good programs and issues for people of the state — from tax relief, senior programs to economic development grants for cities, towns, townships and a host of non-profit organizations," Haddock said. "Unregulated gaming machines and the problems connected to them must be addressed."

Haddock said some people in Harrisburg would like to see skill games banned.

"I know the cut from skill games helps to support VFWs, American Legions, volunteer fire companies and other fraternal groups and as such, I will not vote to eliminate them," he said.

Rep. Pashinski said he always looks for balance and fairness to help guide his decisions when possible.

"I believe skill games play a roll in our social structure, but I expect the operation of those machines must be regulated to give the players a fair shot to win and that those machines contribute in a similar fashion like our casino operations," Pashinski said.

He also said the amount to be taxed can be negotiated and a decision can be made once all the numbers have been verified.

"I also believe the Gaming Board should oversee these machines," Pashinski said. "They are the experts, they understand the operation, the system, the process and they have over 20 years of experience managing this highly successful business, making the Gaming Board an obvious choice to evaluate and incorporate the appropriate regulations and procedures to provide a profitable system for the benefit of the business, the state and the people."

Pashinski said skill games do not contribute any money to property tax relief like casinos do, they do not contribute to compulsive and problem gambling programs and they do not pay a Local Share Assessment of their revenue like casinos do.

"These dollars have improved the lives of millions of Pennsylvanians and taxing and regulating our skill games will provide new dollars for mental health, compulsive gambling, property tax reductions and countless other need in our commonwealth," he said.

Rep. Cabell said skill games remain a complex topic, including how they impact other gaming revenues and the determination of a tax structure.

"Legislators need to take a balanced approach in debating and determining the legislative solution to this matter," Cabell said.

In 2023, Cabell said the Commonwealth Court of Pennsylvania ruled that skill games do not constitute illegal gambling — agreeing with a lower court decision. He said the Supreme Court of Pennsylvania declined to review a decision that allows skill games.

"Should they be regulated? Should they be taxed? These are both questions that members of the General Assembly can introduce and pass legislation to determine," Cabell said.

Cabell said his colleagues have introduced several legislative proposals addressing this issue, including:

—SB 706 (Yaw) would regulate and establish an additional tax on skill video games in Pennsylvania. The bill is before the Senate Community, Economic and Recreational Development Committee (May 26, 2023).

—SB 969 (Cappelletti) would add "skill games" to the list of illegal gambling devices, thereby outlawing their use throughout the commonwealth. The bill is before the Senate Judiciary Committee (Nov. 16, 2023).

—HB 2075 would levy a 16% tax on skill video games and place skill games under the Department of Revenue's oversight. The bill is before the House Gaming Oversight Committee (Feb. 28, 2024).

—HB 2042 (Dunbar) would regulate and establish an additional tax on skill video games in Pennsylvania to mirror those imposed upon VGTs. The bill is before the House Gaming Oversight Committee (Feb. 20, 2024).

—SB 1142 would create a gaming license for establishments that serve alcohol and allow for casino slot machines, VGTs or skill games to be placed into these establishments. The bill will also license, regulate and tax skill games. . The bill is before the Senate Community, Economic and Recreational Development Committee (April 5, 2024).

Meanwhile, during his budget proposal unveiling, Cabell said Gov. Shapiro proposed a 42% tax on skilled games.

Cabell said oversight is also a complex question.

"At this time, the answer is an unknown — some wish for Department of Revenue to have oversight, while others wish to provide that authority to the PA Gaming Control Board," Cabell said. "This is, again, an issue that will be debated and deliberated upon by legislators."

Cabell said there is no uniform or agreed upon avenue to take in overseeing, regulating, or taxing the skill game industry.

"I look forward to having the opportunity to deliberate upon this complex issue in the weeks and months ahead," Cabell said.

Sen. Flynn said he believes skill games should be subject to taxation, regulation, and oversight to ensure responsible operation and protect consumers.

"Especially considering the current scenario where this industry operates as an untaxed black market, estimated at around 1 billion dollars a year" Flynn said. "While they can remain legal, their impact on society should be carefully considered. Regulation is essential to maintain fairness and transparency, while taxation can generate revenue and deter harmful behavior."

Flynn said oversight should involve government agencies and industry stakeholders collaborating to address evolving challenges and promote responsible gaming.

Rep. Kaufer said issues surrounding skill games are very complex and nuanced.

"These games have been discussed for many years while still being out in our community," Kaufer said. "This discussion requires a great deal of contemplation including the regulating entity, what the tax rate will be, where they can be located, who will enforce the law, and what can be done to enhance destination gaming along with such a package of legislation.

"There are varying degrees of legislation out there that require a great deal more of consensus building."

Reach Bill O'Boyle at 570-991-6118 or on Twitter @TLBillOBoyle.