Pennsylvania’s highest court has reversed two lower court rulings that had allowed skill game devices to operate in a legal grey area outside gambling regulation.
The Supreme Court of Pennsylvania has ruled that so-called skill game devices – machines resembling slot machines found in bars, convenience stores, laundromats and pizza parlours across the state – are illegal under both the state’s Gaming Act and its Crimes Code.
The ruling, handed down yesterday (15 June) and written by Justice Wecht, reverses two previous Commonwealth Court decisions that had placed the devices beyond the reach of gambling regulators and law enforcement, allowing them to proliferate in thousands of unlicensed venues statewide.
However, the court said law enforcement cannot take effect for 120 days, giving the legislature a four-month window to regulate the machines if it chooses to do so.
The Commonwealth Court’s reasoning was found to be “deeply flawed”, with the supreme court concluding that a plain reading of existing law brings skill games squarely within the definition of a slot machine – and that their unlicensed operation has been unlawful for years.
Central to the ruling is a 2017 amendment to the Gaming Act that added the terms “skill slot machine” and “hybrid slot machine” to the statutory definition of a slot machine – meaning that whether a game’s outcome is determined by skill, chance or a combination of both is legally irrelevant.
Industry built on flawed legal foundations
The court was clear that it was not making new law. Justice Wecht said: “It is not this court that declares ‘skill games’ to be unlawful. Rather, it is the General Assembly that did so nearly a decade ago.”
The device at the centre of both cases, the Pennsylvania Skill Amusement Device – distributed by POM of Pennsylvania – features spinning reels and a secondary memory-based feature called “Follow Me,” which operators argued introduced a sufficient skill element to remove the machines from gambling regulation.
The court dismissed this, finding it made no difference to the device’s classification as a slot machine.
The ruling acknowledged that many operators had acted in good faith, relying on the earlier court decisions and assurances from device manufacturers.
Accordingly, the court imposed the 120-day stay on its order, during which no enforcement action may be taken against owners or operators.
Operators set for uplift in either path
Analysts Jordan Bender and Isabelle Slavin as Citizens highlighted previous estimates that there are between 70,000 and 100,000 skill-based gaming units state-wide and that they directly compete with land-based casinos.
Pointing to previous precedents in Kentucky and Virginia, they said removal of the units from Pennsylvania could generate a 10-15% uplift in win per unit per day for licensed operators, with Penn Entertainment most likely to benefit, followed by Boyd Gaming and Churchill Downs.
Online operators could also be beneficiaries as some players may migrate to online slots options in the absence of skill-based slot machines.
However, if Pennsylvania chooses instead to legalise and regulate the sector, skill-based operators like Accel Entertainment could move to establish a more meaningful presence in the state and land-based operators might opt to take part in the market.
The analysts said: “Prior legislative proposals in other states have included restrictions on machine placement, including distance requirements from religious institutions and existing casinos.
“As a result, legalisation would likely reduce the number of machines currently operating in the state. While such an outcome would be less favourable for traditional casino operators than outright removal, it could still provide a modest benefit to EBITDA relative to the status quo.”
