Pennsylvania Supreme Court’s to Decide on Whether Cash-Paying Electronic Game Terminals Constitute Unlicensed Gambling Machines

Key Points of the Case:

1. Nature of the Machines:
   • Skill vs. Chance: The crux of the legal debate is whether these machines are based predominantly on skill or chance. Skill game proponents argue that players can influence the outcome through memory challenges, distinguishing them from slot machines. Opponents, including the state attorney general’s office, contend that the skill element is minimal and these machines function essentially as gambling devices.
2. Legal and Economic Impact:
   • Revenue and Regulation: The Pennsylvania Lottery and casinos argue that skill games siphon off revenue without being subject to the high taxes imposed on licensed gambling entities. Casinos face a 54% tax on slot machine revenue, whereas skill games currently operate tax-free.
   • Market Proliferation: The American Gaming Association estimates that there are at least 67,000 skill game terminals in Pennsylvania, highlighting their extensive presence and economic impact on traditional gambling revenue streams.
3. Legislative Context:
   • Pending Legislation: There are ongoing legislative efforts to either ban or regulate these skill games. The industry itself is pushing for regulation to legitimize their operations and protect against seizures.
   • Public Policy Debate: The argument extends beyond the courts, with some legislators viewing the future of skill games as a matter for the General Assembly rather than judicial interpretation.
4. Court’s Considerations:
   • Definition and Characteristics: The Supreme Court will examine whether the inclusion of a skill element in these machines disqualifies them from being considered illegal gambling devices under Pennsylvania law. This includes assessing how “slot machines” should be legally defined and whether the skill component in these terminals is substantive or negligible.
5. Economic and Social Implications:
   • Business Impact: Bars and restaurants argue that these machines have been crucial for business survival, particularly post-pandemic. The outcome of the court case could significantly affect their revenue models and operational viability.

The decision by the Pennsylvania Supreme Court will not only resolve a critical legal question but also set a precedent with wide-reaching implications for the regulation of gambling and the future of the skill game industry in Pennsylvania and potentially other states facing similar issues.