The gaming landscape in Pennsylvania is at a crossroads. With a critical deadline looming, lawmakers are scrambling to regulate skill games before the state Supreme Court’s October 13, 2026, deadline. The outcome will shape the future of these games, impact small businesses, and influence property tax relief for homeowners.
At the heart of the debate is a push to modernize Pennsylvania’s gaming laws, which many argue are outdated. Representative Russ Diamond (R-Lebanon) is leading the charge with two proposed bills aimed at legalizing and regulating skill games, while also providing substantial property tax relief.
Proposed Legislation and Its Impact
Diamond’s legislation proposes a 20% tax rate on skill games, with up to five machines allowed in specific venues such as clubs, liquor-licensed restaurants, bars, and qualified truck stops. The bills also aim to reduce the tax rate for casino-based slot machines to 49.9% and set a uniform rate for online casino games.
The proposed legislation goes beyond taxation. It includes a formula to maximize property tax relief, fund the Race Horse Development Trust Fund, double support for compulsive and problem gambling treatment, and maintain revenue for the state’s General Fund. Notably, Diamond’s plan would deliver property tax relief through direct annual gaming dividend payments to qualified homeowners, a departure from the traditional homestead/farmstead exclusion method.
“Every time I talk about property taxes, people complain about not seeing the relief from casinos promised by politicians more than 20 years ago,” Diamond said. “This set of bills will increase property tax relief for 96% of Pennsylvania’s homeowners and deliver it directly into their hands.”
The Stakes for Small Businesses
For small businesses and social clubs, the legalization of skill games is a matter of survival. Shawn Anderson, president of the Ancient Order of Hibernians Division #39 in Tacony, highlights the financial strain his organization faces. The revenue from skill game terminals, ranging from $500 to $2,000 monthly, is crucial for keeping the lights on and supporting charitable activities.
“It’s probably between $500 and $2,000, depending on the month. For us, it’s a lot,” Anderson said. “Whether it’s $100, $200, $1,000, that money every month allows us to keep our building open. It allows us to help feed all the families during the holidays. It really helps us keep going.”
The state Supreme Court’s ruling in June declared the estimated 70,000 skill game terminals in use around Pennsylvania illegal under state law. The legislature has until October 13, 2026, to create a regulatory framework. If lawmakers fail to act, these terminals must be turned off and could be seized by state police.
The Debate Over Tax Rates
The debate over skill game regulation has pitted game manufacturers against casino interests. Pace-O-Matic, a Georgia company that produces many of the games used in Pennsylvania, advocates for bills sponsored by state Sens. Anthony Williams (D-Philadelphia) and Gene Yaw (R-Lycoming), and state Reps. Danilo Burgos (D-Philadelphia) and Rep. Jonathan Fritz (R-Susquehanna/Wayne). These bills propose a monthly, $500 per-terminal fee, which sponsors say would generate $300 million for the state in its first year.
Governor Josh Shapiro has proposed a 52% tax rate on the devices, close to the 55% rate for casino slot machines. Senate Republican leaders have backed a 35% rate, while Yaw has separately sponsored legislation imposing a 16% tax rate. The differing proposals reflect the complex interplay of economic interests and political priorities.
Game manufacturers argue that skill games do not threaten casino revenues. “We’re not taking money from the casinos,” said Jeff Millay, chief operating officer at Miele, which builds machines for Pace-O-Matic. “We’re getting the guy that just got done working at the factory, who wants to stop by his local bar and have a beer. He wants to have a little bit of entertainment, so he puts a $20 bill in a machine and gets to have a little bit of fun. He’s not going to the casino.”
The Broader Implications
The gaming terminals have also been an issue in annual state budget negotiations. Shapiro has sought to increase funding for priorities like public schools and transit agencies through new taxes on skill games and legalized marijuana. Republican leaders have accused him of overspending and rejected his proposals.
Shapiro wants to put the devices under the state’s existing rules on video gaming terminals, capping their number at 40,000 and limiting establishments to five machines. However, some of his allies have argued that the devices should remain illegal or their use highly restricted, citing concerns about their impact on low-income communities and potential for attracting crime and nuisance behavior.
Philadelphia City Council voted in 2024 to ban skill games from most businesses, except casinos and establishments with a liquor license and room for at least 30 people to eat or drink. A court subsequently blocked that law from going into effect. Mayor Cherelle Parker applauded the Supreme Court decision in June, calling skill gaming a “predatory activity” that “only exacerbates seemingly intractable problems.”
Community Support and Opposition
Supporters of skill game legalization argue that the machines are a vital source of revenue for small businesses and community organizations. Patrick McMullen, president of the Knights of Columbus Regina Coeli Home Association, said that without the four skill games machines in their bar, the organization would have closed during the COVID-19 pandemic.
“They always pick a family in the community who just lost a parent and had a rough time going, and they’ll buy all the toys for the kids and food and all that,” McMullen said. “All that stuff, that comes from this. That’s the thing that breaks my heart, because those people are going to be hurt, too.”
Daniel Varon, who runs a lounge called Azucar in Feltonville, said many small bars depend heavily on the machines, which can bring in $1,000 to $1,500 a week and provide more than half of their revenues. He noted that immigration enforcement activity has hurt some businesses, making the machines even more crucial for survival.
“People are scared to go to Latino bars. The income went down a lot, and then the machines are the only way to survive,” Varon said. “People think they’re making a fortune. They’re not, because it depends how much [people] play and how much they win.”
As the October 13, 2026, deadline approaches, the pressure on Pennsylvania lawmakers to act intensifies. The outcome will not only shape the future of skill games but also have significant implications for small businesses, community organizations, and homeowners across the state.
