New Skill Games Legislation Draws Criticism Of PA Lottery, PGCB

Pennsylvania is grappling with how to get a handle on largely unregulated skills games spreading across the Commonwealth.

With numerous court cases pending in several jurisdictions, these games of skill are drawing the attention of multiple lawmakers.

A PA Senate bill stuck in committee since July had proposed simply outlawing the games. A House bill sponsored by Rep. Dan Moul seeks to legalize, regulate, and tax the games.

The House Gaming Oversight committee heard testimony on Moul’s bill on Wednesday. Both the PA Lottery and the PA Gaming Control Board (PGCB) expressed serious reservations about Moul’s current iteration of the bill.

Lottery claims big losses to skills games

The PA Lottery, which says 23% of its roughly 9,800 retailers also have skills games in their locations, puts its loss to the skills machines at $192.5 million in annual sales. Those losses will only worsen under Moul’s proposal, according to the lottery.

Written testimony from Drew Svitko, executive director of the PA Lottery, was the most damning argument against the bill as written.

Svitko claimed:

“Our initial calculations indicate the legislation could result in nearly $368 million to approximately $600 million in annual sales losses to the lottery.”

Some small consensus on issues, though not legislation

Gaming Committee Chairman Jim Marshall, a Republican from Beaver County, had said the hearing was meant as a starting dialogue.

Finding consensus remains unanswered for now, especially in light of a pending ruling in a May 2019 court case challenging the legality of the games.

Several primary issues raised at the hearing developed some degree of consensus on areas of concern.

They are:

• Do the skills games operate fairly? No one is currently checking.
• How should oversight be provided? And relatedly, how should the oversight be funded?
• For-profit businesses with skill machines are currently providing no local or state revenue.

Moul said at the beginning of the hearing that “getting them under control,” rather than making them illegal, “is the payoff for the community and the Commonwealth.” His bill caps the machines at no more than five per location.

PGCB says the bill has no funding for regulation

The bill, in its current form, would put the responsibility on the PGCB to regulate and oversee the skills games.

But PGCB Executive Director Kevin O’Toole testified overseeing skills games is not among the duties of the gaming board as the law is now written.

He also said the proposed legislation does not provide a stream of new revenue to fund investigations and licensing in a new area of responsibility.

O’Toole also noted the difficulty in assessing the fairness of a skill-based game.

The legality of skills games needs “clarification,” But that will be up to the legislature. Fairness cannot be objectively tested because everyone’s skill level differs. He added there is no vetting done at all now.

As it stands, the games provide no state revenue, and players have no protections, O’Toole added.

Cutting up the skills game pie

The legislation proposed by Moul, a Republican from Gettysburg, sets the following splits:

• • Fraternal organizations may retain 100%.
  • Clubs will retain 60%.
  • Taverns will pay 50% to the state and 5% to the host municipality.

PA State Police say skills game wagering illegal

The leader of the PA State Police Bureau of Liquor Control Enforcement Major Scott Miller, said skills games are seen as illegal gambling within his organization. A 2014 court ruling in Beaver County had ruled the games legal, but that opinion has not guided most jurisdictions.

Most enforcement has de facto fallen to the State Police.

He called the current unregulated play “ripe for corruption” because the machines generate millions with no public accounting and no public benefit for the machines in bars. Each machine can generate $500 per week. Miller said he is also concerned about under the table side-deals and loansharking.

The state has taken court action against two manufacturers in the past, and two additional cases are pending, said Miller. Police have cited 13 host locations.

In some cases, illegal gambling parlors filled with dozens of the machines have operated in the state, said Miller. Destroying seized machines can take two years and paying for legal experts to make a case has hit as much as $12,000 in one case.

Miller asked for “prompt clarity” from legislators on the legal definition of what constitutes a skills game.

With clarity, Miller said he would expect more voluntary compliance.

Unfortunately, it seems as though groups can agree, something should be done about skill games. What they can’t seem to agree on is what that something is.