Pennsylvania bill would tax skill games at 20%

Pennsylvania Representative Russ Diamond (R-Lebanon County) is preparing legislation that would tax skill game revenue at 20% and cap machines at 5 per venue, with six weeks left before a state Supreme Court stay expires and the terminals become illegal.

The court ruled on 15 June 2026 that skill game devices are slot machines under the Race Horse Development and Gaming Act, in In Re: Three Pennsylvania Skill Amusement Devices (No. 50 MAP 2024) and POM of Pennsylvania, LLC v. Commonwealth of Pennsylvania, Department of Revenue (No. 2 EAP 2024). Justice David Wecht wrote the opinion, joined by Chief Justice Debra Todd and Justice Daniel McCaffery in a 3-0 decision, and the court held that both the Gaming Act and Section 5513 of the Crimes Code apply to the machines.

The ruling was stayed for 120 days, during which no law enforcement agency is to take adverse action. That window closes on 13 October 2026. Without legislation, an installed base that industry estimates put above 70,000 machines has no legal basis to operate.

What the proposal does

Diamond’s plan sets a 20% tax on skill game revenue and restricts the machines to clubs, restaurants and bars holding liquor licences, and qualifying truck stops. Each location would be limited to 5 terminals.

The same legislation would cut the rate on casino slot machines and online casino games to 49.9%. Casino operators currently pay 54% on slot revenue, one of the highest rates in any regulated US market, and have argued that any skill game framework should tax the devices at a comparable level.

Revenue from the new tax would be split between property tax relief, the Race Horse Development Trust Fund, compulsive gambling treatment and the state General Fund.

It’s time to modernise our approach, bring skill games into a regulated system ahead of the state Supreme Court’s October 13th deadline, and make sure Pennsylvania homeowners see a greater benefit from the revenue generated by gaming.

Property tax relief carries the pitch

Diamond has built the case around a homeowner dividend rather than gaming policy. His office puts the total relief at close to $1 billion, reaching 96% of state homeowners and around 2.87 million residents, with a minimum of $702 a year for each qualified household. In his own Lebanon County district, he estimates increases of between $459 and $602 depending on school district.

Every time I talk about property taxes, people complain about not seeing the relief from casinos promised by politicians more than 20 years ago.

That framing addresses a specific political problem. Pennsylvania legalised casinos in 2004 on an explicit promise of property tax relief, and the payouts that followed were smaller than voters expected. Tying skill game revenue to a named annual figure per household gives lawmakers something more concrete to defend than a transfer into the General Fund.

Twelve years of legal limbo

Skill game terminals spread across Pennsylvania bars, clubs and convenience stores for more than a decade while their legal status stayed unresolved. Manufacturers, led by Georgia-based Pace-O-Matic, argued the devices required player skill and therefore fell outside the definition of a slot machine. The Department of Revenue and the casino industry argued the opposite. Lower courts reached differing conclusions, and successive legislatures produced bills but no law.

The June ruling ends that argument on the legal question and moves it to the tax question. Courts have driven much of the definitional work on US gambling this year, including the Ninth Circuit decision backing Nevada in its dispute with Kalshi over sports event contracts, and legislatures have been left to write rules against court-set deadlines.

The arithmetic in Harrisburg

Diamond’s 20% figure sits well below what casino operators have pushed for and below the rates floated in earlier budget rounds. Governor Josh Shapiro has previously proposed taxing the machines at 52%, closer to the casino rate, and any bill Diamond introduces has to clear committee in both chambers and reach the governor’s desk.

Pennsylvania passed its 2026-27 budget without settling the question, which leaves skill games to a standalone bill in a session with limited floor time. The social clubs, taverns and small businesses that host the terminals have spent August pressing lawmakers to act before the stay runs out.

If nothing passes by 13 October, the stay lapses and enforcement becomes a matter for district attorneys and the Pennsylvania State Police rather than for the legislature. Operators would face seizure of unlicensed devices under the Crimes Code, and the roughly 70,000 machines currently in service would have to come out of venues that have counted on the income for years.

Source: Pennsylvania House of Representatives