The consequences of the Pennsylvania Supreme Court’s ruling on arcade games extend far beyond the corner bar or local gas station.
The assessment that games of skill are slot machines and is contrary to the views of the Commonwealth of Nations Gaming Control Act has a major influence on budget negotiations between Democrats in the House and Republicans in the Senate in a divided state government. He could also put Governor Josh Shapiro able to find modern sources of revenue to finance its initiatives or decide what to cut to avoid greater deficit spending.
Governor Budget for FY27 renewed calls to legalize recreational marijuana, regulate and tax arcade gaming machines, and raise the minimum wage. The largest source of revenue was a 52 percent tax on video gaming terminals, which the administration estimated would generate more than $2 billion annually.
Problem? Shapiro’s budget proposal called for $53.3 billion in spending with one-time aid of $4.5 billion from the state’s so-called “rainy day fund,” an emergency savings account. Take $2 billion out of the mix and the dilemma becomes clear.
“The proliferation of skill games is a public safety issue that must be addressed, and given the timing of this decision, we believe that skill game reform is a key element of this year’s budget resolution,” he said. Senate President pro tempore Kim Ward (R-Westmoreland) i Senate Majority Leader Joe Pittman (R-Armstrong/Indiana/Jefferson/Westmoreland) in a statement. “Furthermore, given the fiscal realities facing our Commonwealth, it makes sense that modern revenues from gaming reform should be directed to the General Fund, as the Governor proposed in his 2026-2027 budget.
“Last year, Senate Republican leaders introduced the gambling reform bill as a basis for discussion, and given the Supreme Court’s ruling, we look forward to all parties quickly engaging in meaningful conversations to address this issue.”
The state high court stayed the ruling for 120 days to give the governor and General Assembly “the discretion at any time to take any legislative action they deem appropriate.” Writing for the majority Judge David Wecht stressed that “our decision today is not based on or constitutes an endorsement of any particular political view regarding the spread of ‘skill games’ across the Community.” Determining and implementing Pennsylvania’s “public policy” is the prerogative of the legislative branch of our government, not the judicial branch. It is a matter of basic application of existing statutory law.”
Wecht also wrote that it has “made a clear statement” through the General Assembly on the issue of arcade games and slot machines Resolution of 2017 “This added new terms to the definition of “slot machine” in the Gambling Act. It is not the Court that says “games of skill are unlawful.” Rather, the General Assembly did it almost a decade ago.”
So now that the proverbial clock is ticking, what will the legislature do?
“The Pennsylvania Supreme Court’s ruling makes clear: skill games are illegal slot machines. We are pleased that Senate Republicans can now be ready to begin work on bipartisan legislation to regulate skill games, and we look forward to what they can pass in their chamber in a bipartisan manner,” House Democratic leaders said in a statement.
Yes, but will they be willing/able to reach a consensus with Republicans on gaming reform?
Shapiro’s tax rate of 52% on gross revenues from skill games is more closely aligned with the state’s existing 55% tax on electronic games and casino slot machines.
Earlier, GOP leaders in the state Senate introduced a 35% rate proposal, while other Republicans favored a 16% tax.
House Republican Party Leader Jesse Topper (R-Bedford/Fulton) says the most crucial issue is the well-being of Pennsylvania.
“We should never tax or regulate an industry to generate revenue,” he said Tuesday. “We should do it in the sense of what’s good for the industry as a whole. What’s good for Pennsylvania as a whole. Trying to pick a number and then fit it to a tax rate never works. It won’t work here. It won’t work in the future.”
“It’s not just about arcade games. It’s about what’s good for the health of the industry as a whole, whether horse racing or casinos. What’s good for the health of the Commonwealth of Pennsylvania in terms of the regulations that have to surround it. That’s what we’re going to be looking at. “There’s no specific plan that I’m married to right now. It’s just a matter of how we can do it in a way that’s good for Pennsylvania.”
The matter is complicated by influential players in the industry, including: Pace-O-March based in Georgiac, which has repeatedly asked the state to regulate and tax slot machines – at a rate much lower than slot machines, arguing that their technology helps diminutive businesses with slim margins stay in business as prices rise.
“Unfortunately, this opinion will have far-reaching consequences as more than 10,000 small businesses and partner clubs in Pennsylvania will become the true victims,” the company said in a news release. “They are now potentially faced with an impossible choice: stop operating these games and lose an important source of revenue, or abolish a legislative solution that could result in excessive regulation and crippling taxes, forcing them to stop operating these games and lose an important source of revenue.”
As a counterpoint, we have casino operators who have made their position clear that they want arcade games to disappear.
In a statement Monday, Parx Casino said it “hopes the ruling will lead to enforcement action to remove the tens of thousands of skill games and other illegal gaming devices currently operating in our state.”
The political stakes are high. Arcade games have generated significant revenue for diminutive businesses and fraternal organizations, which have lobbied aggressively against any licensing systems they consider punitive. At the same time, Pennsylvania’s licensed casino industry has long argued that unregulated slot machines pose unfair competition and a threat to the integrity of the state’s gaming market.
Lawmakers now face a real deadline of just 19 days from the 2026 general election. Voters will decide 25 seats in the state Senate and 203 seats in the House of Representatives. What is the legislative response? A formal regulatory framework for arcade games? High taxes? Total ban? Either decision would impact thousands of diminutive businesses that rely on revenue from arcade games.
“Skill gaming regulations and taxes may be part of budget negotiations, but any revenue they generate will only be a drop in the ocean and will not cover the state’s budget deficit,” he said. Nathan BenefieldDirector of Policy at the Commonwealth Foundation. “Governor Shapiro has proposed spending more than $6 billion on top of available revenues. The math doesn’t lie: this deficit would ultimately require a sales or income tax increase totaling more than $2,000 per Pennsylvania family.”
If the General Assembly does not pass legislation regulating or legalizing skill gaming before the 120-day stay expires, law enforcement agencies throughout Pennsylvania will have the legal authority to begin seizing or disabling the machines. The court’s ruling makes it clear that gambling without complying with state gaming laws will constitute a criminal violation once the suspension is lifted.
“I was encouraged when Senate leaders said yesterday that they wanted to do this now,” he said Governor Josh Shapiro during an event in Allentown. “I would encourage Senate Republican leaders to work with Democratic leaders in the Senate and see what package can get 26 votes in their chamber and get this bill to my desk.”
