Pennsylvania Skill Game Machines Ruled Illegal: Local Businesses Under Threat

Pennsylvania lawmakers have determined that skill games are basically slot machines, rocking a niche gaming industry that has previously run without any regulatory oversight. In Pennsylvania alone, there are around 70,000 skill gaming machines, which are usually located in gas stations, corner stores, gaming arcades and taverns. That sounds like a massive figure, and it is. Consider this, the Pennsylvania Gaming Control Board is responsible for regulating the landbased casinos in Pennsylvania, and in a 2026 April Year-on-Year fiscal report, it calculated only 24,845 slot machines in operation across these casinos.

The businesses that run skill games did not run under any state laws, and so this was pretty much uncharted territory for the gaming authorities. But not for long. With the ruling that skill games will be classified as slot machines, operators have a 120 day window to clean up their act, and comply with any new laws that roll out on this controversial gaming niche. It could definitely slow down a boming gaming industry, and may prompt other state authorities to take action on skill games.

Pennsylvania Ruling on Skill Games

The Supreme Court decided, on June 15, that skill games should be regulated like slot machines, and are subject to the state’s gambling statutes. Next, the state has 120 days to determine how to regulate these gaming machines, including any taxation schemes, conditions on the gameplay, and how any player protection or responsible gambling measures will be integrated. Skill games are moving into a new era in Pennsylvania, but it is not certain yet whether or not that is good for the industry or not. Commentators speculated that taxing the industry could bring in around $300 million for the state. Which is peanuts compared to the total market value of Pennsylvania – which hauled in nearly $7 billion across all gaming verticals in 2025.

Skill games are not a big competition for landbased slots and table games, not in revenue nor in market share. The real competition is iGaming, which is soaking up the majority of the $7 billion per year market share, but casino operators are still dead set against targeting skill games.

The ruling went 5-2 in favor of the Attorney General, Dave Sunday’s, argument that skill games are unlicensed and unregulated slot machines. The big point of contention here being how the skill games actually run. Operators and suppliers argue that the games run on skill, and that while chance can play a role, the primary factor that determines the outcome is based on the skill of the player. Many of these are not big operators either, they are local corner shop owners, restaurateurs, pub owners, and arcade gaming centers.

Who Runs the Skill Games in PA

Don’t think of skill game machines as an organized industry, like the landbased US casinos or resorts, the scene is far more fragmented, with much smaller players. You can get gaming arcades across Pennsylvania, similar to the Japanese Pachinko parlors, but then there are also gaming machines scattered in restaurants, bars, gas stations and other smaller venues. Similar to the fruities that used to be a staple in UK pubs until the 2000s. Skill game machines are also offered by non-profit organizations, such as charity clubs, fundraisers held by local agencies, and community support initiatives.

So it is varied, and the scale of the organizations is never all that big. But as a collective, they make a massive industry, and one that lawmakers will be keen to both regulate and tax – to get their cut from the popular venture. If they did roll out limits and taxation schemes, it would be the local businesses that would suffer the most. As they would need to gain the necessary permissions, pay any licensing or operational fees, comply with regulations, and then shell out a part of their profit margin to pay the taxes.

Pace-O-Matic and Key Suppliers

Suppliers will suffer too. Right now, the most well known studio supplying the games is Pace-O-Matic, a Georgia-based company. Pace-O-Matic creates games specifically with small businesses and nonprofits in mind. They are not the only supplier in the region, but they have a good standing among Pennsylvania business owners. Though Pace-O-Matic has been taken to the courts before by casino operators and skill game critics. The company responded to the court’s decision to class skill games as unregulated gambling, and stated that over 10,000 small businesses and clubs would be the real victims of the proceedings.

It wouldn’t strengthen the industry, but instead force operators to stop offering skill games, or scale back, as they would not be as profitable.

How Skill Gaming Machines Run

Slot machines, as per state legislation, are defined as a “coin operated gambling machine that pays off according to the matching of symbols on wheels spun by a handle”. That is a fairly accurate description of how the slot machine mechanisms work, but leaves a gaping hole about the conditions of the games. Because it doesn’t explore how the outcomes are determined. Classic slot machines use RNGs or algorithms to randomize the outcomes of each round. While skill games also use RNGs, these are not the primary factors determining an outcome.

Pace-O-Matic Skill Game Playthrough

The best way to describe a typical skill game is to give a little demo walkthrough of how it works. These are digitized gaming machines, operated by coins. You put in your coin and then launch a game. Standard Pace-O-Matic machines, which are widely available across Pennsylvania, use a 3×3 grid, where you have to form lines of matching symbols.

When a game is launched, the reels spin, and random symbols fall onto the 3×3 grid. You can select a symbol to become a wild, creating a line, and then get paid out according to the rarity of the symbols you have lined up, and how many lines you have completed. During rounds, there is an automatic timer, that puts the pressure on, and if you run out of time, the game will end. You can also trigger a new game if you get a puzzle that has no lines to be formed.

Some games also come with a Follow Me feature. This is a secondary game, that is triggered if the normal game round does not yield as much money as your stake. This is basically a memory game, where you are shown a pattern sequence, and must follow the exact pattern. It tests your memory retention skills, and if you can successfully complete the pattern, you can win back your play level (or even more, depending on the game).

These games require more engagement than a simple slot machine, where you can spin the reels, sit back, and wait to see what happens. Or, set up an autoplay limit and play round after round. The skills required here are critical thinking, quick decision making and puzzle solving. It is more akin to a historical horse racing machine – a type of gaming machine that provides parimutuel horse racing bets, where sports expertise and strategic choices can help players gain an edge. Neither are entirely devoid of luck, but they are not purely based on luck – like throwing a dice and hoping it will land on your lucky numbers.

How Pennsylvania May Treat Skill Games

The next 4 months are going to be a make-or-break period for skill game runners and suppliers. Lawmakers have to establish a regulatory framework for these machines, and there have been hints at both more oppressive and more lenient approaches. A more lenient way forward would be to create a separate regulatory category for skill games, with their own tax schemes, licensing and operational costs, and compliance requirements – not putting them under the same constraints as slot machines. This would allow the current operators to still hold onto their gaming machines, albeit with costs and potential tweaks required to make their machines compliant.

Treating skill games like slots would most likely wipe out the small businesses’ hold on skill games. Because slots in Pennsylvania are only allowed in designated casinos, with conditions such as casinos can only have up to 5,000 machines – casino resorts can only hold up to 600, RTP must be a minimum of 85%, and slot machine tax revenue ranges from 48% to 54% of gross gaming revenue. Getting the Pennsylvania Gaming Control Board to authorize skill games at smaller sites may prove difficult for the majority of operators, who may just have a handful of skill game machines. Plus, the high tax threshold would arguably shave their gains to a minimum, effectively rendering what was a profitable venture into a sunk cost for a lot of the current businesses.

Impacts on Other States with Skill Games

It is a highly sensitive subject, and one that cannot be resolved without hurting parties on either side of the argument. Skill games are going to be put to the test in Pennsylvania, and the rulings can either kill off the sector or push it out of the domain of small businesses and into larger organizations. There is even a remote chance that the House will push back on the ruling, potentially adding further delays and questions over what will happen to skill games in Pennsylvania.

Pennsylvania is not the only state with a booming skill games market. While it is the biggest state for skill games, with an estimated 70,000+ machines, the states of Nebraska, Missouri and Texas also have a considerable number of these games. Then, there are the online platforms to consider. While not as widespread, nor demanding the same revenue figures, skill games have also found their way into internet gambling, and like their landbased counterparts, these too operate out of a gray area in the law.

The decision in Pennsylvania may have a knock-on effect, giving other state authorities the onus to look into skill games and see how they can regulate or tax them. It may not be an immediate thing either, as regulators would need time to see if skill games regulation in Pennsylvania could actually bring profit to the state, and whether or not such laws are worthwhile. If Pennsylvania manages to bring the industry under the regulation of the gambling authorities, satisfy the player protection lobbyists, and give the operators enough headroom to make profit – all while benefiting the state, then this could be the start of something special.