How Shapiro’s proposed tax rate could impact Butler County skill game operators
The role of skill games in the state of Pennsylvania could change drastically if a proposal by Gov. Josh Shapiro comes to pass.
As part of his annual budget proposal for 2025-26, Shapiro proposed a 52% tax rate on skill games, which would have a direct impact on Butler County, where in recent years, the slot-machine like games have popped up at gas stations, truck stops, bars, fraternal organizations and other public hot spots.
The governor’s proposed measure has drawn criticism from those involved with the controversial machines.
Jeannette Krebs, a spokesperson for Pennsylvania Skill, says that Pennsylvania Skill has expected, and even supports, legislation to regulate and legitimize skill games in Pennsylvania. However, she says that the tax rate proposed by Shapiro crosses a line.
“We want to see guardrails placed around the games,” Krebs said. “The governor is calling for a much higher tax rate. We oppose that plan and are deeply concerned that many businesses and fraternal clubs will be unable to pay it.”
Donnie Shiffer serves as legal counsel for Keystone Klub, a skill game parlor that recently opened at the Greater Butler Mart shopping center in Butler Township. He warns that a tax rate of 52% could deter operators from even bothering with them.
“Right now, there’s no regulation of these games, no enforcement of a tax rate or anything,” Shiffer said. “I think everyone’s in favor of some form of regulation, right, of these games because it legitimizes the whole situation.
“But frankly, some of the tax rates that are being thrown around are not realistic. There’s not enough on the table to make the value of being in the business of skill games worth it.”
By contrast, state Sen. Gene Yaw, R-23rd, is proposing legislation that would levy a tax rate of 16% — the same as the one that currently exists for table games at casinos. The proposed legislation would also give the Pennsylvania Department of Revenue full regulatory authority over skill games in the state. Shapiro’s proposal would give control to the state gaming board.
“(It) would provide the state police with the tools needed to shut down illegal games and mini-casinos, which are harming communities,” Krebs said. “The tax on the games would also provide the state with $250 million in new tax revenue in just the first year.”
In a news release announcing the proposal, Shapiro’s office argued that skill game revenue harmed the state’s elderly by diverting money from the Pennsylvania Lottery, whose slogan famously declares that it “benefits older Pennsylvanians, every day.”
Krebs disputes this, saying that Lottery sales numbers don’t align with this assertion.
“The Lottery has had record sales in recent years and all years since skill games have been introduced in Pennsylvania,” Krebs said. “This shows there is no impact.”
Skill game backers, such as Krebs, maintain there is a key difference between skill game machines and the type of machines commonly found at casinos.
“You can win every time you play a legal skill game,” Krebs said. “With casino games, there is a reason for the old saying, ‘the House always wins.’ Casino games have an algorithm built into the game, which means it is all luck when you win.”
That hasn’t stopped lobbyists for the casino industry from arguing for tighter legislation of skill games. Many argue skill games are no different from slot machines and other casino games and operate in a legal gray area.
Complicating matters further is the distinction between “legal” and “illegal” skill games. The root of this legal fight dates back to 2014, when Pace-O-Matic — the parent of Pennsylvania Skill — introduced a skill game machine into the state. The Beaver County Court of Common Pleas ruled that the game was, under Pennsylvania law, a legal game of skill. Subsequent court rulings in other counties — and in 2023, the Pennsylvania Commonwealth Court — affirmed this decision.
But these decisions don’t apply to all skill game machines, according to Shiffer.
“There are other games that are out there that may look the same, but don’t have those features,” Shiffer said. “Those features include pattern recognition and ‘follow me’ features. In other words, basically allowing the player to determine the outcome each time they play.”
Pennsylvania Skill maintains that its machines are the only games with legal backing in Pennsylvania, and that they should only be operated in places where they provide a supplemental source of income.
“The places with wall-to-wall games are not legal and not real skill games. Pennsylvania Skill games are never in storefront mini-casinos,” Krebs said. “We only put our games in places where they are a source of supplemental income — not the main source of income.”
Shiffer maintains that the machines at Keystone Klub are legal games of skill, according to the terms of the Commonwealth Court’s decisions on the matter over the past decade.
“The ones that the Keystone Klub uses are a result of a pretty long court battle, and they are absolutely legal under Pa. law,” Shiffer said.
Krebs argues that Shapiro’s proposal could result in unintended consequences for the state.
“Places will lose needed supplemental revenue and some will close,” Krebs said. “Other locations will turn to illegal games, increasing that problem, and the state will lose the tax revenue it needs.
“We look forward to working with the governor on a plan that supports small businesses and all Pennsylvanians.”
