Deputy Editor
Pennsylvania Gov. Josh Shapiro included a plan to tax “skill gaming” terminals in his proposed 2026-27 budget. Previous proposals along the same lines have received pushback from the state’s casinos, which do not want to see the machines legitimized. However, the Governor’s latest proposal incorporates changes seemingly aimed at addressing the arguments the casinos made against those previous efforts.
Along with legalizing and taxing adult-use cannabis, Shapiro’s office claims that the legalized skill game terminals could add $2 billion per year in state revenue. That would ensure “providing long-term, recurring revenue to support schools, public safety, and taxpayer relief,” a press release said.
However, local casino interests would rather see state laws amended to define the machines as illegal gambling. State courts have ruled them legal based on the inclusion of skill elements.
As things stand, Pennsylvania is one of the most diversified gambling markets in the country. It has thriving retail casinos, online poker with shared liquidity, online casinos, sports betting, an online lottery, and truck stop video gaming terminals (VGTs).
Those VGTs and the online lottery are already a sore sport for the casinos, which say they too closely resemble slots. The so-called skill gaming terminals are functionally similar to VGTs, except for the inclusion of skill elements aimed at skirting the legal definition of gambling. Similar devices exist in a legal gray area in many states, though some, such as Missouri, are starting to give them more scrutiny.
PokerScout reached out to several Pennsylvania casinos for comment on the proposed budget regarding the skill games. Two did not provide a response at the time of writing. A representative from Rivers, which has properties in Pittsburgh and Philadelphia, said the company “respectfully declined” to comment.
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Skill Gaming Terminals Produce Big Revenue
Skill gaming terminals are big business in several states. Shapiro’s budget notes that they are “currently unlicensed” in Pennsylvania, but they proliferate nonetheless.
“Skill games are prevalent across Pennsylvania, with previous estimates of as many as 70,000 skill game terminals, including 12,000 terminals in Pennsylvania Lottery retailers,” the budget says.
Shapiro’s office proposes to tax and regulate the terminals under the same framework as VGTs. It would also reduce the total amount of VGTs and skill game terminals to 40,000, with a maximum of five per establishment. They’d be taxed at 52 percent, in line with the current rate for VGTs.
Two objections raised by the casinos to previous efforts were that the gambling market was oversaturated and that it was unfair to tax skill games at a lower rate than VGTs. The machine cap and higher tax rate in the new proposal may soften the objections this time around. However, for their part, skill game manufacturers have said they consider a 52% tax rate to be more than their business model can bear.
Shapiro’s budget estimates that the state could bring in an additional $765 million in a partial fiscal year through the added tax.
Illinois has one of the most robust VGT markets and may provide an appropriate comparison point. There, about 50,000 VGTs produced more than $955 million in tax revenue in 2025. They aren’t without drawbacks, however, as the state has dealt with a crime spree surrounding VGTs.
When it comes to the skill gaming terminals, specifically, the hold on the machines can be eye-popping. Whereas regulated slot machines generally have return-to-player (RTP) rates above 90%, the skill gaming terminals can come in well below that figure.
The American Gaming Association, which has a vested interest in fighting for casinos, claimed that Pennsylvania skill gaming terminals have an RTP of just 75%. A report in Missouri was even bleaker, citing a 65% RTP.
Many of the small businesses that house the machines are understandably reticent to let such a revenue source go. They’ve lobbied hard to keep the games in operation over the years, successfully keeping opponents at bay.
Missouri Among States Taking Closer Look at Skill Gaming Terminals
That same Missouri report cited multiple government sources, including State Attorney General Catherine Hanaway, calling the machines illegal.
“Right now it’s illegal, so I’m going to be going after them,” she said.
However, as with Pennsylvania, lobbying by the operators and the small businesses has kept the machines functioning. A report from the Missouri Independent said that two of the skill game operators contributed more than $1.8 million to political action committees (PACs) supporting high-level politicians in the state.
The story noted that while the Missouri House looked likely to pass legislation legalizing the terminals, similar legislation in the Senate had a “slim” chance. Casino lobbying on the other side was strong as well. Like Pennsylvania, Missouri has a robust casino market, presumably with even deeper pockets than those of the terminal operators.
Expect a similar lobbying war to commence in Pennsylvania as the hotly debated issue intensifies in the wake of Shapiro’s proposal to legalize and tax the skill game machines.
Image credit: Tom Wolf/Wikimedia Commons (license)
