Pennsylvania Skill Games Are Finally Heading to a Supreme Court Decision — Here’s What’s at Stake for the Gray Market Machine Fight

Pennsylvania has approximately 70,000 “skill game” machines operating in gas stations, bars, convenience stores, and restaurants across the state. These machines look like slot machines, play like slot machines, and generate revenue like slot machines — somewhere in the range of $1 billion annually for the industry. They pay no gaming taxes. They have no mandatory consumer protections or problem gambling safeguards. They are not regulated by the Pennsylvania Gaming Control Board. And their legal status has been in dispute for years, a gray market that the state Supreme Court is now being asked to definitively resolve.

Oral arguments were heard by the Pennsylvania Supreme Court in November 2025. A decision is expected in the coming months. The court’s ruling will determine whether the machines are illegal gambling devices subject to the state’s Gaming Act — which would effectively end their operation in the commonwealth — or whether the “skill” element embedded in their design is sufficient to exempt them from gaming regulation entirely. Either outcome will have significant consequences for the hundreds of small businesses that host the machines, the operators who supply them, and the licensed casino industry that has been fighting their proliferation for years.

How These Machines Work and Why the Legal Question Is Complicated

The machines at issue are primarily manufactured by Georgia-based Pace-O-Matic and assembled locally by Lycoming County-based Miele Manufacturing. They were first deemed non-illegal by a Beaver County judge in 2014, a ruling that allowed the machines to spread rapidly across the state before any regulatory framework could be established.

The skill element that forms the basis of the legal defense is called “Follow Me” — a memory-game bonus round in which a losing player sees a sequence of colored shapes and must reproduce the sequence correctly to win back their wager plus a bonus. Pace-O-Matic attorneys argue that because a player can theoretically achieve a payout rate of 105 percent through the Follow Me feature, the game cannot be classified as a slot machine, which by law cannot be programmed to pay out above 100 percent. The Attorney General’s office counters that the presence of any skill element does not exempt the machines from gambling law, and that the overwhelming majority of the gaming experience is functionally identical to a slot machine.

The Commonwealth Court agreed with Pace-O-Matic in 2023, using a standard dictionary definition of “slot machine” rather than the broader definition embedded in the Gaming Act itself. The Supreme Court agreed to review that ruling — and how it resolves the definitional question will determine the fate of the machines statewide.

The $15.3 Million Verdict That Raised the Stakes

The Supreme Court’s deliberations are complicated by a verdict issued in a Philadelphia civil case in November 2025, in which a jury held Pace-O-Matic liable for $15.3 million following a 2020 fatal shooting of a store clerk in Hazleton. The shooting occurred at a convenience store that hosted skill game machines. Testimony in the case revealed that operators routinely found ways to avoid paying customers who won — a structural consumer protection failure that licensed casino regulation would have prevented.

The verdict is not directly before the Supreme Court, but it puts the regulatory gap into stark relief. Licensed Pennsylvania casinos generated $2.6 billion in gaming taxes last year, including $1.2 billion in slot machine taxes alone, all generated under a comprehensive regulatory scheme that covers surveillance, security, game fairness, and guaranteed payout of winnings. None of those protections exist for the 70,000 machines operating outside the Gaming Act’s framework. The Supreme Court is deciding a legal question, but the verdict makes clear that the policy consequences of that question are not abstract.

Where the Legislature Stands

Pennsylvania Gov. Josh Shapiro has publicly advocated for legalizing and regulating skill games rather than banning them outright, proposing a 52 percent state tax on skill game revenue. The licensed casino industry, which pays a 54 percent tax on slot machine revenue, has argued that the disparity between regulated and unregulated gaming is inherently unfair and that any regulation short of the existing standards would create an unlevel playing field.

Lawmakers have failed to reach agreement on a skill game regulation bill in multiple recent budget cycles. The Supreme Court’s ruling, expected before the end of 2026, may effectively force the legislature’s hand. A ruling that declares the machines illegal under existing law would create immediate pressure to either enforce that ruling through statewide removal or pass new legislation legalizing and taxing the machines before enforcement action begins. A ruling in favor of Pace-O-Matic would likely reinforce the status quo and put additional pressure on casinos and their legislative allies to pursue a constitutional amendment or new statutory framework.

What It Means for Players

For the many Pennsylvanians who regularly use skill game machines at their local bar or gas station, the immediate practical reality depends heavily on the Supreme Court’s decision timeline and any subsequent legislative response. The machines are not going to disappear overnight in any realistic scenario — even a court ruling against them would require enforcement action to remove roughly 70,000 machines from thousands of locations across the state.

What the ruling will determine is whether the gray market continues, expands, or finally enters a legitimate regulatory framework. Licensed gaming’s consumer protections exist for a reason — guaranteed payouts, problem gambling resources, transparent odds — and players using skill game machines currently operate without any of those safeguards. Whether that changes, and when, is the question Pennsylvania’s highest court is now answering.