Posted: September 1, 2022, 1:20 a.m.
Last update: September 1, 2022, 2:04 a.m.
The Pennsylvania Lottery says its revenue is down due to unregulated skill gaming machines. The devices are proliferating across the Commonwealth in restaurants, bars, gas stations, convenience stores and strip malls.
The lottery claims to negatively impact the lottery and the benefits it provides to older Pennsylvanians.
Pennsylvania skill game terminals are found in every county, according to the Pennsylvania Lottery. The Pennsylvania State Police, the Pennsylvania Gaming Control Board, and the Pennsylvania Attorney General allege that gray machines, which are neither regulated nor taxed, constitute illegal gambling.
The route makers and distributors behind the controversial devices argue that the skill element of the machines – which usually involves a player having to identify a winning payline as opposed to a casino slot machine automatically informing the player if the round won – means that an outcome is more dependent on skill than luck, and is therefore not a game of chance.
State judges have come to various conclusions about their legality. The state legislature is expected to revisit the issue when it meets again later this month. But as the skill game machines continue to operate, lottery officials say the elderly are the ones being penalized.
The low-skill machines at lottery sales
The Pennsylvania Lottery and its longtime operator, Scientific Games, recently dove into the game of skill to determine its impact on lottery operations.
The lottery said nearly 200 lottery district sales representatives began monitoring skill game machines and collecting field data on the devices starting in 2017. Representatives regularly reported on the number of skill machines found at over 9,000 lottery retailers.
The data, compiled through March 2022, showed nearly 30% of licensed lottery retailers in Pennsylvania have games of skill on their premises. In 2017, only 5% did. The spread caused some would-be lottery players to play skill machines instead, the lottery report sums up.
Even though scratch sales have steadily increased over this period, our analysis reveals that the total revenue earned by the Commonwealth was 4.4% less than it could have been, costing the lottery of Pennsylvania over $650 million in revenue since tracking began in late 2017,” says the impact assessment.
On sales of $650 million, the lottery said it would have expected to generate net revenue of around $200 million.
“To put it another way, the $14.9 billion in scratch products sold between October 2017 and March 2022 could have been more than 4.4% higher, which would have generated more than $200 million more for the older Pennsylvanians and local businesses,” the lottery explained.
The Pennsylvania Lottery benefits older Pennsylvanians with property and rent tax reductions, low-cost prescription assistance, transportation services, and free meals.
The manufacturer maintains the advantages
Pace-O-Matic, a Georgia-based gaming company, is a leading manufacturer of skill game machines and is responsible for Pennsylvania Skill terminals, the most popular skill game title in the state. . Michael Barley, director of public affairs for the company, says the company’s products are not prohibited by Pennsylvania law.
They’re not illegal.” Barley recently said Fox43. “Every dollar earned…over 92% of it stays in the Commonwealth, stays in small business. It has literally been a lifesaver, especially thanks to COVID.
Revenues from skill games are split between the host company, the manufacturer and the route distributor. Neither the state nor the host county/township/municipality receives revenue from the machines.
While Pace-O-Matic has claimed for years that its machines are helping small businesses weather pandemic-related revenue losses, a recent report in Virginia showed the company has made a habit of suing business partners when they chose to turn off the devices. Pace-O-Matic has filed nearly 150 lawsuits against small businesses for breach of contract.
“Like most companies, we vigorously defend our contract terms,” Barley said.