Pennsylvania is not the first state to stare down the skill games question — and it won't be the last. Virginia essentially banned them. Georgia found a tenuous middle path. Illinois built a licensing framework that created winners and losers. Each state left behind data that is directly relevant to what happens in Harrisburg before June 30.
With the PA Supreme Court expected to issue its ruling on skill games at any point in 2026, and with the legislature locked in a standoff between a 16% operator-backed rate and Governor Shapiro's proposed 52%, the outcomes in other states offer the clearest available guide to what different choices actually produce.
Virginia: The Cautionary Tale
Virginia's skill games experience is the most instructive failure in the country. In 2020, the state legislature quietly included language in its budget that effectively banned skill games, citing concerns that they were unregulated gambling devices. The machines — tens of thousands of them operating in gas stations, convenience stores, and small restaurants — were ordered shut down without a regulatory alternative.
The aftermath played out in predictable fashion. Operators and location owners went to court. Years of litigation followed. Small businesses that had come to depend on machine revenue faced sudden income gaps. The state collected nothing from the machines it removed, and the court battles cost public resources without producing a durable resolution.
Virginia's choice was binary: ban or ignore. It chose ban, got years of litigation, and collected zero tax revenue in the interim. That is not a model — it is a warning.
Virginia eventually moved toward regulated skill games in subsequent legislative sessions, attempting to build the framework it should have created in the first place. By then, the market had contracted, operators had left, and the trust between the industry and the state was damaged.
The PA parallel: A Supreme Court ruling against skill games, without a concurrent legislative framework in place, risks creating a Virginia-style outcome — abrupt disruption, litigation, and zero revenue — instead of a managed transition that captures tax income while preserving operator activity.
Illinois: How Licensing Can Work — and Who It Leaves Out
Illinois built the most structured skill games licensing system in the country through its Video Gaming Act, which created the Video Gaming Terminal (VGT) framework. The state issues licenses to terminal operators, routes the machines through licensed establishments, and collects a tax. It works — but the structure matters enormously.
Illinois taxed VGTs at a rate of 29% of net terminal income when the system launched. The state later raised that rate, and by 2020, operators in some tiers were paying 34% to 36%. The result: the market survived and grew, but smaller independent operators who lacked the scale of large terminal operators were squeezed out over time. The Illinois market increasingly consolidated around large regional operators who could absorb the tax burden that individual owners could not.
The lesson for Pennsylvania is specific. A tax rate that works for a 500-machine operator does not necessarily work for a bar owner with two machines or a VFW post with four. Illinois's experience confirms that the rate is not the only variable — structure and minimum thresholds matter just as much.
| State | Tax Rate | Market Outcome | Operator Impact |
|---|---|---|---|
| Virginia | Effectively banned (2020) | Market collapse + litigation | Severe — operators lost revenue overnight |
| Illinois | 29% → 34–36% (VGTs) | Survived; market consolidated | Small operators squeezed; large operators scaled |
| Georgia | Location-based licensing fees | Active; contested but operating | Variable — depends on local enforcement posture |
| PA (Shapiro proposal) | 52% proposed | Unresolved; ruling + deadline pending | Projected: market contraction at 52% |
Georgia: The Gray Zone That Keeps Operating
Georgia's skill games market is a case study in regulatory limbo — and what it looks like when that limbo persists for years without resolution. The state never enacted a comprehensive skill games framework. Instead, the machines operate under a patchwork of local interpretations, with some counties taking an enforcement posture and others looking the other way.
What Georgia demonstrates is something PA lawmakers rarely say aloud: unregulated tolerance has a ceiling, and it is lower than everyone thinks. As machine counts grew, Georgia's uncaptured tax revenue became a political liability. Opponents of skill games used the gray zone as evidence that the industry was exploiting regulatory absence rather than building legitimate commerce.
Pennsylvania has operated its own version of this gray zone — 80,000 machines, no licensing, no state tax — for years. The Supreme Court case is the direct product of that unresolved tension. The longer a state allows an unregulated market to grow, the more the political cost of any regulatory outcome rises. Pennsylvania is living that reality in real time.
What the Data Actually Suggests for PA
Across every state that has navigated skill games regulation, a consistent pattern emerges. Tax rates below roughly 25% of net terminal income tend to preserve the market and generate the projected revenue. Rates above 35% to 40% tend to produce contraction — operators pull low-volume machines first, then restructure routes entirely. Rates at or above 50% historically produce either mass machine removal or operator consolidation into large-scale entities that can absorb the burden.
This is the core problem with Governor Shapiro's 52% proposal. The $766 million projection assumes machine counts stay relatively stable under the new rate. But Illinois, the only comparable large-scale regulated market, taxed at 29% to 36% and still saw market consolidation. At 52% — the same rate applied to casino-adjacent VGTs at truck stops — the assumption that 80,000 machines remain in operation is not supported by any other state's experience.
The PA Revenue Department admitted no market impact study exists for the 52% rate. Every comparable state that has tried to tax at that level saw machine counts drop, not hold. A projection built on a rate with no empirical support is not a revenue plan — it's a guess.
The Two Paths Still Available to Pennsylvania
Pennsylvania has a closing window to choose its own model. The two realistic paths, based on what other states have demonstrated, are:
Path 1: The Illinois Model — Structured Licensing at a Survivable Rate
A formal licensing framework administered by the Revenue Department or Gaming Control Board, with a tax rate in the 16% to 25% range, creates a regulated market that generates real revenue while allowing the existing operator base to survive. This produces less revenue per machine than Shapiro's proposal but far more total revenue than a market that contracts sharply or collapses into litigation. Sen. Yaw's SB 626 at 16% sits at the lower end of this range and represents the strongest advocacy position for small operators and community venues.
Path 2: The Virginia Warning — Court-Driven Disruption Without a Framework
If the Supreme Court issues a ruling against skill games before the legislature acts, Pennsylvania risks a Virginia-style outcome: forced removal, operator lawsuits, and a period of zero state revenue from machines that were previously generating economic activity in thousands of small businesses, fire companies, and veterans halls across the commonwealth. This is the worst-case scenario for operators, locations, and the state budget simultaneously.
What Operators Should Be Doing This Week
Understand your exposure at each tax scenario.
Model your current route at 16%, 33%, and 52%. Know which locations break even, which generate positive net after tax, and which would go negative. That analysis determines your contingency plan the moment a deal is announced.
Connect with your legislators using state comparison data.
Legislators respond to concrete evidence. Virginia's market collapse, Illinois's consolidation effects, Georgia's unresolved gray zone — these are real-world outcomes that support the case for a survivable rate. Data from other states carries more weight than general opposition to a high rate.
Stay current on the Supreme Court docket.
The ruling could come before the budget process concludes. If it does, the legislative calculus shifts immediately. A ruling in favor of skill games strengthens the hand of lower-rate proponents. A ruling against them changes the entire framework of what operators can do before a bill passes.
Build relationships with your location hosts now.
Your VFW posts, fire companies, and bar operators are your most credible advocates in Harrisburg. A fire company commander testifying about machine revenue is a different kind of voice than an operator association. If you haven't connected those location owners to the legislative conversation, now is the time.
The Bottom Line
Pennsylvania has the advantage of being a late mover. Virginia made its mistake in 2020. Illinois built its framework through years of iteration. Georgia is still living in limbo. PA can look at all three and choose a different path — one that creates a functional regulated market, generates real budget revenue, and preserves the thousands of small venues that have made skill games part of the state's economic fabric.
The June 30 deadline is the forcing function. The Supreme Court ruling is the wildcard. Between now and when both of those resolve, the shape of Pennsylvania's skill games framework — and what it means for operators on the ground — is still being written.
The operators who understand what's at stake, and who engage now, are the ones most likely to operate under a framework they can survive.
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