Pennsylvania's skill games debate has a new data point that operators should not miss: a House cosponsor memo is now circulating with the same structure as Senate Bill 1079 — $500 per machine per month, no revenue percentage, no complex audit trail. With the General Assembly facing a June 30 budget deadline and a PA Supreme Court ruling pending, the flat-fee approach is the most viable path to regulation that doesn't wipe out small-business operators. Here's where things stand.
The Flat Fee Has Crossed into the House
When Senators Gene Yaw (R-Williamsport) and Anthony Williams (D-Philadelphia) introduced a cosponsor memo for a $500/month-per-terminal flat fee structure, it was notable for two reasons: bipartisan sponsorship in the Senate, and the political logic of side-stepping the 52% vs. 16% impasse entirely.
Now Rep. Danilo Burgos has circulated a parallel cosponsor memo in the House, targeting establishments hosting skill game terminals — bars, convenience stores, social clubs — and proposing the same $500 monthly fee structure. The bill would not only raise revenue but, as Burgos noted, address a real public safety problem: establishments that host imposter terminals designed to look like legitimate skill games while operating as unregulated gambling devices.
"This is about more than just rules — it's about making sure these games contribute to the state they call home." — Rep. Danilo Burgos, PA House of Representatives
The emerging two-chamber convergence around a flat fee isn't a coincidence. It reflects a recognition that percentage-of-revenue taxation creates compliance nightmares, invites audit disputes, and remains politically explosive given the gap between what casinos pay (54–55%) and what skill game operators and their supporters consider survivable (16%). A flat fee skips that argument entirely.
Why the Flat Fee Works Better for Small Operators
The 52% proposal from Governor Shapiro is built on the assumption that skill games produce revenue similar to slot machines, and therefore should be taxed like them. The problem: most skill game locations aren't casinos. They're neighborhood bars, veteran posts, and roadside gas stations operating on thin margins where a $780/month tax on a single machine is not viable.
The flat-fee model gives operators something they can budget around. Consider the math:
| Approach | Source | Monthly Cost on Machine Earning $1,500 |
|---|---|---|
| $500 flat fee | SB 1079 (Yaw/Williams) + Burgos House memo | $500 fixed |
| 16% of gross | Yaw SB 626 (earlier proposal) | ~$240 |
| 35% of gross | Senate Republican leadership (SB 756) | ~$525 |
| 52% of gross | Governor Shapiro's budget proposal | ~$780 |
At $500/month fixed, a machine earning $1,500 nets $1,000 before location revenue share — workable for most operators in most locations. At 52% of gross, that same machine leaves $720 before the location share. At lower-volume locations, 52% doesn't just squeeze margins. It removes the economic rationale for the machine entirely.
Pace-O-Matic's Public Position: Regulation Without Extinction
Pace-O-Matic, the dominant skill games developer and distributor operating in Pennsylvania, has been explicit about what it supports and what it won't accept. Mike Barley, the company's chief public affairs officer, framed the flat-fee bills as serving a dual purpose that goes beyond revenue:
"Although many responsible bar and restaurant owners operate within the rules, those who don't gain an unfair competitive advantage. The bill will mirror Senate Bill 1079 and will not only help small businesses but veteran posts, volunteer fire companies and fraternal groups that have skill games as a much-needed way to supplement their revenue." — Mike Barley, Pace-O-Matic
This framing matters politically. Pace-O-Matic is not just arguing for lower taxes — it's arguing that a flat-fee regulatory structure would clean up a market currently plagued by unscrupulous operators running imposter machines with no accountability. That's a law-and-order argument dressed in a business suit, and it plays well on both sides of the aisle.
Shapiro's Counterargument: The Lottery Fund
Governor Shapiro's administration has been consistent on one point: skill games, as currently operated, divert spending away from the Pennsylvania Lottery, which funds property tax relief for seniors. The Lottery returned $386 million in senior property tax relief in 2024 — roughly one-third of its $1.2 billion in total revenue. Shapiro argues that skill game spending cannibalizes lottery ticket purchases.
Skill games advocates dispute this directly. Research cited by operators indicates that lottery sales actually increase at locations that also host legal, regulated skill game terminals — because foot traffic goes up across the board. Whether that's true at scale is contested, but it's the argument being made against Shapiro's lottery-impact rationale.
What's not contested: at 52%, Shapiro's own revenue projection of $766 million assumes machine counts stay stable. If operators pull machines because the math doesn't work, that projection collapses. And the PA Revenue Department, as of the March 11 budget hearing, has not completed any market impact study showing whether the 52% rate is actually sustainable.
The Supreme Court: The Wildcard No One Controls
While the legislature debates tax rates, the Pennsylvania Supreme Court is still sitting on a case that could reshape the entire landscape. Oral arguments were heard in November 2025. A ruling is expected sometime in 2026 — but there is no announced date.
Lower courts have consistently ruled that skill games are not illegal slot machines because they involve a skill component that distinguishes them from games of pure chance. The Commonwealth argued to the Supreme Court that no meaningful distinction exists — that these machines function identically to the slots regulated under existing casino law.
If the Supreme Court agrees with the Commonwealth, any operator currently running machines without a gaming license would face immediate legal exposure. If it agrees with the lower courts, it strengthens the legislative hand of those pushing for a lower tax rate and a framework that treats skill games as a distinct category.
The ruling could arrive before or after a legislative deal. Operators should not assume the legislature will move first.
What Operators Should Do Before June 30
Model your fleet at $500/month — today.
Run a location-by-location analysis of which machines are viable at a $500 flat fee and which aren't. Identify the locations where machines would need to come out and what that does to your revenue and your location relationships. This analysis will inform every conversation you have between now and budget day.
Know your legislators' positions.
Rep. Burgos's House memo needs cosponsors. Sen. Yaw's Senate bill needs floor movement. If your state legislators represent districts with skill game operators, they need to hear from those operators directly — with numbers, not talking points.
Prepare for the Supreme Court ruling.
Talk to legal counsel about what a ruling against skill games would mean for your operation: licensing requirements, timeline, enforcement risk. Do this now, not after the ruling drops. The timeline between a ruling and any enforcement action is not guaranteed to be long.
Engage community partners.
VFW posts, volunteer fire companies, and American Legion halls operate in legislative districts where their voices carry disproportionate weight. If these organizations host your machines and depend on that revenue, now is the time to make sure they know what's at stake and know how to reach their representatives.
The Bottom Line
The PA skill games debate in March 2026 is more active than it has been at any point in the past decade. The flat-fee structure has genuine bipartisan support in both chambers. The Supreme Court could rule any day. The budget deadline is June 30. And Governor Shapiro is still holding the line at 52% with a $766 million revenue target and no market study to support it.
Operators who wait and watch are making a choice — just not an active one. The next 100 days will determine the framework that governs this industry for years. The time to be present in Harrisburg is before the deal is done, not after.
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