Fight over cash-paying video games hits crucial stretch

HARRISBURG, Pa. — Just across the mall lobby from the glass-door entrance to the Pennsylvania attorney general’s office sits a cash-paying electronic game terminal that the office is fighting to outlaw, like thousands of other devices like it around the state.

In an unfolding court battle, the state’s top law enforcement office is representing Gov. Tom Wolf’s administration, which accuses the proliferating machines of siphoning more than $200 million in revenue last year from the Pennsylvania Lottery.

An ally is Pennsylvania’s competition-wary casino industry in the nation’s No. 2 commercial casino state.

The court fight comes down to whether Pennsylvania law prohibits the machines as unlicensed slot machines, even if a player’s success is supposedly based on skill, rather than chance.

Arguments are scheduled for Wednesday before the state’s Commonwealth Court in a case given momentum by recent police seizures of the machines. The court, on Dec. 13, ordered a halt to police seizures of the Pennsylvania Skill brand of game terminals and it will decide whether to maintain that injunction while it considers the legal fate of the machines.

How the courts rule could have ramifications for those profiting from the games: coin-operated machine distributors, bars, pizza parlours, groceries, corner stores, bowling alleys, tobacco shops and even the greeting card store steps away from the attorney general’s office.

Non-profit clubs, such as the Rescue Firemen’s Home Association in Middletown, near Harrisburg, say the games are allowing them to make far bigger charitable contributions to the community.

Meanwhile, storefronts have popped up with nothing but machines inside, sometimes 10 or more. Some, including ones in Monaca and Ambridge, about 15 or 20 miles outside Pittsburgh, have prominent window advertisements saying “WIN CASH.”

Lawmakers are paying attention.

“The fact that these machines are everywhere has been the biggest concern,” said House Gaming Oversight Committee Chairman Jim Marshall, R-Beaver.

The machines have spurred friction in other states, too, but the stakes might be higher in Pennsylvania, where the lottery and casinos are big revenue producers, at more than $2.5 billion a year.

Legal limbo has surrounded the machines since they began arriving in earnest in Pennsylvania a few years ago, now numbering upward of 20,000, according a state police estimate. Operators estimate that the machines take in hundreds of millions of dollars a year, divvied up among the host, the distributor, the manufacturer and the software-maker.

The most common machine is the Pace-O-Matic, from a Georgia-based software-maker. In Pennsylvania, those machines are branded as Pennsylvania Skill and assembled by a Williamsport-based coin-op machine distributor, Miele Manufacturing.

Miele Manufacturing points to a Beaver County judge’s ruling in 2014 that the state did not prove that the games on a seized machine — a tic-tac-toe game, a shooting game and a memory game — were based on chance and, as a result, should not have been seized by police. The state did not appeal.

Miele Manufacturing has hired prominent lobbyists and lawyers, including a former congressman, and assembled more than $270,000 for campaign donations to make its case. One booster is Bob Asher, Pennsylvania’s Republican national committeeman, who has told lawmakers he would like to see VFWs and American Legion halls use the machines to help them keep their doors open.

In the Legislature, lawmakers are eyeing competing proposals to both ban the machines or regulate them in some fashion.

In recent days, Senate Majority Leader Jake Corman, R-Centre, said he will introduce legislation to tax skill games like the gambling terminals that a 2017 law allowed in truck stops — a 52% tax rate — and allow both skill games and the gambling terminals in bars and non-profit clubs.

For its part, Miele Manufacturing has encouraged lawmakers to regulate and tax the games at a reasonable rate, say, 10%, a spokesman said.

For scores of coin-op machine distributors hit hard by the disappearance of arcades, skill games have been something of a saviour.

“A lot of them were to the point where they said, ‘Hey, I don’t know if I want my children to go into this business, there’s no future,’” said Del Guerrini, who owns the Lewistown-based distributor his father started in 1939.

Bar owners suffering from the loss of six-pack sales to beer distributors under a 2016 law are generally happy to have the new cash stream, even if it’s just a hundred dollars a week per machine.

But they are nervous about talking about it for fear of police seizing the machines and adding sanctions to their liquor license.

“One side is telling the bars, ‘Hey, they’re legal because of this ruling in Beaver County,’” said Chuck Moran, executive director of the Harrisburg-based Pennsylvania Taverns Association. “And then they see the police raids.”

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