Listen to article \u2022\u00a00:00 min<\/p>\n
Shortly after the Pennsylvania Supreme Court dealt a legal blow<\/a> to so-called skill games in June, the CEO of Parx Casino celebrated the decision<\/a> and blamed the unregulated slot machine-like devices for attracting \u201crampant crime, money laundering, compulsive gambling and underage gambling.\u201d<\/p>\n Days later, hundreds of small-business owners, veterans, and other supporters of skill games had a very different message at a state Capitol rally. They had signs reading \u201cSUPPORT SKILL GAMES, SUPPORT SMALL BUSINESSES\u201d and others declaring that the machines help generate revenue for American Legion and Veterans of Foreign Wars posts.<\/p>\n \u201cDon\u2019t Hurt the Little Guy,\u201d read one sign in a scene captured by television cameras<\/a>.<\/p>\n Some supporters arrived on buses paid for by Pace-O-Matic, the out-of-state game developer that in recent years has become a political heavyweight in Pennsylvania, spending millions on lobbying and electoral campaigns, and growing an unregulated market that swept across corner stores, bars, gas stations, and other locations. <\/p>\n The dueling messages marked the latest clash between Parx and Pace-O-Matic in a yearslong political, legal, and public relations fight over the games, which has featured accusations of conflicts of interest and attempts to influence legislators, law enforcement authorities, and other government officials.<\/p>\n An Inquirer review of hundreds of pages of court records and interviews with key players offer an inside look at the behind-the-scenes battle to shape public policy in Harrisburg between Georgia-based Pace-O-Matic \u2014 a leading developer of software for the video game machines \u2014 and Bensalem\u2019s Parx Casino, which reported the most gross slot machine revenue<\/a>, $375 million, of any Pennsylvania casino operator last year. <\/p>\n In the last decade, skill game developers and manufacturers seized on a huge business opportunity, which casinos and other gambling interests say cost them market share. And some politicians were salivating over a new potential source of tax revenue, while others saw an unacceptable expansion of the vice economy. <\/p>\n That debate has reached a turning point, as the high court found that unregulated skill games are unlawful. But the court paused its order, giving lawmakers a window until October to legalize, tax, and regulate the games \u2014 or leave owners and operators vulnerable to prosecution. <\/p>\n Pennsylvania made a bet on gambling two decades ago, legalizing slot machines in casinos in 2004 as lawmakers sought a new stream of tax revenue. The legislature has since authorized more games such as poker and blackjack, sports betting, and video game terminals at truck stops. <\/p>\n Gambling outside casinos and other licensed establishments remains illegal. But corner store skill games managed to take off \u2014 in part because of a 2014 court decision that found Pace-O-Matic\u2019s game was not a \u201cgambling device\u201d under the state crimes code.<\/p>\n There are now an estimated 70,000 machines across the state, according to the Pennsylvania Attorney General\u2019s Office, not subject to the taxes or regulations on casino slot machines.<\/p>\n In his February budget address, Democratic Gov. Josh Shapiro proposed<\/a> a 52% tax on gross skill game revenues \u2014 roughly in line with the rate that applies to casino slot machines \u2014 which the administration projects<\/a> could generate almost $800 million in the first year of implementation. <\/p>\n Under his proposal, Shapiro would authorize<\/a> 40,000 skill game machines and video game terminals \u2014 which are already legal \u2014 statewide. That means tens of thousands of skill machines currently operating would be considered unlawful.<\/p>\n Separately, a bill supported by the skill game industry would impose a $500 monthly fee on each machine, cap the number of total machines at 50,000, and raise an estimated $300 million in tax dollars in the first year. The games are \u201ca small, lifeline raft to help mom-and-pop business owners,\u201d said State Rep. Danilo Burgos (D., Philadelphia), a sponsor of the bill<\/a>.<\/p>\n Casinos and other gaming interests are trying to protect a $6.8 billion market<\/a> in Pennsylvania. Pace-O-Matic\u2019s machines across the state generated about $525 million in gross revenue in 2024, with the company receiving 20% of that, minus certain discounts, and the rest going to operators that scout locations and stores that house the machines, according to court documents<\/a>.<\/p>\n But, come October, if its skill game machines ultimately are not legalized by the state legislature, Pace-O-Matic will pull out of Pennsylvania, said Mike Barley, the company\u2019s chief public affairs officer. \u201cWe\u2019ll always abide by the law.\u201d <\/p>\n Millions in lobbying<\/p>\n Pace-O-Matic has spent $8.4 million on lobbying in Harrisburg over the last five years, records show, the most by any single gaming company. In contrast, the operators of more than a dozen Pennsylvania casinos spent $7.6 million combined on lobbying during that time period, according to an Inquirer review of disclosures. <\/p>\n Lobbyists help draft legislation, communicate their clients\u2019 interests to policymakers, and wine and dine government officials. <\/p>\n And Pace-O-Matic has recruited Harrisburg insiders with close ties to state lawmakers for the job: a former member of the Republican National Committee, a former state senator, a onetime top aide to House and Senate Republicans<\/a>, and a former chief of staff to then-Gov. Tom Wolf, a Democrat.<\/p>\n Since 2021, a political action committee affiliated with the company has reported spending more than $9 million in Pennsylvania, with about two-thirds of that coming this year. <\/p>\n Part of that war chest was aimed at unseating three incumbent Republican state senators in primary elections this spring, as Pace-O-Matic took exception to a proposed skill games tax backed by Senate GOP leaders last year. More than $3 million went toward loan repayments to donors. <\/p>\n Pace-O-Matic has also devoted resources to fighting with its competitor, Parx Casino, in court.<\/p>\n Pace-O-Matic has filed numerous lawsuits, including several that accuse Parx\u2019s lobbyists of going beyond lawful advocacy and wrongfully interfering with its business relationships. <\/p>\n Parx has fought Pace-O-Matic\u2019s growth by privately drafting legislation to ban skill games, filing briefs opposing skill games to the state Supreme Court, and accusing Pace-O-Matic in a lawsuit of leading a criminal enterprise. <\/p>\n Parx spent almost $1.3 million on lobbying during the last five years, the most of any casino. Among its lobbyists is a former state senator who sponsored Parx-backed legislation to ban skill games. Parx\u2019s affiliated PAC, 2999 Group, has reported almost $1 million in expenditures since 2021. <\/p>\n \u201cIt\u2019s a scorched-earth campaign that nobody in town who I know has ever seen anything quite like it,\u201d said Pete Shelly, one of the Harrisburg lobbyists for Parx who was personally sued by Pace-O-Matic. \u201cThe amount of money they were able to spend, and the resources they threw at protecting their franchise, was astounding. And their tactics speak for themselves.\u201d<\/p>\n In response, Pace-O-Matic\u2019s Barley responded simply: \u201cDitto.\u201d<\/p>\n Drafting a bill<\/p>\n Founded in 2000 by Michael Pace \u2014 a pioneer of countertop video games \u2014 Pace-O-Matic expanded to Pennsylvania in 2014. The company took its game straight to the cops.<\/p>\n Pace-O-Matic says it asked<\/a> the Pennsylvania State Police whether its coin-operated tabletop machine qualified as a legal game of skill \u2014 or as an illegal gambling device. In an effort to test this legal question, the company and the Pennsylvania Bureau of Liquor Control Enforcement in November 2013 arranged for a \u201cfriendly\u201d seizure of its game at the American Italian Club in Aliquippa, Beaver County, according to court records<\/a>. <\/p>\n The judge sided with Pace-O-Matic<\/a>.<\/p>\n Whereas in a game of chance like a slot machine, the outcome is decided predominantly \u201con the basis of probability,\u201d the Pace-O-Matic game featured a level of interactivity that required skill, the judge wrote. That meant the state had failed to prove it was a gambling device.<\/p>\n The opinion gave the skill industry a boost, leading to a boom in machines across the state. Within a few years, Parx went on the offensive. <\/p>\n In 2019, representatives for Parx privately drafted legislation<\/a>, at the request of then-State Sen. Tommy Tomlinson (R., Bucks), to ban skill games, Spotlight PA reported. <\/p>\n In a March 2019 memo<\/a> to colleagues about his legislation, Tomlinson cited a lack of consumer protections to prevent minors from playing skill games and pointed to testimony from Pennsylvania Lottery officials that the machines divert funds from programs for seniors.<\/p>\n \u2018Coordinated litigation strike\u2019<\/p>\n Later that year, in July 2019, Parx outside attorney Mark Stewart e-mailed lawyers representing other casinos, proposing they join together to \u201claunch a coordinated litigation strike on the same day against a large number\u201d of stores that hosted Pace-O-Matic games, according to court papers.<\/p>\n The strike would put \u201cPA Skill\u201d \u2014 a reference to Pace-O-Matic\u2019s Pennsylvania Skill games \u2014 \u201con the defensive, having to run around, spend money, and dedicate time and personnel resources to defending the numerous suits,\u201d Stewart wrote. <\/p>\n He added that this would also \u201cdraw public and political attention to the illegality of the machines,\u201d according to a lawsuit Pace-O-Matic later filed against Stewart and his firm, Eckert Seamans Cherin & Mellott.<\/p>\n A few months later, Eckert filed dozens of lawsuits on behalf of Parx against retail locations that had skill games, including many that hosted Pace-O-Matic machines, the lawsuit said.<\/p>\n The law firm\u2019s involvement caught Pace-O-Matic\u2019s attention, the company says, because Eckert had represented the company in Virginia even as Stewart advocated against its interests in Pennsylvania. <\/p>\n Pace-O-Matic in 2020 filed a lawsuit accusing Eckert of violating the firm\u2019s fiduciary duties. In court filings, Eckert has denied the allegations, saying that the company knew about the firm\u2019s representation of gaming clients in Pennsylvania. A judge in 2022 signed an order prohibiting Eckert from advocating against the legality of Pace-O-Matic\u2019s skill games. The litigation is ongoing. <\/p>\n Stewart \u2014 now an executive vice president at the Cordish Cos., a Baltimore real estate and entertainment company whose properties include two Pennsylvania casinos \u2014 did not respond to a request for comment. A spokesperson for Eckert did not return a message.<\/p>\n That litigation unearthed emails showing coordination between Parx representatives and Tomlinson\u2019s office on the proposed legislative ban. <\/p>\n In the two years after he proposed that legislation, Tomlinson\u2019s campaigns received $20,000 in contributions from 2999 Group, the PAC led by Parx founder and chairman Robert W. Green. The PAC formed in 2020 after federal courts struck down a Pennsylvania law banning political contributions<\/a> from people involved in the gaming industry. <\/p>\n Tomlinson retired in 2022<\/a>. He registered a lobbying firm, RMT Legislative Consulting, in October 2024. He started lobbying for Parx the following month, records show.<\/p>\n Tomlinson did not respond to requests for comment.<\/p>\n \u2018STOP THESE MACHINES\u2019<\/p>\n While Tomlinson\u2019s legislation to ban skill games failed to advance, casinos pursued other avenues to protect their interests as the unregulated and untaxed games continued to proliferate throughout the state. <\/p>\n Ahead of a planned meeting with the office of then-Pennsylvania Attorney General Josh Shapiro in July 2021, Parx representatives drafted a PowerPoint presentation depicting a child playing a skill game under the heading \u201cSTOP THESE MACHINES,\u201d according to emails reviewed by The Inquirer. <\/p>\n The presentation argued that skill games were illegal, undercut revenue for the Pennsylvania Lottery and the programs it funds for seniors, and failed to comply with anti-money laundering rules that \u201cguard against organized crime and terrorist groups.\u201d<\/p>\n Parx lobbyists wanted to meet with the attorney general\u2019s office, emails show, because they believed prosecutors were preventing the state police from seizing skill games. The attorney general\u2019s office had said in a statement that while the office maintained that skill games were illegal, it would not \u201cactively seize machines\u201d until the state Commonwealth Court provided guidance on whether they were legal.<\/p>\n Reached by The Inquirer, the Pennsylvania Attorney General\u2019s Office \u2014 now led by Republican Dave Sunday<\/a> \u2014 said it was unable to confirm if that meeting took place. A spokesperson said the office maintained the posture reflected in its public statement and \u201csuccessfully advocated for that position leading to the Supreme Court\u2019s decisive ruling.\u201d <\/p>\n Pace-O-Matic\u2019s Barley said that around this time, there was a \u201cnotable shift in the way the OAG\u2019s office treated our games.\u201d Prosecutors started working with counties to coordinate seizures of games, he said, but Pace-O-Matic successfully challenged those actions and its property was returned.<\/p>\n Casino interests reached out to local law enforcement authorities as well. <\/p>\n When an executive at Mohegan Pennsylvania casino in Wilkes-Barre spotted a new coffee shop in nearby Kingston that advertised Pace-O-Matic games, he contacted his lobbying team, including Stewart and Shelly, the lobbyist who was later sued by Pace-O-Matic, emails show.<\/p>\n \u201cMaybe instead of [Pennsylvania State Police] or local police, we send letter to Luzerne County DA,\u201d Shelly wrote in a March 2021 email to colleagues.<\/p>\n \u201cSeems good idea,\u201d Stewart responded, noting that they had previously sent a letter to the district attorney in Monroe County about skill games.<\/p>\n An alleged conflict of interest<\/p>\n Soon after, the fight over skill games became personal.<\/p>\n Pace-O-Matic in 2022 filed lawsuits against three Parx lobbyists \u2014 Shelly, Richard Gmerek, and Sean Schafer \u2014 accusing them of attempting to sabotage Pace-O-Matic\u2019s business. In court papers, attorneys for the lobbyists have denied the allegations. The case is ongoing.<\/p>\n In an interview, Parx CEO Eric Hausler said Pace-O-Matic\u2019s lawsuits aimed to \u201cshut our people up, and shut us up, by trying to intimidate our people into being silent about what we believed and continue to believe was a form of illegal gambling.\u201d<\/p>\n He said the firm\u2019s lobbying was appropriate. \u201cWe reached out to anybody that would listen to us, whether it was regulators or the attorney general\u2019s office or the legislature, to say, \u2018These are slot machines,\u2019\u201d Hausler said.<\/p>\n The Parx CEO noted that the law firm representing Pace-O-Matic in those cases, the McCormick Law Firm, employs State Sen. Gene Yaw (R., Lycoming), a proponent of legislation favored by the skill games industry. Yaw\u2019s wife, Ann S. Pepperman, is a partner at Williamsport-based McCormick. The CEO described Yaw\u2019s association with the firm as a \u201cclear conflict of interest.\u201d<\/p>\n Yaw told the Pennsylvania Capital-Star in 2023<\/a> that he does not consult with anyone at his firm about Pace-O-Matic. <\/p>\n Yaw has benefited from Pace-O-Matic\u2019s political giving. Operators for Skill, a PAC led and funded in part by Pace-O-Matic executives, has contributed $47,500 to Yaw\u2019s campaigns since 2021, records show.<\/p>\n His district is home to Miele Manufacturing, a company that makes and distributes Pace-O-Matic\u2019s Pennsylvania Skill machines.<\/p>\n In response to written questions about whether Yaw or his wife has benefited financially from McCormick\u2019s representation of Pace-O-Matic, a spokesperson said the senator had no comment.<\/p>\n Pace-O-Matic representatives have said the company\u2019s leaders and PAC donate to many candidates in both parties.<\/p>\n Targeting incumbent senators<\/p>\n Beyond Yaw, Pace-O-Matic has cultivated plenty of allies in Harrisburg, contributing millions to politicians\u2019 campaigns and inviting lawmakers to an outdoor rodeo festival<\/a> in Wyoming \u2014 and helping pay for some members\u2019 travel. The company has said the purpose of the 2022 trip was to help lawmakers learn from Wyoming legislators about that state\u2019s regulated skill game industry.<\/p>\n But Pace-O-Matic has also alienated some lawmakers, who have described its tactics as overly aggressive.<\/p>\n Last year, the company contributed hundreds of thousands of dollars to a federal super PAC called Citizens Alliance Political Action Committee Inc., which in turn donated to an Ohio-based PAC called Defeating Communism.<\/p>\n Defeating Communism distributed flyers <\/a>attacking Pennsylvania Republican state senators who had taken positions at odds with the skill game industry. \u201cTell Senator Farry to stop targeting PA Firefighters + Veterans!\u201d read one flyer targeting State Sen. Frank Farry, a Bucks County<\/a> Republican and longtime volunteer firefighter who had introduced legislation to tax skill games at the same rate as casinos. <\/p>\n The skill games industry says many volunteer fire departments and Veterans of Foreign Wars posts generate income from their machines.<\/p>\n Pace-O-Matic upped the ante this year, targeting three sitting Republican senators who were facing primary campaigns this spring. A company affiliate contributed $1 million this year to the Citizens Alliance super PAC, which contributed $2.8 million to a state PAC of the same name.<\/p>\n The state PAC spent that money in part on TV ads and mail literature against incumbent Sens. Lisa Baker (R., Luzerne), Camera Bartolotta (R., Washington) \u2014 both of whom are members of GOP leadership<\/a> \u2014 and Chris Gebhard (R., Lebanon). Gebhard wrote a bill last year that proposed taxing skill games at a rate the industry argued was too high.<\/p>\n Operators for Skill, the Pace-O-Matic-affiliated PAC, gave $950,000 this year to Citizens Alliance of Pennsylvania PAC, a separate state group that also invested in campaigns against the three senators.<\/p>\n Citizens Alliance<\/a> is a national organization with chapters in several states, including Pennsylvania<\/a>. Citizens Alliance CEO Cliff Maloney said his group opposes net increases in taxes and fees, and it works \u201cwith partners who agree and want to advance our principles.\u201d<\/p>\n In Bartolotta\u2019s race, voters were getting upward of six mailers each day about her that she described as filled with \u201cevery ridiculous lie and smear.\u201d <\/p>\n She remains confused why she was targeted by Pace-O-Matic, arguing that she has always supported fraternal organizations and other small businesses using the machines as an additional revenue source.<\/p>\n \u201cClearly Pace-O-Matic was making money hand over fist and they didn\u2019t want to be regulated and they didn\u2019t want to be taxed,\u201d Bartolotta said. \u201cThey wanted it to be the wild, wild west.\u201d<\/p>\n The outside money prompted Senate Republicans\u2019 campaign arm to spend hundreds of thousands of dollars protecting the incumbents, who ultimately prevailed. The senators also got a boost from sports betting interests, which spent millions backing their campaigns, Spotlight PA reported<\/a>. That intervention came after a coalition of online sports betting sites helped stave off a last-minute effort<\/a> to tax sports bets last year.<\/p>\n Asked about Pace-O-Matic\u2019s decision to invest in those races, Barley said, \u201cThere\u2019s a part of us that doesn\u2019t feel like our positions were being heard fairly.\u201d <\/p>\n Political skill<\/p>\n Despite the electoral setbacks, Pace-O-Matic has maintained support among a broad cross-section of lawmakers \u2014 from State Sen. Anthony H. Williams, a Philadelphia Democrat, to Yaw, the Lycoming County Republican \u2014 who point to the revenue skill games generate for small businesses.<\/p>\n \u201cWe signed up to protect the small-business owner, and in this time when everybody talks about affordability, I can\u2019t afford a 52% tax,\u201d Williams said at the recent rally, referring to the governor\u2019s proposal. <\/p>\n He and Yaw have sponsored legislation backed by the industry that would impose the $500 monthly fees on game terminals. In an interview, Williams said the bill would reduce the number of skill games operators in his community \u201csignificantly\u201d and ensure proper regulation, adding that he was concerned about locations that offer games in addition to selling liquor by the drink and loose cigarettes.<\/p>\n The political committee aligned with Pace-O-Matic, Operators for Skill, has contributed $70,000 to Williams\u2019 campaign account since last year, records show. Williams, the top Democrat on a Senate panel<\/a> that oversees gambling, said he developed his policy position before receiving that campaign money. He noted he has also received contributions from casino interests.<\/p>\n \u201cI don\u2019t get a contribution and then decide to support something,\u201d he said. \u201cI\u2019ve never done that.\u201d<\/p>\n Parx CEO Hausler said he is sympathetic to small businesses that host the machines but argued regulation will improve the quality of the games and reduce the number of locations competing with them.<\/p>\n But he argued that skill games should face the same tax rate as casino slot machines, and called the Yaw-Williams bill a \u201csweetheart deal.\u201d<\/p>\n \u201cI think of it like, \u2018I was making $20 an hour in cash off the books. And now I gotta pay taxes,\u2019\u201d he said. <\/p>\n Hausler said Pennsylvania\u2019s casino industry employs 15,000 people and pays more than $2 billion annually in gaming taxes that fund property tax relief, horse racing, and local government grants.<\/p>\n How legislators will balance those interests \u2014 and address a perennial budget deficit \u2014 remains to be seen. Under Shapiro\u2019s proposed $53 billion budget, the state would spend<\/a> $4.8 billion more than it is projected to take in over the next fiscal year.<\/p>\n \u201cIt\u2019s important that lawmakers act. We don\u2019t want something that\u2019s rushed. We want something that grows the foundation for our future,\u201d Doug Sprankle, a Western Pennsylvania grocery store owner who runs a skill games advocacy group, said during the Capitol rally.<\/p>\n There are signs that at least some lawmakers are not ready to cut ties with Pace-O-Matic or the skill game industry. <\/p>\n