How ‘skill games’ exploded across Pennsylvania — and sparked a multimillion-dollar political fight

Shortly after the Pennsylvania Supreme Court dealt a legal blow to so-called skill games in June, the CEO of Parx Casino celebrated the decision and blamed the unregulated slot machine-like devices for attracting “rampant crime, money laundering, compulsive gambling and underage gambling.”

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 “SUPPORT SKILL GAMES, SUPPORT SMALL BUSINESSES” and others declaring that the machines help generate revenue for American Legion and Veterans of Foreign Wars posts.

“Don’t Hurt the Little Guy,” read one sign in a scene captured by television cameras.

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.

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.

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 — a leading developer of software for the video game machines — and Bensalem’s Parx Casino, which reported the most gross slot machine revenue, $375 million, of any Pennsylvania casino operator last year.

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.

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 — or leave owners and operators vulnerable to prosecution.

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.

Gambling outside casinos and other licensed establishments remains illegal. But corner store skill games managed to take off — in part because of a 2014 court decision that found Pace-O-Matic’s game was not a “gambling device” under the state crimes code.

There are now an estimated 70,000 machines across the state, according to the Pennsylvania Attorney General’s Office, not subject to the taxes or regulations on casino slot machines.

In his February budget address, Democratic Gov. Josh Shapiro proposed a 52% tax on gross skill game revenues — roughly in line with the rate that applies to casino slot machines — which the administration projects could generate almost $800 million in the first year of implementation.

Under his proposal, Shapiro would authorize 40,000 skill game machines and video game terminals — which are already legal — statewide. That means tens of thousands of skill machines currently operating would be considered unlawful.

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 “a small, lifeline raft to help mom-and-pop business owners,” said State Rep. Danilo Burgos (D., Philadelphia), a sponsor of the bill.

Casinos and other gaming interests are trying to protect a $6.8 billion market in Pennsylvania. Pace-O-Matic’s 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.

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’s chief public affairs officer. “We’ll always abide by the law.”

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.

Lobbyists help draft legislation, communicate their clients’ interests to policymakers, and wine and dine government officials.

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, and a former chief of staff to then-Gov. Tom Wolf, a Democrat.

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.

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.

Pace-O-Matic has also devoted resources to fighting with its competitor, Parx Casino, in court.

Pace-O-Matic has filed numerous lawsuits, including several that accuse Parx’s lobbyists of going beyond lawful advocacy and wrongfully interfering with its business relationships.

Parx has fought Pace-O-Matic’s 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.

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’s affiliated PAC, 2999 Group, has reported almost $1 million in expenditures since 2021.

“It’s a scorched-earth campaign that nobody in town who I know has ever seen anything quite like it,” said Pete Shelly, one of the Harrisburg lobbyists for Parx who was personally sued by Pace-O-Matic. “The 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.”

In response, Pace-O-Matic’s Barley responded simply: “Ditto.”

Founded in 2000 by Michael Pace — a pioneer of countertop video games — Pace-O-Matic expanded to Pennsylvania in 2014. The company took its game straight to the cops.

Pace-O-Matic says it asked the Pennsylvania State Police whether its coin-operated tabletop machine qualified as a legal game of skill — 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 “friendly” seizure of its game at the American Italian Club in Aliquippa, Beaver County, according to court records.

The judge sided with Pace-O-Matic.

Whereas in a game of chance like a slot machine, the outcome is decided predominantly “on the basis of probability,” 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.

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.

In 2019, representatives for Parx privately drafted legislation, at the request of then-State Sen. Tommy Tomlinson (R., Bucks), to ban skill games, Spotlight PA reported.

In a March 2019 memo 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.

Later that year, in July 2019, Parx outside attorney Mark Stewart e-mailed lawyers representing other casinos, proposing they join together to “launch a coordinated litigation strike on the same day against a large number” of stores that hosted Pace-O-Matic games, according to court papers.

The strike would put “PA Skill” — a reference to Pace-O-Matic’s Pennsylvania Skill games — “on the defensive, having to run around, spend money, and dedicate time and personnel resources to defending the numerous suits,” Stewart wrote.

He added that this would also “draw public and political attention to the illegality of the machines,” according to a lawsuit Pace-O-Matic later filed against Stewart and his firm, Eckert Seamans Cherin & Mellott.

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.

The law firm’s involvement caught Pace-O-Matic’s attention, the company says, because Eckert had represented the company in Virginia even as Stewart advocated against its interests in Pennsylvania.

Pace-O-Matic in 2020 filed a lawsuit accusing Eckert of violating the firm’s fiduciary duties. In court filings, Eckert has denied the allegations, saying that the company knew about the firm’s representation of gaming clients in Pennsylvania. A judge in 2022 signed an order prohibiting Eckert from advocating against the legality of Pace-O-Matic’s skill games. The litigation is ongoing.

Stewart — now an executive vice president at the Cordish Cos., a Baltimore real estate and entertainment company whose properties include two Pennsylvania casinos — did not respond to a request for comment. A spokesperson for Eckert did not return a message.

That litigation unearthed emails showing coordination between Parx representatives and Tomlinson’s office on the proposed legislative ban.

In the two years after he proposed that legislation, Tomlinson’s 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 from people involved in the gaming industry.

Tomlinson retired in 2022. He registered a lobbying firm, RMT Legislative Consulting, in October 2024. He started lobbying for Parx the following month, records show.

Tomlinson did not respond to requests for comment.

While Tomlinson’s 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.

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 “STOP THESE MACHINES,” according to emails reviewed by The Inquirer.

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 “guard against organized crime and terrorist groups.”

Parx lobbyists wanted to meet with the attorney general’s office, emails show, because they believed prosecutors were preventing the state police from seizing skill games. The attorney general’s office had said in a statement that while the office maintained that skill games were illegal, it would not “actively seize machines” until the state Commonwealth Court provided guidance on whether they were legal.

Reached by The Inquirer, the Pennsylvania Attorney General’s Office — now led by Republican Dave Sunday — 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 “successfully advocated for that position leading to the Supreme Court’s decisive ruling.”

Pace-O-Matic’s Barley said that around this time, there was a “notable shift in the way the OAG’s office treated our games.” 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.

Casino interests reached out to local law enforcement authorities as well.

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.

“Maybe instead of [Pennsylvania State Police] or local police, we send letter to Luzerne County DA,” Shelly wrote in a March 2021 email to colleagues.

“Seems good idea,” Stewart responded, noting that they had previously sent a letter to the district attorney in Monroe County about skill games.

Soon after, the fight over skill games became personal.

Pace-O-Matic in 2022 filed lawsuits against three Parx lobbyists — Shelly, Richard Gmerek, and Sean Schafer — accusing them of attempting to sabotage Pace-O-Matic’s business. In court papers, attorneys for the lobbyists have denied the allegations. The case is ongoing.

In an interview, Parx CEO Eric Hausler said Pace-O-Matic’s lawsuits aimed to “shut 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.”

He said the firm’s lobbying was appropriate. “We reached out to anybody that would listen to us, whether it was regulators or the attorney general’s office or the legislature, to say, ‘These are slot machines,’” Hausler said.

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’s wife, Ann S. Pepperman, is a partner at Williamsport-based McCormick. The CEO described Yaw’s association with the firm as a “clear conflict of interest.”

Yaw told the Pennsylvania Capital-Star in 2023 that he does not consult with anyone at his firm about Pace-O-Matic.

Yaw has benefited from Pace-O-Matic’s political giving. Operators for Skill, a PAC led and funded in part by Pace-O-Matic executives, has contributed $47,500 to Yaw’s campaigns since 2021, records show.

His district is home to Miele Manufacturing, a company that makes and distributes Pace-O-Matic’s Pennsylvania Skill machines.

In response to written questions about whether Yaw or his wife has benefited financially from McCormick’s representation of Pace-O-Matic, a spokesperson said the senator had no comment.

Pace-O-Matic representatives have said the company’s leaders and PAC donate to many candidates in both parties.

Beyond Yaw, Pace-O-Matic has cultivated plenty of allies in Harrisburg, contributing millions to politicians’ campaigns and inviting lawmakers to an outdoor rodeo festival in Wyoming — and helping pay for some members’ travel. The company has said the purpose of the 2022 trip was to help lawmakers learn from Wyoming legislators about that state’s regulated skill game industry.

But Pace-O-Matic has also alienated some lawmakers, who have described its tactics as overly aggressive.

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.

Defeating Communism distributed flyers attacking Pennsylvania Republican state senators who had taken positions at odds with the skill game industry. “Tell Senator Farry to stop targeting PA Firefighters + Veterans!” read one flyer targeting State Sen. Frank Farry, a Bucks County Republican and longtime volunteer firefighter who had introduced legislation to tax skill games at the same rate as casinos.

The skill games industry says many volunteer fire departments and Veterans of Foreign Wars posts generate income from their machines.

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.

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) — both of whom are members of GOP leadership — 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.

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.

Citizens Alliance is a national organization with chapters in several states, including Pennsylvania. Citizens Alliance CEO Cliff Maloney said his group opposes net increases in taxes and fees, and it works “with partners who agree and want to advance our principles.”

In Bartolotta’s race, voters were getting upward of six mailers each day about her that she described as filled with “every ridiculous lie and smear.”

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.

“Clearly Pace-O-Matic was making money hand over fist and they didn’t want to be regulated and they didn’t want to be taxed,” Bartolotta said. “They wanted it to be the wild, wild west.”

The outside money prompted Senate Republicans’ 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. That intervention came after a coalition of online sports betting sites helped stave off a last-minute effort to tax sports bets last year.

Asked about Pace-O-Matic’s decision to invest in those races, Barley said, “There’s a part of us that doesn’t feel like our positions were being heard fairly.”

Despite the electoral setbacks, Pace-O-Matic has maintained support among a broad cross-section of lawmakers — from State Sen. Anthony H. Williams, a Philadelphia Democrat, to Yaw, the Lycoming County Republican — who point to the revenue skill games generate for small businesses.

“We signed up to protect the small-business owner, and in this time when everybody talks about affordability, I can’t afford a 52% tax,” Williams said at the recent rally, referring to the governor’s proposal.

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 “significantly” 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.

The political committee aligned with Pace-O-Matic, Operators for Skill, has contributed $70,000 to Williams’ campaign account since last year, records show. Williams, the top Democrat on a Senate panel that oversees gambling, said he developed his policy position before receiving that campaign money. He noted he has also received contributions from casino interests.

“I don’t get a contribution and then decide to support something,” he said. “I’ve never done that.”

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.

But he argued that skill games should face the same tax rate as casino slot machines, and called the Yaw-Williams bill a “sweetheart deal.”

“I think of it like, ‘I was making $20 an hour in cash off the books. And now I gotta pay taxes,’” he said.

Hausler said Pennsylvania’s 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.

How legislators will balance those interests — and address a perennial budget deficit — remains to be seen. Under Shapiro’s proposed $53 billion budget, the state would spend $4.8 billion more than it is projected to take in over the next fiscal year.

“It’s important that lawmakers act. We don’t want something that’s rushed. We want something that grows the foundation for our future,” Doug Sprankle, a Western Pennsylvania grocery store owner who runs a skill games advocacy group, said during the Capitol rally.

There are signs that at least some lawmakers are not ready to cut ties with Pace-O-Matic or the skill game industry.

Pennsylvania House Republican leaders have invited prospective donors to a July 27 outing at the Aronimink Golf Club in Newtown Square, with a reception and dinner to follow the tournament, according to a fundraising solicitation obtained by The Inquirer.

Listed alongside the event’s sponsors was Operators for Skill, the Pace-O-Matic PAC.

Staff writer Gillian McGoldrick contributed to this article.