Behind the battle over Pa. ‘skill games’: lobbying, lawsuits, and thousands and thousands in political spending

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

Days later, tons of of small-business house owners, veterans, and different supporters of talent video games had a really totally different message at a state Capitol rally. They had indicators studying “SUPPORT SKILL GAMES, SUPPORT SMALL BUSINESSES” and others declaring that the machines assist generate income for American Legion and Veterans of Foreign Wars posts.

“Don’t Hurt the Little Guy,” learn one register a scene captured by television cameras.

Some supporters arrived on buses paid for by Pace-O-Matic, the out-of-state sport developer that in recent times has turn into a political heavyweight in Pennsylvania, spending thousands and thousands on lobbying and electoral campaigns, and rising an unregulated market that swept throughout nook shops, bars, fuel stations, and different places.

The dueling messages marked the most recent conflict between Parx and Pace-O-Matic in a yearslong political, authorized, and public relations battle over the video games, which has featured accusations of conflicts of curiosity and makes an attempt to affect legislators, legislation enforcement authorities, and different authorities officers.

An Inquirer overview of tons of of pages of courtroom information and interviews with key gamers supply an inside have a look at the behind-the-scenes battle to form public coverage in Harrisburg between Georgia-based Pace-O-Matic — a number one developer of software program for the online game machines — and Bensalem’s Parx Casino, which reported the most gross slot machine revenue, $375 million, of any Pennsylvania on line casino operator final yr.

In the final decade, talent sport builders and producers seized on an enormous enterprise alternative, which casinos and different playing pursuits say price them market share. And some politicians have been salivating over a brand new potential supply of tax income, whereas others noticed an unacceptable enlargement of the vice financial system.

That debate has reached a turning level, because the excessive courtroom discovered that unregulated talent video games are illegal. But the courtroom paused its order, giving lawmakers a window till October to legalize, tax, and regulate the video games — or depart house owners and operators weak to prosecution.

Pennsylvania made a guess on playing 20 years in the past, legalizing slot machines in casinos in 2004 as lawmakers sought a brand new stream of tax income. The legislature has since licensed extra video games akin to poker and blackjack, sports activities betting, and online game terminals at truck stops.

Gambling exterior casinos and different licensed institutions stays unlawful. But nook retailer talent video games managed to take off — partly due to a 2014 courtroom resolution that discovered Pace-O-Matic’s sport was not a “gambling device” underneath the state crimes code.

There at the moment are an estimated 70,000 machines throughout the state, in accordance with the Pennsylvania Attorney General’s Office, not topic to the taxes or laws on on line casino slot machines.

In his February price range handle, Democratic Gov. Josh Shapiro proposed a 52% tax on gross talent sport revenues — roughly in step with the speed that applies to on line casino slot machines — which the administration projects may generate nearly $800 million within the first yr of implementation.

Under his proposal, Shapiro would authorize 40,000 talent sport machines and online game terminals — that are already authorized — statewide. That means tens of 1000’s of talent machines presently working could be thought of illegal.

Separately, a invoice supported by the talent sport business would impose a $500 month-to-month charge on every machine, cap the variety of complete machines at 50,000, and lift an estimated $300 million in tax {dollars} within the first yr. The video games are “a small, lifeline raft to help mom-and-pop business owners,” stated State Rep. Danilo Burgos (D., Philadelphia), a sponsor of the bill.

Casinos and different gaming pursuits try to guard a $6.8 billion market in Pennsylvania. Pace-O-Matic’s machines throughout the state generated about $525 million in gross income in 2024, with the corporate receiving 20% of that, minus sure reductions, and the remainder going to operators that scout places and shops that home the machines, according to court documents.

But, come October, if its talent sport machines in the end are usually not legalized by the state legislature, Pace-O-Matic will pull out of Pennsylvania, stated Mike Barley, the corporate’s chief public affairs officer. “We’ll always abide by the law.”

Millions in lobbying

Pace-O-Matic has spent $8.4 million on lobbying in Harrisburg during the last 5 years, information present, probably the most by any single gaming firm. In distinction, the operators of greater than a dozen Pennsylvania casinos spent $7.6 million mixed on lobbying throughout that point interval, in accordance with an Inquirer overview of disclosures.

Lobbyists assist draft laws, talk their purchasers’ pursuits to policymakers, and wine and dine authorities officers.

And Pace-O-Matic has recruited Harrisburg insiders with shut ties to state lawmakers for the job: a former member of the Republican National Committee, a former state senator, a onetime prime aide to House and Senate Republicans, and a former chief of employees to then-Gov. Tom Wolf, a Democrat.

Since 2021, a political motion committee affiliated with the corporate has reported spending greater than $9 million in Pennsylvania, with about two-thirds of that coming this yr.

Part of that conflict chest was aimed toward unseating three incumbent Republican state senators in major elections this spring, as Pace-O-Matic took exception to a proposed talent video games tax backed by Senate GOP leaders final yr. More than $3 million went towards mortgage repayments to donors.

Pace-O-Matic has additionally devoted assets to combating with its competitor, Parx Casino, in courtroom.

Pace-O-Matic has filed quite a few lawsuits, together with a number of that accuse Parx’s lobbyists of going past lawful advocacy and wrongfully interfering with its enterprise relationships.

Parx has fought Pace-O-Matic’s progress by privately drafting laws to ban talent video games, submitting briefs opposing talent video games to the state Supreme Court, and accusing Pace-O-Matic in a lawsuit of main a prison enterprise.

Parx spent nearly $1.3 million on lobbying over the past 5 years, probably the most of any on line casino. Among its lobbyists is a former state senator who sponsored Parx-backed laws to ban talent video games. Parx’s affiliated PAC, 2999 Group, has reported nearly $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,” stated Pete Shelly, one of many 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 merely: “Ditto.”

Drafting a invoice

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

Pace-O-Matic says it asked the Pennsylvania State Police whether or not its coin-operated tabletop machine certified as a authorized sport of talent — or as an unlawful playing machine. In an effort to check this authorized query, the corporate and the Pennsylvania Bureau of Liquor Control Enforcement in November 2013 organized for a “friendly” seizure of its sport on the American Italian Club in Aliquippa, Beaver County, in accordance with court records.

The decide sided with Pace-O-Matic.

Whereas in a sport of likelihood like a slot machine, the end result is determined predominantly “on the basis of probability,” the Pace-O-Matic sport featured a degree of interactivity that required talent, the decide wrote. That meant the state had did not show it was a playing machine.

The opinion gave the talent business a lift, resulting in a increase in machines throughout the state. Within a couple of years, Parx went on the offensive.

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

In a March 2019 memo to colleagues about his laws, Tomlinson cited an absence of client protections to stop minors from enjoying talent video games and pointed to testimony from Pennsylvania Lottery officers that the machines divert funds from applications for seniors.

‘Coordinated litigation strike’

Later that yr, in July 2019, Parx exterior lawyer Mark Stewart e-mailed legal professionals representing different casinos, proposing they be a part of collectively to “launch a coordinated litigation strike on the same day against a large number” of shops that hosted Pace-O-Matic video games, in accordance with courtroom papers.

The strike would put “PA Skill” — a reference to Pace-O-Matic’s Pennsylvania Skill video 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 is able to additionally “draw public and political attention to the illegality of the machines,” in accordance with a lawsuit Pace-O-Matic later filed in opposition to Stewart and his agency, Eckert Seamans Cherin & Mellott.

Just a few months later, Eckert filed dozens of lawsuits on behalf of Parx in opposition to retail places that had talent video games, together with many who hosted Pace-O-Matic machines, the lawsuit stated.

The legislation agency’s involvement caught Pace-O-Matic’s consideration, the corporate says, as a result of Eckert had represented the corporate in Virginia at the same time as Stewart advocated in opposition to its pursuits in Pennsylvania.

Pace-O-Matic in 2020 filed a lawsuit accusing Eckert of violating the agency’s fiduciary duties. In courtroom filings, Eckert has denied the allegations, saying that the corporate knew concerning the agency’s illustration of gaming purchasers in Pennsylvania. A decide in 2022 signed an order prohibiting Eckert from advocating in opposition to the legality of Pace-O-Matic’s talent video games. The litigation is ongoing.

Stewart — now an govt vice chairman on the Cordish Cos., a Baltimore actual property and leisure firm whose properties embrace two Pennsylvania casinos — didn’t reply to a request for remark. A spokesperson for Eckert didn’t return a message.

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

In the 2 years after he proposed that laws, Tomlinson’s campaigns acquired $20,000 in contributions from 2999 Group, the PAC led by Parx founder and chairman Robert W. Green. The PAC shaped in 2020 after federal courts struck down a Pennsylvania legislation banning political contributions from folks concerned within the gaming business.

Tomlinson retired in 2022. He registered a lobbying agency, RMT Legislative Consulting, in October 2024. He began lobbying for Parx the next month, information present.

Tomlinson didn’t reply to requests for remark.

‘STOP THESE MACHINES’

While Tomlinson’s laws to ban talent video games did not advance, casinos pursued different avenues to guard their pursuits because the unregulated and untaxed video games continued to proliferate all through the state.

Ahead of a deliberate assembly with the workplace of then-Pennsylvania Attorney General Josh Shapiro in July 2021, Parx representatives drafted a PowerPoint presentation depicting a baby enjoying a talent sport underneath the heading “STOP THESE MACHINES,” in accordance with emails reviewed by The Inquirer.

The presentation argued that talent video games have been unlawful, undercut income for the Pennsylvania Lottery and the applications it funds for seniors, and did not adjust to anti-money laundering guidelines that “guard against organized crime and terrorist groups.”

Parx lobbyists wished to fulfill with the lawyer normal’s workplace, emails present, as a result of they believed prosecutors have been stopping the state police from seizing talent video games. The lawyer normal’s workplace had stated in a press release that whereas the workplace maintained that talent video games have been unlawful, it will not “actively seize machines” till the state Commonwealth Court offered steering on whether or not they have been authorized.

Reached by The Inquirer, the Pennsylvania Attorney General’s Office — now led by Republican Dave Sunday — stated it was unable to verify if that assembly came about. A spokesperson stated the workplace maintained the posture mirrored in its public assertion and “successfully advocated for that position leading to the Supreme Court’s decisive ruling.”

Pace-O-Matic’s Barley stated that round this time, there was a “notable shift in the way the OAG’s office treated our games.” Prosecutors began working with counties to coordinate seizures of video games, he stated, however Pace-O-Matic efficiently challenged these actions and its property was returned.

Casino pursuits reached out to native legislation enforcement authorities as effectively.

When an govt at Mohegan Pennsylvania on line casino in Wilkes-Barre noticed a brand new espresso store in close by Kingston that marketed Pace-O-Matic video games, he contacted his lobbying workforce, together with Stewart and Shelly, the lobbyist who was later sued by Pace-O-Matic, emails present.

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

“Seems good idea,” Stewart responded, noting that that they had beforehand despatched a letter to the district lawyer in Monroe County about talent video games.

An alleged battle of curiosity

Soon after, the battle over talent video games grew to become private.

Pace-O-Matic in 2022 filed lawsuits in opposition to three Parx lobbyists — Shelly, Richard Gmerek, and Sean Schafer — accusing them of making an attempt to sabotage Pace-O-Matic’s enterprise. In courtroom papers, attorneys for the lobbyists have denied the allegations. The case is ongoing.

In an interview, Parx CEO Eric Hausler stated 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 stated the agency’s lobbying was applicable. “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 stated.

The Parx CEO famous that the legislation agency representing Pace-O-Matic in these instances, the McCormick Law Firm, employs State Sen. Gene Yaw (R., Lycoming), a proponent of laws favored by the talent video games business. Yaw’s spouse, Ann S. Pepperman, is a companion at Williamsport-based McCormick. The CEO described Yaw’s affiliation with the agency as a “clear conflict of interest.”

Yaw advised the Pennsylvania Capital-Star in 2023 that he doesn’t seek the advice of with anybody at his agency about Pace-O-Matic.

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

His district is dwelling to Miele Manufacturing, an organization that makes and distributes Pace-O-Matic’s Pennsylvania Skill machines.

In response to written questions on whether or not Yaw or his spouse has benefited financially from McCormick’s illustration of Pace-O-Matic, a spokesperson stated the senator had no remark.

Pace-O-Matic representatives have stated the corporate’s leaders and PAC donate to many candidates in each events.

Targeting incumbent senators

Beyond Yaw, Pace-O-Matic has cultivated loads of allies in Harrisburg, contributing thousands and thousands to politicians’ campaigns and welcoming lawmakers to an outdoor rodeo festival in Wyoming — and serving to pay for some members’ journey. The firm has stated the aim of the 2022 journey was to assist lawmakers be taught from Wyoming legislators about that state’s regulated talent sport business.

But Pace-O-Matic has additionally alienated some lawmakers, who’ve described its ways as overly aggressive.

Last yr, the corporate contributed tons of of 1000’s of {dollars} to a federal tremendous PAC known as Citizens Alliance Political Action Committee Inc., which in flip donated to an Ohio-based PAC known as Defeating Communism.

Defeating Communism distributed flyers attacking Pennsylvania Republican state senators who had taken positions at odds with the talent sport business. “Tell Senator Farry to stop targeting PA Firefighters + Veterans!” learn one flyer focusing on State Sen. Frank Farry, a Bucks County Republican and longtime volunteer firefighter who had launched laws to tax talent video games on the identical fee as casinos.

The talent video games business says many volunteer fireplace departments and Veterans of Foreign Wars posts generate earnings from their machines.

Pace-O-Matic upped the ante this yr, focusing on three sitting Republican senators who have been dealing with major campaigns this spring. An organization affiliate contributed $1 million this yr to the Citizens Alliance tremendous PAC, which contributed $2.8 million to a state PAC of the identical title.

The state PAC spent that cash partly on TV adverts and mail literature in opposition to incumbent Sens. Lisa Baker (R., Luzerne), Camera Bartolotta (R., Washington) — each of whom are members of GOP leadership — and Chris Gebhard (R., Lebanon). Gebhard wrote a invoice final yr that proposed taxing talent video games at a fee the business argued was too excessive.

Operators for Skill, the Pace-O-Matic-affiliated PAC, gave $950,000 this yr to Citizens Alliance of Pennsylvania PAC, a separate state group that additionally invested in campaigns in opposition to the three senators.

Citizens Alliance is a nationwide group with chapters in a number of states, including Pennsylvania. Citizens Alliance CEO Cliff Maloney stated his group opposes web will increase in taxes and costs, and it really works “with partners who agree and want to advance our principles.”

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

She stays confused why she was focused by Pace-O-Matic, arguing that she has all the time supported fraternal organizations and different small companies utilizing the machines as an extra income supply.

“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 stated. “They wanted it to be the wild, wild west.”

The exterior cash prompted Senate Republicans’ marketing campaign arm to spend tons of of 1000’s of {dollars} defending the incumbents, who in the end prevailed. The senators additionally acquired a lift from sports activities betting pursuits, which spent thousands and thousands backing their campaigns, Spotlight PA reported. That intervention got here after a coalition of on-line sports activities betting websites helped stave off a last-minute effort to tax sports activities bets final yr.

Asked about Pace-O-Matic’s resolution to put money into these races, Barley stated, “There’s a part of us that doesn’t feel like our positions were being heard fairly.”

Political talent

Despite the electoral setbacks, Pace-O-Matic has maintained help amongst a broad cross-section of lawmakers — from State Sen. Anthony H. Williams, a Philadelphia Democrat, to Yaw, the Lycoming County Republican — who level to the income talent video games generate for small companies.

“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 stated on the current rally, referring to the governor’s proposal.

He and Yaw have sponsored laws backed by the business that may impose the $500 month-to-month charges on sport terminals. In an interview, Williams stated the invoice would scale back the variety of talent video games operators in his neighborhood “significantly” and guarantee correct regulation, including that he was involved about places that supply video games along with promoting liquor by the drink and free cigarettes.

The political committee aligned with Pace-O-Matic, Operators for Skill, has contributed $70,000 to Williams’ marketing campaign account since final yr, information present. Williams, the highest Democrat on a Senate panel that oversees playing, stated he developed his coverage place earlier than receiving that marketing campaign cash. He famous he has additionally acquired contributions from on line casino pursuits.

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

Parx CEO Hausler stated he’s sympathetic to small companies that host the machines however argued regulation will enhance the standard of the video games and scale back the variety of places competing with them.

But he argued that talent video games ought to face the identical tax fee as on line casino slot machines, and known as the Yaw-Williams invoice 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 stated.

Hausler stated Pennsylvania’s on line casino business employs 15,000 folks and pays greater than $2 billion yearly in gaming taxes that fund property tax reduction, horse racing, and native authorities grants.

How legislators will steadiness these pursuits — and handle a perennial price range deficit — stays to be seen. Under Shapiro’s proposed $53 billion price range, the state would spend $4.8 billion greater than it’s projected to soak up over the following fiscal yr.

“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 retailer proprietor who runs a talent video games advocacy group, stated through the Capitol rally.

There are indicators that at the least some lawmakers are usually not prepared to chop ties with Pace-O-Matic or the talent sport business.

Pennsylvania House Republican leaders have invited potential donors to a July 27 outing on the Aronimink Golf Club in Newtown Square, with a reception and dinner to observe the match, in accordance with a fundraising solicitation obtained by The Inquirer.

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

Staff author Gillian McGoldrick contributed to this text.