HARRISBURG — An all-out political war is erupting in the state Capitol between the most powerful Republican lawmakers and a deep-pocketed company that has reshaped the gaming landscape in Pennsylvania.
Hanging in the balance are hundreds of millions of dollars in potential state tax revenue — a key piece in closed-door budget talks as the June 30 deadline approaches with no deal in sight.
The conflict escalated suddenly and bitterly over the past week, with skill games developer and distributor Pace-O-Matic now accusing the state Senate’s top two GOP leaders of intimidating its hired guns in the halls of the Capitol.
In an interview Monday, Michael Barley, Pace-O-Matic’s chief public affairs officer, said state Senate Republican leaders threatened the company’s lobbying firms with retaliatory action unless they dropped Pace-O-Matic as a client.
As a result, he said, three firms — including Harrisburg lobbying powerhouse Long Nyquist — told Pace-O-Matic they could no longer represent it within the space of a few days.
Barley said the lobbyists told the company that Majority Leader Joe Pittman and President Pro Tempore Kim Ward’s offices warned them that if they stuck with Pace-O-Matic, the interests of their other clients — or other business they have with the caucus — could be in jeopardy.
“We are being told, ‘We are very sorry we have to do this, here is why,’” said Barley, who said such intimidation at the very least raises ethical concerns.
He added: “This one is ugly.”
In an email, Kate Flessner, spokesperson for Pittman, simply said of Barley’s claims: “Senator Pittman has never heard a more hypocritical statement.”
Erica Clayton Wright, a spokesperson for Ward, added that it’s “difficult to respond to such a bizarre statement." She added that Pace-O-Matic has been included in meetings as caucus leaders have worked on legislation to tax and regulate the machines.
“This is an unfortunate and embarrassing moment for Pace-O-Matic as they are demonstrating an erratic approach to a serious matter,” Wright said.
The intensity of the dispute is unusual even in this month’s high-stress environment of budget negotiations in the Capitol. It has briefly drawn Harrisburg insiders’ attention away from the policy conversation, even as lawmakers rush to meet the deadline.
It could still escalate.
Figuring out how to regulate and tax skill games — slot-like machines in bars, taverns, social halls, and other establishments — is a priority for lawmakers looking for ways to raise much-needed revenue.
Skill game manufacturers and owners have shown themselves to have deep pockets, the will to fight, and the ear of influential national conservative organizations. On Tuesday, they are expected to hold a news conference inside the Capitol to intensify pressure on lawmakers to pass a version of a bill that they support.
Leaders in the GOP-controlled state Senate sidestepped the debate for years. Now, they are steadfast in their support for regulating and taxing skill games at rates higher than Pace-O-Matic supports, calling it a public safety issue. Pittman himself cited two robberies in his district that occurred at skill game parlors.
“My personal opinion is, this is gambling, and so it needs to be regulated, it needs to be age restricted,” Pittman said last week. Asked if he’d back a full ban of the machines, Pittman added: “We're open to everything and anything at this point.”
Pace-O-Matic’s pressure campaign
In recent months, top Republicans have become increasingly frustrated with Pace-O-Matic’s refusal to budge from its support of a proposal that calls for a 16% tax on skill games’ gross revenue. That is a far cry from Democratic Gov. Josh Shapiro’s proposed 52% tax rate, as well as a compromise proposal of 35% that is supported by top Senate Republicans.
But the breaking point came after an Ohio-based Super PAC targeted at least two GOP senators, Frank Farry and Chris Gebhard, with attack fliers delivered by door knockers in May after state Senate Republicans formally introduced regulation legislation.
The senators are “siding with Harrisburg insiders and lobbyists to stop small town groups like our volunteer firefighters and VFWs from being able to raise additional revenues,” the fliers, viewed by Spotlight PA, stated.
The fliers were paid for by an Ohio-based super PAC called Defeating Communism. Barley said Pace-O-Matic did not coordinate with the group that advanced that ad campaign, and noted that there are "a lot of interest groups involved in this issue."
Defeating Communism, in turn, is funded by the national organization Citizens Alliance, which has backed several successful primaries of top Pennsylvania Republicans.
However, Pace-O-Matic has for several years tried to pressure lawmakers to support regulation schemes it favors.
The company has held pep rally-style town halls around the state — more recently, in Republican senators’ districts — and paid for television, radio, and newspaper ads pushing its cause. Many of the ads have portrayed legislative efforts to regulate skill games as attacks on the small businesses that house the machines and rely on revenue from them.
The attack on Farry, in particular, raised insiders’ eyebrows because his suburban Philadelphia district has been a top target of Democrats who hope to flip the upper chamber in 2026.
Farry, who has tried to broker a compromise bill, said the attacks struck him as unprecedented among the rush of budget deadline policymaking.
“They’re saying I’m trying to close firehouses,” Farry told Spotlight PA. “I’ve been a volunteer firefighter for 30 years. Are you kidding me?”
Ward has publicly accused skill game supporters of “bullying” legislators and complained that it is difficult to get operators to share basic information, including how many machines they have in Pennsylvania.
A failed truce
Hoping to foster a truce, Long Nyquist arranged a meeting earlier this month between Pace-O-Matic representatives and top staffers for Pittman, two sources familiar with the gathering told Spotlight PA. The sources requested anonymity because they were not authorized to speak publicly about it.
The expectation was to reach agreement on changes to the bill that state Senate GOP leaders favored — the one with the 35% tax rate and regulation by the Pennsylvania Gaming Control Board, which oversees casinos — in hopes that Pace-O-Matic would back off its pressure campaign.
The exchange was unproductive, and both sides walked away frustrated, the sources said.
Then, late last week, Long Nyquist, which has represented Pace-O-Matic for nearly a decade, abruptly updated its client list on the state’s lobbying disclosure website. It reflected that the firm had stopped representing the gaming company.
Two days later, another firm, K&L Gates, also abruptly dropped Pace-O-Matic as its client. And on Monday, one more firm, GSL Public Strategies, did the same.
Long Nyquist founder and partner Mike Long declined to comment on the matter, saying, “We don’t comment on lobbying clients.”
Representatives from K&L Gates and GSL did not respond to requests for comment.
Pace-O-Matic has spent big bucks on politics since its machines first made it to Pennsylvania in the mid-2010s, including $2.5 million in campaign contributions from the company’s main PAC, Operators for Skill, as well as millions more on some of Harrisburg’s best-connected lobbying firms.
Tens of thousands of skill machines have proliferated across the commonwealth, backed by a court ruling that protected their operations. They have raked in billions in revenue — even as gambling competitors paid high taxes on earnings — without any significant move by the legislature to restrict them.
This year, however, resolve among both Democrats and Republicans to regulate and tax skill games hardened. Doing so is one of the only viable bipartisan proposals on the table to raise money as the commonwealth struggles with a longstanding structural deficit and a slew of expensive spending priorities.
Revenue estimates vary widely depending on a proposal’s specifics, but most peg the state’s missing share as being hundreds of millions of dollars. While not a massive windfall, such new revenue could help the state afford boosts to transit or education funding, even as it faces uncertainty over the amount of federal funding it will receive.
The issue has split the state Senate Republican caucus. Lawmakers whose districts include skill games manufacturers back light taxation, while casino-aligned legislators have called for a complete ban. Faced with deep internal divisions, GOP leadership opted to punt on the issue in years past.
“What's made this a harder deal to strike is that we've looked the other way for several years,” Pittman told reporters last week, “and now we have small businesses that have come to rely on these machines.”